Supercuts 2005 Annual Report Download - page 6

The Company’s long-term outlook for organic expansion remains strong. The Company has at least one salon in all major cities in
the U.S. and has penetrated every viable U.S. market with at least one concept. However, because the Company has a variety of concepts,
it can place several of its salons within any given market. The Company plans to continue expansion not only in North America, but also
in the United Kingdom and throughout continental Europe. Opportunities in Asian markets are also being explored.
A key component to successful North American and international organic growth relates to site selection, as discussed in the
following paragraphs.
Salon Site Selection. The Company’s salons are located in high-traffic locations, such as; regional shopping malls, strip
centers, lifestyle centers, Wal-Mart Supercenters, high-street locations and department stores. The Company’s financial strength,
successful salon operations and international recognition causes the Company to be an attractive tenant to landlords. In evaluating
specific locations for both company-owned and franchise stores, the Company seeks conveniently located, visible locations which
allow customers adequate parking and quick and easy store access. Various other factors are considered in evaluating sites, including
trade area demographics, availability and cost of space, the strength of the major retailers within the area, location of competitors,
proximity of other company-owned and franchise salons, traffic count, signage and other leasehold factors in a given center or area.
Because the Company’s different salon concepts target slightly different mass-market customer groups, more than one of the
Company’s salon concepts may be located in the same real estate development. As a result, there are numerous leasing opportunities
for all of its salon concepts.
While same-store sales growth plays an important part in the Company’s organic growth strategy, it is not critical to achieving the
Company’s long-term revenue growth objectives. New salon construction and salon acquisitions (described below) are expected to
generate low, double-digit revenue growth. Generating annual same-store sales increases in excess of two percent is, however, necessary
to achieve the Company’s long-term earnings growth objective of low-to-mid teen earnings per share growth. The Company anticipates
low single-digit same-store sales growth on an annual basis.
Pricing is a factor in same-store sales growth. The Company actively monitors the prices charged by its competitors in each market
and makes every effort to maintain prices which remain competitive with prices of other salons offering similar services. Historically, the
Company has not depended on price increases to drive same-store sales growth. However, in an effort to stimulate same-store sales
growth, the Company increased prices at approximately 2,500 salons during calendar 2005, primarily during the first six months.
Salon Acquisition Growth. In addition to organic growth, another key component of the Company’s growth strategy is the
acquisition of salons. With an estimated two percent world-wide market share, management believes opportunities to acquire additional
salons remain.
Over the past nearly twelve years, the Company has completed 339 acquisitions, adding 7,165 locations. Through acquisition, the
Company has expanded in both North America and internationally. When contemplating an acquisition, the Company evaluates the
existing salon or salon group with respect to the same characteristics as discussed above in conjunction with site selection for constructed
salons (conveniently located, visible, with strong retailers in the area, etc.). The Company generally acquires mature strip center locations,
which are systematically integrated within the salon concept that it most clearly emulates.
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