Supercuts 2009 Annual Report Download - page 9

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Table of Contents
either case, the closures generally occur at the end of a lease term and typically do not require significant lease buyouts. In addition,
during the Company's acquisition evaluation process, the Company may identify acquired salons that do not meet operational or real
estate requirements. Generally, at the time of acquisition limited value is allocated to these salons, which are usually closed within the
first year.
During fiscal year 2009, 313 salons were closed, including 255 company-owned salons and 58 franchise salons (excluding 83
franchise buybacks). In February of 2009, the Company sold its Trade Secret salon concept which consisted of 655 company-owned
locations and 57 franchise locations. See Note 2 to the Consolidated Financial Statements for additional information. In June of 2009, the
Company approved a plan to close up to 80 underperforming United Kingdom company-
owned salons in fiscal year 2010, the majority of
which are expected to occur in the first half of fiscal year 2010. All of the 80 locations are in the United Kingdom. The 80
underperforming United Kingdom company-owned salons expected to close in fiscal year 2010 is in addition to the normal closure
activity of salons at the end of a lease term. We expect the normal closure activity of company-owned salons to be approximately 150 to
180 salons.
During fiscal year 2008, 285 salons were closed, including 180 company-owned salons and 105 franchise salons (excluding 150
franchise buybacks). In July of 2008 (fiscal year 2009), the Company approved a plan to close up to 160 underperforming company-
owned salons in fiscal year 2009. Approximately 100 locations were regional mall based concepts, another 40 locations were strip center
concepts and 20 locations were in the United Kingdom. As of June 30, 2009, 70 stores ceased using the leased property or negotiated a
lease termination agreement with the lessor in which the Company will cease using the right to the leased property subsequent to June 30,
2009. See Note 11 to the Consolidated Financial Statements for additional information.
Economies of Scale. Management believes that due to its size and number of locations, the Company has certain advantages which are
not available to single location salons or small chains. The Company has developed a comprehensive point of sale system to accumulate and
monitor service and product sales trends, as well as assist in payroll and cash management. Economies of scale are realized through the
centralized support system offered by the home office. Additionally, due to its size, the Company has numerous financing and capital
expenditure alternatives, as well as the benefits of buying retail products, supplies and salon fixtures directly from manufacturers. Furthermore,
the Company can offer employee benefit programs, training and career path opportunities that are often superior to its smaller competitors.
Centralized Control Over Salon Operations.
The Company manages its expansive salon base through a combination of area and regional
supervisors, corporate salon directors and chief operating officers. Each area supervisor is responsible for the management of approximately ten
to 12 salons. Regional supervisors oversee the performance of five to seven area supervisors or approximately 50 to 80 salons. Salon directors
manage approximately 200 to 300 salons while chief operating officers are responsible for the oversight of an entire salon concept. This
operational hierarchy is key to the Company's ability to expand successfully. In addition, the Company has an extensive training program,
including the production of training DVDs for use in the salons, to ensure its stylists are knowledgeable in the latest haircutting and fashion
trends and provide consistent quality hair care services. Finally, the Company tracks salon activity for all of its company-owned salons through
the utilization of daily sales detail delivered from the salons' point of sale system. This information is used to reconcile cash on a daily basis.
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
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