Supercuts 2011 Annual Report Download - page 35

Table of Contents
Organic salon revenue is achieved through the combination of new salon construction and salon same-store sales results. Once customer
visitations stabilize, we expect we will continue with our historical trend of building several hundred company-owned salons. We anticipate our
franchisees will open approximately 100 to 120 salons in fiscal year 2012. Older, unprofitable salons will be closed or relocated. Our long-term
outlook for our salon business is annual consolidated low single digit same-store sales increases. We project our annual fiscal year 2012
consolidated same-store sales to be in a range of negative 1.0 percent to positive 1.0 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 2011, we acquired 8,050 salons, net of franchise buybacks. Once customer
visitations normalize, we anticipate adding several hundred company-owned salons each year from acquisitions. Some of these acquisitions may
include buying salons from our franchisees.
Hair Restoration Business
In December 2004, we acquired Hair Club for Men and Women. Hair Club for Men and Women is a provider of hair loss solutions with an
estimated five percent share of the $4 billion domestic market. This industry is comprised of numerous locations domestically and is highly
fragmented. As a result, we believe there is an opportunity to consolidate this industry through acquisition. Expanding the hair loss business
organically and through acquisition would allow us to add incremental revenue which is neither dependent upon, nor dilutive to, our existing
salon businesses.
Our organic growth plans for the hair restoration business include the construction of a modest number of new locations in untapped
markets domestically and internationally. However, the success of our hair restoration business is not dependent on the same real estate criteria
used for salon expansion. In an effort to provide confidentiality for our customers, our hair restoration centers operate primarily in professional
or medical office buildings. Further, the hair restoration business is more marketing intensive. As a result, organic growth at our hair restoration
centers will be dependent on successfully generating new leads and converting them into hair restoration customers. Our growth expectations for
our hair restoration business are not dependent on referral business from, or cross marketing with, our hair salon business, but these concepts
continue to be evaluated closely for additional growth opportunities.
CRITICAL ACCOUNTING POLICIES
The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of
America. In preparing the Consolidated Financial Statements, we are required to make various judgments, estimates and assumptions that could
have a significant impact on the results reported in the Consolidated Financial Statements. We base these estimates on historical experience and
other assumptions believed to be reasonable under the circumstances. Estimates are considered to be critical if they meet both of the following
criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made, and
(2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from
period to period. Changes in these estimates could have a material effect on our Consolidated Financial Statements.
Our significant accounting policies can be found in Note 1 to the Consolidated Financial Statements contained in Part II, Item 8 of this
Form 10-K. We believe the following accounting policies are most critical to aid in fully understanding and evaluating our reported financial
condition and results of operations.
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