Supercuts 2005 Annual Report Download - page 17

Pro Cuts (North America)
The majority of existing Pro Cuts franchise agreements have a ten-year term with a ten-year option to renew. The agreements also
provide the Company a right of first refusal if the store is to be sold or transferred. The current franchise agreement is site specific.
Franchisees may enter into development agreements with the Company which provide limited territorial protection.
St. Algue and JLD (International)
St. Algue was purchased in connection with the acquisition of the French franchisor, GGG. The majority of St. Algue’s franchise
contracts have a five-year term with an implied option to renew for a term of three years. All new JLD contracts have five-
year terms. The
franchise agreements for both St. Algue and JLD are site specific and only a small minority of the contracts provide for territorial
exclusivity. The agreements provide for the right of first refusal during the period covered by the franchise contract if the salon is to be
sold and the franchisee must obtain the Company’s approval before selling of the salon. With regards to the store site, neither St. Algue
nor JLD acts as lessor for their franchisees. Additionally, JLD franchise contracts prohibit the franchisee from selling the salon to another
major national competitor for one year after the contract term ends.
Franchisee Training. The Company provides new franchisees with training, focusing on the various aspects of store management,
including operations, personnel management, marketing fundamentals and financial controls. Existing franchisees receive training, counseling
and information from the Company on a continuous basis. The Company provides store managers and stylists with extensive technical training
for Supercuts franchises. For further description of the Company’s education and training programs, see the “Salon Education and Training
Programs” section of this document.
Salon Markets and Marketing:
The Company maintains various advertising, sales and promotion programs for its salons, budgeting a predetermined percent of revenues
for such programs. The Company has developed promotional tactics and institutional sales messages for each of its concepts targeting certain
customer types and positioning each concept in the marketplace. Print, radio, television and billboard advertising are developed and supervised
at the Company’s headquarters, but most advertising is done in the immediate market of the particular salon.
Most franchise concepts maintain separate Advertising Funds (the “Funds”), managed by the Company, that provide comprehensive
advertising and sales promotion support for each system. All stores, company-owned and franchise, contribute to the Funds, the majority of
which are allocated to the contributing market for media placement and local marketing activities. The remainder is allocated for the creation of
national advertising campaigns and system-
wide activities. This intensive advertising program creates significant consumer awareness, a strong
concept image and high loyalty.
Salon Education and Training Programs:
The Company has an extensive hands-on training program for its stylists which emphasizes both technical training in hairstyling and
cutting, hair coloring, perming and hair treatment regimes as well as customer service and product sales. The objective of the training programs
is to ensure that customers receive a professional and quality service, which the Company believes will result in more repeat customers,
referrals and product sales.
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