Supercuts 2008 Annual Report Download - page 20

the needs of each individual client and educate them on the hair restoration centers' suite of hair loss solutions.
The Company's long term outlook for organic expansion remains strong due to several factors, including favorable industry
dynamics, addressing new market opportunities, menu expansion, developing new locations and new cross marketing initiatives. The
aging "baby boomer" population is expanding the number of individuals within the hair restoration centers' target market. This group of
individuals is entering their peak years of disposable income and has demonstrated a willingness to improve their physical appearance.
In 2003, Hair Club began marketing to women and changed its name to Hair Club for Men and Women. This represents a large and
relatively untapped market. Women now represent approximately 35 percent of new customers.
Currently, all locations offer hair systems, hair therapy and hair care products. Among the hair restoration centers' product offerings
are hair transplants. The hair restoration centers employ a hub and spoke strategy for hair transplants. As of June 30, 2008, 17 locations
were equipped and staffed to perform the procedure. Currently, a total of 34 hair restoration centers offer this service to their customers.
The Company plans to add the capability to conduct hair transplants to more centers in future periods.
Company-owned-and franchise hair restoration centers are located in markets representing 75 percent of all U.S. television (TV)
households. The Company's hair restoration centers advertise on cable TV to over 83 million households. There is an opportunity to add
a limited number of new centers in under penetrated markets. Additionally, the Company is currently investigating international
expansion opportunities.
Hair Restoration Acquisition Growth.
The Company plans to supplement organic growth with opportunistic acquisition activity.
The hair restoration industry is comprised of a highly-fragmented group of 4,000 locations. This landscape provides an opportunity for
consolidation. Given the existing coverage of Hair Club locations, it is anticipated that transactions may involve the acquisition of
customer lists, rather than physical locations.
Affiliated Ownership Interests:
The Company maintains ownership interests in salons and beauty schools. The primary ownership interests are in Provalliance, EEG and
Intelligent Nutrients, LLC., which are accounted for as cost method and equity method investments.
The Company maintains a 30.0 percent ownership interest in Provalliance. The fiscal year 2008 merger of the operations of the European
operating subsidiaries with the Franck Provost Salon Group created a newly formed entity, Provalliance, and is expected to created significant
growth opportunities for Europe's salon brands. The Franck Provost Salon Group management structure has a proven platform to build and
acquire company-owned stores as well as a strong franchise operating group that is positioned for expansion.
The Company maintains a 55.1 percent ownership interest in EEG. Contributing the Company's beauty schools in fiscal year 2008 to EEG
leverages EEG's management expertise, while enabling the Company to maintain a vested interest in the highly profitable beauty school
industry.
The Company maintains a 49.0 percent ownership interest in Intelligent Nutrients, LLC. The investment in Intelligent Nutrients, LLC is for
the development of an organic line of products. The organic line of products will be tested in Company owned salons.
The Company maintains a 14.8 percent ownership interest in MY Style. The Company's ownership interest in MY Style enables the
Company to expand into the Asian market.
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