Supercuts 2007 Annual Report Download - page 5

Industry Overview:
Management estimates that annual revenues of the hair care industry are approximately $53 billion in the United States and approximately
$150 billion worldwide. Management estimates that the Company holds approximately two percent of the worldwide market. The hair salon,
beauty school and hair restoration markets are each highly fragmented, with the vast majority of locations independently owned and operated.
However, the influence of salon chains on these markets, both franchise and company-owned, has increased substantially. Management
believes that salon chains will continue to have a significant influence on these markets and will continue to increase their presence. As the
Company is the principal consolidator of these chains in the hair care industry, it prevails as an established exit strategy for them, which affords
the Company numerous opportunities for continued selective acquisitions. Management believes the demand for salon services, professional
products and hair restoration services will continue to increase as the overall population continues to focus on personal health and beauty, as
well as convenience.
Salon Business Strategy:
The Company’s goal is to provide high quality, affordable hair care services and products to a wide range of mass market consumers,
which enables the Company to expand in a controlled manner. The key elements of the Company’s strategy to achieve these goals are taking
advantage of (1) growth opportunities, (2) economies of scale and (3) centralized control over salon operations in order to ensure (i) consistent,
quality services and (ii) a superior selection of high quality, professional products. Each of these elements is discussed below.
Salon Growth Opportunities. The Company’s salon expansion strategy focuses on organic (new salon construction and same-store sales
growth of existing salons) and salon acquisition growth.
Organic Growth. The Company executes its organic growth strategy through a combination of new construction of company-
owned and franchise salons, as well as same-store sales increases. The square footage requirements related to opening new salons allow
the Company great flexibility in securing real estate for new salons as the Company has small or flexible square footage requirements for
its salons. 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. In April 2007, the Company entered the Asian market through an
investment in a privately held Japanese company that operates salons in Asia. Refer to Note 3 to the Consolidated Financial Statements for
additional information.
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 is an attractive tenant to landlords due
to its financial strength, successful salon operations and international recognition. In evaluating specific locations for both company-
owned and franchise salons, the Company seeks conveniently located, visible sites which allow customers adequate parking and quick and
easy location access. Various other factors are considered in evaluating sites, including area demographics, availability and cost of space,
the strength of the major retailers within the area, location and strength of competitors, proximity of other company-owned and franchise
salons, traffic volume, signage and other leasehold factors in a given center or area.
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