In this exclusive Franchise Chatter FDD Talk post, you’ll learn the following:

Section I – Estimated initial investment (franchise costs) for a Great Clips franchise, based on Item 7 of the company’s 2024 FDD

Section II – Initial franchise fee, royalty fee, and marketing fee for a Great Clips franchise, based on Items 5 and 6 of the company’s 2024 FDD

Section III – Number of franchised and company-owned Great Clips outlets at the start of the year and the end of the year for 2021, 2022, and 2023, based on Item 20 of the company’s 2024 FDD

Section IV – News updates on the Great Clips franchise opportunity

Section V – Presentation and analysis of Great Clips’ financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2024 FDD, including information on the:

• 2023 average service sales, average product sales, and average, median, high, and low total sales for the 4,171 Great Clips salons (the “2023 Salons”) that were eligible to be open during the entire 2023 calendar year (a salon is considered “eligible to be open” if Great Clips has entered into a Franchise Agreement for the unit and approved and authorized the salon to be open and operating as a Great Clips salon)

• 2023 average service sales, product sales, labor, occupancy, product costs, continuing franchise fees, advertising, other expenses, and operating cash flow for the 2,014 of the 2023 Salons (totaling 4,171) that provided sufficient data to Great Clips (the “Reporting 2023 Salons”).

• 2023 average sales, labor, occupancy, all other expenses, and cash flow for the Reporting 2023 Salons based on sales range (<$250,000; $250,000 to $300,000; $300,000 to $350,000; $350,000 to $400,000; $400,000 to $450,000; $450,000 to $500,000; $500,000 to $550,000; >$500,000; and all salons in sample)

Section VI – Key ratios, comparables, computations, and analyses for the Great Clips franchise opportunity (exclusive content for Platinum subscribers)

Section I – Great Clips Franchise Costs

• Initial Franchise Fee:  $20,000 or $35,000 (if you sign a Three Star Program Agreement, along with three separate Franchise Agreements)
• Initial Advertising Contribution to the Market Development Ad Fund (“MDAF”):  $5,000
• Travel and Expenses While Training:  $1,500 to $2,500 per participant
• Architecture Fees:  $250 to $3,500
• Leasehold Improvements, Including Labor:  $70,000 to $200,000
• Rent and Security Deposits:  $1,000 to $10,000
• Fixtures, Signage, and Furnishings, Including Salon Technology Hardware:  $40,000 to $55,000
• Freight:  $4,000 to $7,000
• Sales Tax on Fixtures, Signage, and Furnishings:  $0 to $3,000
• Opening Inventory and Supplies:  $4,700 to $6,400
• Grand Opening Advertising:  $20,000 to $25,000
• Insurance:  $1,500 to $3,000
• Lease Liability Fee and Lease Review Fee:  $0 to $4,000
• Additional Funds (6-12 Months):  $15,000 to $55,000
• Total Estimated Great Clips Franchise Costs:  $182,950 to $414,400

Section II – Great Clips’ Initial Franchise Fee, Royalty Fee, and Marketing Fee

• Initial Franchise Fee:  $20,000 or $35,000 (if you sign a Three Star Program Agreement, along with three separate Franchise Agreements)
• Continuing Franchise Fee:  6% of your Gross Sales
• Continuing Advertising Contribution to the Ad Fund:  5% of your Gross Sales
• Local Co-op Dues:  system average of $100 per month

Section III – Number of Franchised and Company-Owned Great Clips Outlets

Franchised

2021

• Outlets at the Start of the Year:  4,472
• Outlets at the End of the Year:  4,447
• Net Change:  -25

2022

• Outlets at the Start of the Year:  4,447
• Outlets at the End of the Year:  4,427
• Net Change:  -20

2023

• Outlets at the Start of the Year:  4,427
• Outlets at the End of the Year:  4,427
• Net Change:  0

Company-Owned

2021

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2022

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2023

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

Section IV – News Updates on the Great Clips Franchise

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Great Clips Franchise (Item 19, 2024 FDD)

• In Part 1 below, Great Clips provides prospective franchisees with information regarding 2023 average sales of a certain subset of franchised Great Clips salons (defined below as the “2023 Salons”). In addition, in Part 2 below, Great Clips provides prospective franchisees with information regarding 2023 average sales, expenses, and cash flows of a certain smaller subset of franchised Great Clips salons (defined below as the “Reporting 2023 Salons”).

• The average sales data included in Part 1 below was obtained from reviewing Great Clips’ internal point of sale system (“POS System”), the system where franchisees input their salon sales numbers. Neither Great Clips nor its independent certified public accountants have independently audited or verified the financial information contained in the POS System.

• The average sales, expenses, profits, cash flows, and earnings data included in Parts 2 and 3 below was obtained from financial statements submitted to Great Clips by certain of its franchisees. Neither Great Clips nor its independent certified public accountants have independently audited or verified these franchisee statements.

