Supercuts 2010 Annual Report Download - page 20

Table of Contents
Salon Design:
The Company's salons are designed, built and operated in accordance with uniform standards and practices developed by the Company
based on its experience. Salon fixtures and equipment are generally uniform, allowing the Company to place large orders for these items with
cost savings due to the economies of scale.
The size of the Company's salons ranges from 500 to 5,000 square feet, with the typical salon having about 1,200 square feet. At present,
the cost to the Company of normal tenant improvements and furnishing of a new salon, including inventories, ranges from approximately
$25,000 to $225,000, depending on the size of the salon and the concept. Less than ten percent of all new salons will have costs greater than
normal with a cost between $225,000 and $500,000 to furnish. International Sassoon salons costs could be even greater than the ranges above.
Of the total leasehold costs, approximately 70 percent of the cost is for leasehold improvements and the balance is for salon fixtures, equipment
and inventories.
The Company maintains its own design and real estate department, which designs and supervises the leasehold installations, furnishing
and fixturing of all new company-owned salons and certain franchise locations. The Company has developed considerable expertise in
designing salons. The design and real estate staff focus on visual appeal, efficient use of space, cost and rapid completion times.
Salon Management Information Systems:
At all of its company-owned salons, the Company utilizes a point-of-sale (POS) information system to collect daily sales information and
customer demographics. Salon employees deposit cash receipts into a local bank account on a daily basis. The POS system sends the amount
expected to be deposited to the corporate office, where the amount is reconciled daily with local deposits transferred into a centralized
corporate bank account. The customer information is then used to determine effectiveness of promotions and the loyalty base of each salon that
feed into salon operational decisions. The information is also used to generate payroll information, monitor salon performance, manage salon
staffing and payroll costs, and anticipate industry pricing and staffing trends. The corporate information systems deliver information on product
sales to improve its inventory control system, including recommendations for each salon of monthly product replenishments. Recent
innovations to increase inventory cycle counts and install high speed connections at each salon are expected to improve stylist productivity and
improve customer satisfaction with the checkout process.
Management believes that its information systems provide the Company with operational efficiencies as well as advantages in planning
and analysis which are generally not available to competitors. The Company continually reviews and improves its information systems to
ensure systems and processes are kept up to date and that they will meet the growing needs of the Company. The goal of information systems is
to maximize the overall value to the business while improving the output per dollar spent by implementing cost-effective solutions and
services.
Salon Competition:
The hair care industry is highly fragmented and competitive. In every area in which the Company has a salon, there are competitors
offering similar hair care services and products at similar prices. The Company faces competition within malls from companies which operate
salons within department stores and from smaller chains of salons, independently owned salons and, to a lesser extent, salons which, although
independently owned, are operating under franchises from a franchising company that may assist such salons in areas of training, marketing
and advertising.
At the individual salon level the barriers to enter the market are not considerable, however, significant barriers exist for chains to expand
nationally due to the need to establish systems and
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