Supercuts 2011 Annual Report Download - page 20

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Table of Contents
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.
Historically, because of the Company's large size and scale requirements it has been necessary for the Company to internally develop and
support its own proprietary POS information system. The Company has recently identified a third party POS software alternative that has a
system that meets our current and enhanced functionality requirements and will cost significantly less to implement and support. This new
technology will be implemented in our salons in fiscal year 2012 will allow the Company to stay current and meet customers' expectations.
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, barriers exist for chains to expand nationally due
to the need to establish systems and infrastructure, recruitment of experienced hair care management and adequate store staff, and leasing of
quality sites. The principal factors of competition in the affordable hair care category are quality, consistency and convenience. The Company
continually strives to improve its performance in each of these areas and to create additional points of differentiation versus the competition. In
order to obtain locations in shopping malls, the Company must be competitive as to rentals and other customary tenant obligations.
Hair Restoration Business Strategy:
Hair Club for Men and Women (Hair Club) is the largest U.S. provider of hair loss solutions and the only company offering a
comprehensive menu of proven hair loss products and services. The Company leverages its strong brand, best-in-class service model and
comprehensive menu of hair restoration alternatives to build an increasing base of repeat customers that generate recurring cash flow for the
Company. From its traditional non-surgical hair replacement systems, to hair transplants, hair therapies and hair care products and services, Hair
Club offers a solution for anyone experiencing or anticipating hair loss. The Company's operations, presented under the Hair Restoration Centers
reporting unit, consist of 96 locations (29 franchise locations) in the United States and Canada. The domestic hair restoration market is estimated
to generate over $4 billion annually. The competitive landscape is highly fragmented and comprised of approximately 4,000 locations. Hair Club
and its franchisees have the largest market share, with approximately five percent based on customer count.
18