Supercuts 2012 Annual Report Download - page 9

Table of Contents
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 235 and 271 salons had major remodels in fiscal
years 2012 and 2011, respectively.
Recent Salon Additions. During fiscal year 2012, the Company constructed 319 new salons (209 company-owned and 110
franchise). Additionally, the Company acquired 13 company-owned salons, including 11 franchise salon buybacks, and purchased a
60.0 percent ownership interest in a franchise network consisting of 31 locations.
During fiscal year 2011, the Company constructed 213 new salons (146 company-owned and 67 franchise). Additionally, the
Company acquired 105 company-owned salons, including 78 franchise salon buybacks.
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 significant lease buyouts.
During fiscal year 2012, 384 salons were closed, including 333 company-owned salons and 51 franchise salons (excluding 11
franchise buybacks).
During fiscal year 2011, 305 salons were closed, including 245 company-owned salons and 60 franchise salons (excluding 78
franchise buybacks).
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. 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. During fiscal year 2012 the Company implemented a new field structure to support our
long-term strategy. The Company manages its expansive salon base through a combination of district leaders, regional directors, vice
presidents and chief operating officers. Each district leader is responsible for the management of approximately 12 to 15 salons. Regional
directors oversee the performance of six to nine district leaders or approximately 80 to 130 salons. Vice presidents manage approximately 700
to 1,000 salons while chief operating officers are responsible for the oversight of an entire consumer concept. During fiscal year 2012 the
Company also created Field Human Resources and Corporate Operations departments to support salon operations. The operational hierarchy is
key to the Company's ability to expand successfully.
The Company also 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 guests' hair care needs by providing competitively priced
services and products with professional and knowledgeable stylists. The
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