Supercuts 2002 Annual Report Download - page 16

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Table of Contents
The Company generally locates its Regis, MasterCuts, Trade Secret and Mia & Maxx Hair Studio salons in fully enclosed, climate-controlled
shopping malls classified as “regional” having 400,000 or more square feet of leasable area and at least two full-line department store anchor
tenants. The Company’s experience has been that selecting the proper mall and obtaining a favorable, high-traffic location within the mall are
important determinants of the success of a new salon. For existing malls, the Company evaluates the current sales per square foot of selected
tenants, the stature and strength of the anchor stores and the other major tenants, the location and traffic patterns within the mall, and the
proximity of competitors. In addition, the Company may conduct site surveys and physical observations to assess the location, traffic patterns
and competitive environment.
Several trends have enabled the Company to continue to lease high-profile space in existing malls. Leasing velocity and turnover have
increased because the average length of shopping mall lease terms has declined over time. Also, many existing malls are being expanded,
renovated and remerchandised. Because of these factors, the Company believes that it has ample expansion opportunities and therefore can be
selective in establishing new mall locations.
Franchising Program
General
The Company has various franchising programs supporting its 3,908 franchised salons as of June 30, 2002, consisting mainly of Supercuts,
Cost Cutters, First Choice Haircutters, Magicuts, Haircrafters, and franchisees operating under the European franchise companies of GGG and
JLD.
The Company provides its franchisees with a comprehensive system of business training, stylist education, site approval and lease negotiation,
professional marketing, promotion and advertising programs, and other forms of support designed to help the franchisee build a successful
business.
Standards of Operations
Franchisees are required to conform to company-established operational policies and procedures relating to quality of service, training, design
and decor of stores, and trademark usage. The Company’s field personnel make periodic visits to franchised stores to ensure that the stores are
operating in conformity with the standards for each franchising program.
To further ensure conformity with all Supercuts and certain other franchises, the Company enters into the lease for the store site directly with
the landlord, and subsequently subleases the site to the franchisee. The franchise agreement and sublease provide the Company with the right to
terminate the sublease and gain possession of the store if the franchisee fails to comply with the Company’s operational policies and
procedures. See Note 6 of “Notes to Consolidated Financial Statements” for further information.
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