Supercuts 2006 Annual Report Download - page 41

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Product Revenues. Product revenues are primarily sales at company-owned salons, beauty schools, hair restoration centers, and sales of
product and equipment to franchisees. Total product revenues were as follows:
The growth in fiscal year 2006 product revenues was primarily due to acquisitions. Fiscal year 2006 and 2005 product revenue percentage
increases were not as robust as the prior fiscal years primarily due to lower same-store product sales increases in our company-owned salons;
same-store product sales increased 0.1 percent in fiscal year 2006 and were flat in fiscal year 2005. The large increase in same-store product
sales during fiscal year 2004 was primarily driven by a trend towards sales of higher priced beauty tools, such as flat irons and the introduction
of the Matrix product line to Trade Secret salons.
Franchise Royalties and Fees. Total franchise revenues, which include royalties and franchise fees, were as follows:
Total franchise locations open at June 30, 2006 and 2005 were 3,816 (including 42 franchise hair restoration centers) and 3,951 (including
49 franchise hair restoration centers), respectively. The decreased number of franchise locations during fiscal year 2006 was primarily due to
franchise buybacks, and strip center and international franchise salon closures. During fiscal year 2005, the number of franchise locations grew
modestly, as new salon construction and the acquisition of the hair restoration centers were largely offset by franchise buybacks and closures.
We purchased 142 and 139 of our franchise salons during the twelve months ended June 30, 2006 and 2005, respectively. Additionally, we
purchased seven of our franchise hair restoration centers during fiscal year 2006. A total of 229 and 168 franchise salons were closed during the
twelve months ended June 30, 2006 and 2005, respectively.
The decrease in consolidated franchise revenues during fiscal year 2006 was primarily due to unfavorable foreign currency exchange rate
fluctuations. Exclusive of foreign currency fluctuations, consolidated franchise revenues decreased 0.6 percent over the prior fiscal year,
stemming from our purchase of 142 franchise salons and seven franchise hair restoration centers during fiscal year 2006.
Favorable foreign currency exchange rate fluctuations caused 3.3 percent of the 8.0 percent increase in consolidated franchise revenues
during the year ended June 30, 2005. Exclusive of the effect of this favorable currency fluctuation, consolidated franchise revenues increased
4.7 percent in the year ended June 30, 2005. The fiscal year 2005 increase was primarily due to the acquisition of 49 franchise hair restoration
centers, as well as opening more new international franchise salons during fiscal year 2005 as compared to the prior fiscal year.
40
Increase Over Prior
Fiscal Year
Years Ended June 30,
Revenues
Dollar
Percentage
(Dollars in thousands)
2006
$
718,942
$
70,522
10.9
%
2005
648,420
70,141
12.1
2004
578,279
78,993
15.8
(Decrease) Increase Over
Prior Fiscal Year
Years Ended June 30,
Revenues
Dollar
Percentage
(Dollars in thousands)
2006
$
77,894
$
(1,644
)
(2.1
)%
2005
79,538
5,906
8.0
2004
73,632
5,950
8.8