Supercuts 2012 Annual Report Download - page 8

Table of Contents
influence on these markets and will continue to increase their presence. As the Company is the principal consolidator of these chains in the hair
care industry, it prevails as an established exit strategy for independent salon owners and operators, which affords the Company numerous
opportunities for continued selective acquisitions.
Salon Business Strategy:
The Company's long-term goal is to provide high quality, affordable hair care services and products to a wide range of mass market
consumers, which enables the Company to expand in a controlled manner. The key elements of the Company's strategy to achieve these goals
are taking advantage of (1) salon growth opportunities, (2) economies of scale and (3) centralized control over salon operations in order to
ensure (i) consistent, quality services and (ii) a superior selection of high quality, professional products. Each of these elements is discussed
below.
Salon Growth Opportunities. The Company's salon expansion strategy focuses on organic (new salon construction and same-
store sales
growth of existing salons) and salon acquisition growth.
Organic Growth. The Company executes its organic growth strategy through a combination of new construction of company-
owned and franchise salons, as well as same-store sales. The square footage requirements related to opening new salons allow the
Company great flexibility in securing real estate for new salons as the Company has small or flexible square footage requirements for
its salons. The Company's long-term outlook for organic expansion remains strong. The Company has at least one salon in all major
cities in the U.S. and has penetrated every viable U.S. market with at least one concept. However, because the Company has a variety of
concepts, it can place several of its salons within any given market.
A key component to successful North American organic growth relates to site selection, as discussed in the following paragraphs.
Salon Site Selection. The Company's salons are located in high-traffic locations such as regional shopping malls, strip centers,
lifestyle centers, Walmart Supercenters, high-street locations and department stores. The Company is an attractive tenant to landlords
due to its financial strength, successful salon operations and international recognition. In evaluating specific locations for both
company-owned and franchise salons, the Company seeks conveniently located, visible sites which allow guests adequate parking and
quick and easy location access. Various other 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.
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.
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 18 years, the Company has acquired 8,052 salons, expanding both in 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
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