Supercuts 2004 Annual Report Download - page 16

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Table of Contents
Control Over Salon Operations. The Company manages its expansive salon base through a combination of area and regional supervisors,
corporate salon directors and chief operating officers. Each area supervisor is responsible for the management of approximately ten salons.
Regional supervisors oversee the performance of five area supervisors or approximately 50 salons. Salon directors manage approximately 200
salons while chief operating officers are responsible for the oversight of an entire salon concept. This operational hierarchy is key to the
Company’s ability to expand successfully. In addition, the Company has an extensive training program, including the production of training
DVDs for use in the salons, to ensure its stylists are knowledgeable in the latest haircutting and fashion trends and provide consistent quality
hair care services. Finally, the Company tracks salon activity for all of its company-owned salons through the utilization of daily sales detail
delivered from the salons’ point of sale system. This information is used to reconcile cash on a daily basis. This information is also reported to
the Company’s Chief Executive Officer, who is also the Chief Operating Decision Maker.
Consistent, Quality Service. The Company is committed to meeting its customers’ hair care needs by providing competitively priced services
and products with professional and knowledgeable stylists. The Company’s operations and marketing emphasize high quality services to create
customer loyalty, to encourage referrals and to distinguish the Company’s salons from its competitors. The major services supplied by the
Company’s salons are haircutting and styling, hair coloring and waving, shampooing, conditioning and waxing. During fiscal year 2004, 2003
and 2002, the percentage of company-owned service revenues attributable to each of these services was as follows:
Beauty career school tuition revenues were earned during fiscal years 2004 and 2003. They represented one percent or less of total company-
owned service revenues for each of these years. However, the Company expects tuition revenues to increase as it expands its presence in the
beauty career school market.
To promote quality and consistency of services provided throughout the Company’s salons, the Company employs full and part-time artistic
directors whose duties are to train salon stylists in current styling trends.
High Quality, Professional Products.
The Company’s salons merchandise nationally-recognized hair care and beauty products as well as a
complete line of private label products sold under the Regis, MasterCuts and Cost Cutters labels. The retail products offered by the Company
are sold exclusively through professional salons. The top selling brands include Matrix, Paul Mitchell, Tigi, Redken, Sebastian, Nioxin, OPI
and the Company’s various private label brands.
The Company has the most comprehensive assortment of retail products in the industry, with an estimated share of the North American retail
beauty product market of up to 15 percent. Although the Company constantly strives to carry an optimal level of inventory in relation to
consumer demand, it is more economical for the Company to have excess inventory on hand than to run the risk of being under-stocked should
demand prove higher than expected. The extended shelf life and lack of seasonality related to the beauty products allows the cost of carrying
inventory to be relatively low and lessens the importance of inventory turnover ratios. The Company’s primary goal is to maximize revenues
rather than inventory turns.
The retail portion of the Company’s business complements its salon services business. The Company’s stylists and beauty consultants are
compensated and regularly trained to sell hair care and beauty products to their customers. Additionally, customers are enticed to purchase
products after a stylist demonstrates its effect by using it in the styling of the customer’s hair.
10
2004
2003
2002
Haircutting and styling (including shampooing & conditioning)
73
%
74
%
75
%
Hair coloring
17
15
14
Hair waving
5
5
6
Waxing
2
2
2
Other, including beauty career school tuition revenues
3
4
3
100
%
100
%
100
%