Supercuts 2010 Annual Report Download - page 34

Table of Contents
consumers. Our salon operations are organized to be managed based on geographical location. Our North American salon operations include
9,525 salons, including 2,020 franchise salons, operating in the United States, Canada and Puerto Rico primarily under the trade names of
Regis Salons, MasterCuts, SmartStyle, Supercuts and Cost Cutters. Our international salon operations include 404 salons located in Europe,
primarily in the United Kingdom. Hair Club for Men and Women includes 95 North American locations, including 33 franchise locations.
During fiscal year 2010, we had approximately 56,000 corporate employees worldwide.
Our growth strategy consists of two primary, but flexible, components. Through a combination of organic and acquisition growth, we seek
to achieve our long-term objective of six to ten percent annual revenue growth. We anticipate that going forward, the mix of organic and
acquisition growth will be roughly equal. However, depending on several factors, including the ability of our salon development program to
keep pace with the availability of real estate for new construction, hair restoration lead generation, the availability of attractive acquisition
candidates and same-store sales trends, this mix will vary from year to year. Due to the current economic conditions we have recently reduced
the pace of our new salon development and salon acquisitions. We expect to continue with our historical trend of building and/or acquiring 700
to 1,000 salons each year once the economy normalizes.
Maintaining financial flexibility is a key element in continuing our successful growth. With strong operating cash flow and balance sheet,
we are confident that we will be able to financially support our long-term growth objectives.
Salon Business
The strength of our salon business is in the fundamental similarity and broad appeal of our salon concepts that allow flexibility and
multiple salon concept placements in shopping centers and neighborhoods. Each concept generally targets the middle market customer,
however, each attracts a different demographic. We believe there are growth opportunities in all of our salon concepts. When commercial
opportunities arise, we anticipate testing and developing new salon concepts to complement our existing concepts.
We execute our salon growth strategy by focusing on real estate. Our salon real estate strategy is to add new units in convenient locations
with good visibility and customer traffic, as well as appropriate trade demographics. Our various salon and product concepts operate in a wide
range of retailing environments, including regional shopping malls, strip centers and Wal-
Mart Supercenters. We believe that the availability of
real estate will augment our ability to achieve the aforementioned long-term growth objectives. In fiscal year 2011, our outlook for constructed
salons will be 160 units. Capital expenditures and acquisitions are expected to be approximately $95.0 and $25.0 million in fiscal year 2011,
respectively.
Organic salon revenue growth is achieved through the combination of new salon construction and salon same-store sales increases. Once
the economy normalizes, we expect we will continue with our historical trend of building several hundred company-owned salons. We
anticipate our franchisees will open approximately 70 to 100 salons in fiscal year 2011. Older, unprofitable salons will be closed or relocated.
Our long-term outlook for our salon business is for annual consolidated low single digit same-store sales increases. Based on current fashion
and economic cycles (i.e., longer hairstyles and lengthening of customer visitation patterns), we project our annual fiscal year 2011
consolidated same-store sales to be in the range of negative 1.0 percent to positive 2.0 percent.
Historically, our salon acquisitions have varied in size from as small as one salon to over one thousand salons. The median acquisition size
is approximately ten salons. From fiscal year 1994 to fiscal year 2010, we acquired 8,023 salons, net of franchise buybacks. Once the economy
normalizes, we anticipate adding several hundred company-owned salons each year from acquisitions. Some of these acquisitions may include
buying salons from our franchisees.
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