Supercuts 2002 Annual Report Download - page 9

Table of Contents
MasterCuts Family Haircutters. MasterCuts Family Haircutters salons are mall-based and serve a broader customer base than Regis Salons
and respond to competitive pressures for more moderate cost hair care services. MasterCuts salons emphasize quality haircutting, lower prices
and time-saving services for the entire family. Hair coloring services have been a recent contributor to the growth in MasterCuts service
revenues. Further, a number of MasterCuts salons have recently begun to offer facial waxing services. The customer mix at MasterCuts salons
contains a greater percentage of men and children than at Regis Salons. MasterCuts salons cater to walk-in customers and provide a warm,
inviting atmosphere that is comfortable for all members of the family. Many of the same product lines sold in Regis Salons are also available in
MasterCuts salons. In addition, the new MasterCuts private label haircare line appeared in salons beginning in July of 2002. The average sale at
MasterCuts salons is approximately $14. The MasterCuts salons place emphasis on discount or promotional pricing for the services being
offered in order to compete more effectively with other salons. At June 30, 2002, the Company operated 551 MasterCuts salons in North
America. Revenues from MasterCuts salons grew to $164.8 million, or 11.3 percent of the Company’s total revenues, in fiscal 2002. During
fiscal 2003, the Company plans to construct approximately 40 new MasterCuts salons.
Trade Secret . Trade Secret salons are designed to emphasize the sale of hair care and beauty products in a mall-based retail setting while
providing high quality hair care services. Trade Secret salons offer the same products as the Regis Salons and MasterCuts salons, but also have
additional hair, skin and nail products. The average sale at Trade Secret salons is approximately $20. At June 30, 2002, the number of Trade
Secret salons totaled 516 in North America, including 26 franchised locations. Revenues from company-owned Trade Secret salons and
franchising activity during fiscal 2002 was $190.0 million and $2.9 million, respectively, or 13.3 percent of the Company’s total revenues. The
Company anticipates constructing approximately 35 new Trade Secret salons in fiscal 2003.
SmartStyle . The Company expanded into the mass merchant retail arena in fiscal 1996 by acquiring 154 salons operating within Wal-Mart
stores and supercenters. These salons share many operating characteristics with MasterCuts: pricing is promotional, services are focused on
family hair services, and product revenues contribute solidly to overall revenues. In fiscal 1998, the Company introduced a new brand name,
SmartStyle Family Hair Salons, for its company-owned Wal-Mart salons and rapidly expanded this new brand name into its Wal-
Mart salons in
fiscal 1999. As part of the merger with The Barbers in May 1999, the Company acquired 199 (158 franchised) salons operating as Cost Cutters
in Wal-Mart stores and supercenters making Regis the primary provider of salon services in Wal-Marts. The Company operated 861 company-
owned SmartStyle salons within Wal-Mart stores and supercenters at June 30, 2002. Revenue from company-owned SmartStyle salons grew to
$178.7 million, or 12.3 percent of the Company’s total revenue in fiscal 2002. The average sale at SmartStyle salons is approximately $16. The
Company anticipates constructing about 150 new company-owned SmartStyle salons in fiscal 2003. See the Cost Cutters section under Strip
Center Salons for discussion of the 210 franchised salons within Wal-mart stores and supercenters.
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