Supercuts 2008 Annual Report Download - page 7

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.
Because the Company's various 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 without impeding sales of either concept. As a result, there
are numerous leasing opportunities for all of its salon concepts.
While same-store sales growth plays an important role in the Company's organic growth strategy, it is not critical to achieving the
Company's long-term revenue growth objectives. However, same-
store sales growth is important to achieving improved annual operating
profit. New salon construction and salon acquisitions (described below) are expected to generate mid to high single-digit annual revenue
growth. The trend for the past several years has been declining visitation patterns due to fashion trends and increasing average ticket
price resulting in flat to low single-digit same-store sales growth. The Company expects fiscal year 2009 same-store sales growth to be
0.5 to 2.5 percent.
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. Price increases
are considered on a market-by-market basis and are established based on local market conditions. The Company implemented a pricing
initiative in fiscal year 2008 that contributed to same-store sales growth.
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 worldwide market share, management believes the opportunity to continue to make
selective acquisitions exists.
Over the past 14 years, the Company has acquired 7,926 locations, expanding 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, strong retailers within the area,
etc.). The Company generally acquires mature strip center locations, which are systematically integrated within the salon concept that it
most clearly emulates.
In addition to adding new salon locations each year, the Company has an ongoing program of remodeling its existing salons, ranging
from redecoration to substantial reconstruction. This program is implemented as management determines that a particular location will
benefit from remodeling, or as required by lease renewals. A total of 186 and 222 salons were remodeled in fiscal years 2008 and 2007,
respectively.
Recent Salon Additions.
During fiscal year 2008, net of closures and relocations, the Company added approximately 488 salons through new construction
and acquisitions. The Company constructed 509 new salons (328 company-owned and 181 franchise). Additionally, the Company
acquired 475 company-owned salons, including 150 franchise salon buybacks.
During fiscal year 2007, net of closures and relocations, the Company added approximately 550 salons through new construction
and acquisitions. The Company constructed 673 new salons (420 company-owned and 253 franchise). Additionally, the Company
acquired 354 company-owned salons, including 97 franchise salon buybacks. The Company's largest fiscal year 2007 salon acquisition
consisted of 175 Fiesta Hair salons.
Salon Closures. The Company evaluates its salon performance on a regular basis. Upon evaluation, the Company may close a
salon for operational performance or real estate issues. In either case, the closures generally occur at the end of a lease term and typically
do not require
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