Supercuts 2007 Annual Report Download - page 8

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. 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. The major services supplied by the Company’s salons are
haircutting and styling, hair coloring and waving, shampooing and conditioning. During fiscal years 2007, 2006, and 2005, the percentage
of company-owned service revenues attributable to each of these services was as follows:
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 intended to be sold only through professional salons. The top selling brands include Paul Mitchell, Biolage, Redken,
Nioxin, Tigi Bedhead, OPI Nail and the Company’s various private label brands.
The Company has launched a product diversion website for the entire industry to use as a measurement tool to track diversion.
Diversion involves the selling of salon exclusive hair care products to unauthorized distribution channels such as discount retailers and
pharmacies. Diversion is harmful to the consumer because diverted product can be old, tainted or damaged. It is also harmful to the salon
owners and stylists because their credibility with the consumer is brought into question.
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 a higher amount of 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.
Salon Concepts:
The Company’s salon concepts focus on providing high quality hair care services and professional products, primarily to the middle
consumer market. The Company’
s North American salon operations consist of 9,826 salons (including 2,168 franchise salons), operating under
five concepts, each offering attractive and affordable hair care products and services in the United States, Canada and Puerto Rico. The
Company’s international salon operations consist of 2,055 hair care salons, including 1,574 franchise salons, located throughout Europe,
primarily in the United Kingdom, France, Italy and Spain. Under the table below, the number of new salons expected to be opened within the
upcoming fiscal year is discussed.
7
2007
2006
2005
Haircutting and styling (including shampooing & conditioning)
72
%
72
%
72
%
Hair coloring
18
18
18
Hair waving
4
5
5
Other
6
5
5
100
%
100
%
100
%