• Many Great Clips franchisees operate more than one salon. The average number of salons per franchisee who has operated Great Clips salons for over five years is 8.4, and the median number of salons per franchisee who has operated Great Clips salons for over five years is 6.

Part 1 – Average Yearly Sales for All Salons Eligible to Be Open During the Entire 2023 Period

• As of December 31, 2023, there were 4,427 Great Clips salons eligible to be open in the United States and Canada. Of these 4,427 Great Clips salons in the United States and Canada as of December 31, 2023, 4,171 are included in the Part 1 below (the “2023 Salons”).

• To be considered a 2023 Salon, the salon must have been eligible to be open (as defined below) during the entire time period from January 1, 2023 to December 31, 2023 (the “2023 Period”).

• A salon is considered “eligible to be open” if Great Clips has entered into a franchise agreement for the salon and approved and authorized the salon to be open and operating as a Great Clips salon.

• The 256 Great Clips salons not included in Part 1 below were excluded because:

• (1) the salon was not approved or authorized to be open for business on January 1, 2023,
• (2) the franchise rights for the salon were terminated or not renewed during the 2023 Period, or
• (3) the salon permanently ceased operations during the 2023 Period.

• The hours of operation for the 4,171 Great Clips salons included in this Part 1 varied from salon to salon during the 2023 Period. Part 1 below contains information relating solely to historical sales data compiled from the 2023 Salons for the 2023 Period.

• Number of 2023 Salons:  4,171
• Average Annual Service Sales:  $371,480
• Average Annual Product Sales:  $11,153
• Average Annual Total Sales:  $382,633
• Number and Percent That Attained or Exceeded Average Total Sales:  1,903/45.62%
• Low Annual Total Sales:  $0
• High Annual Total Sales:  $1,071,583
• Median Annual Total Sales:  $366,735

• “Average Annual Sales” means the average of the annual sales of the 2023 Salons for the 2023 Period broken out by sales categories.

• “Service Sales” means all sales from a Great Clips salon for services, including without limitation haircuts, shampooing, conditioning, styling, bang trims, neck trims, or beard trims.

• “Product Sales” means all sales from a Great Clips salon for products, including without limitation shampoo, conditioner, gel, and hairspray.

• “Total Sales” means total of Service Sales and Product Sales from a from a Great Clips salon.

• During the 2023 Period, 98 Great Clips salons in the United States and Canada closed and permanently ceased operations, and among these salons, 1 closed and permanently ceased operations after being open less than 12 months. The salons described in the preceding sentence are among those excluded from Part 1 above.

Part 2 – Average Operating Cash Flow Statement of Reporting 2023 Salons

• The following statement (referred to in this disclosure document as the “Average Operating Cash Flow Statement”) consists of the average sales and expenses of 2,014 of the 2023 Salons (totaling 4,171) that provided sufficient data to Great Clips (the “Reporting 2023 Salons”) to allow Great Clips to include them in the Average Operating Cash Flow Statement.

• The number of Reporting 2023 Salons is 2,014. 2023 Salons that provided Great Clips with no or insufficient data to be reasonably assured of having accurate and complete expense information were excluded (the “Non-Reporting 2023 Salons”). The number of Non-Reporting 2023 Salons is 2,157.

• If all 2,157 Non-Reporting 2023 Salons had been included in the metrics reported for the Reporting 2023 Salons, the median total sales in the Reporting 2023 Salons would have decreased by 4.7% and the net operating cash flow would have decreased by a larger percent.

• The average expenses, profits, cash flows and earnings data included in Parts 2 and 3 below was obtained from financial statements submitted to Great Clips by the franchisees of the Reporting 2023 Salons. The time frame or accounting period of these financial statements was the most current available to Great Clips, but, in some cases, did not match the exact time frame from which sales figures were drawn. Therefore, some information was annualized to extract a full year’s worth of data.

Average Annual Sales

• Service Sales:  $386,335 (96.83%)
• Product Sales:  $12,635 (3.17%)
• Total Sales:  $398,971 (100.0%)

Average Annual Expenses

• Labor:  $192,728 (48.31%)
• Occupancy:  $43,638 (10.94%)
• Products:  $8,151 (2.04%)
• Continuing Franchise Fees:  $23,990 (6.01%)
• Advertising:  $20,866 (5.23%)
• Other:  $27,676 (6.94%)
• Total Expenses:  $317,049 (79.47%)

Operating Cash Flow:  $81,921 (20.53%)

Part 3 – Averages Based on Sales Range of Reporting 2023 Salons

Average Annual Sales Range: <$250K

• Count:  240 (11.92%)
• Average Annual Sales:  $198,978
• Labor:  55.96%
• Occupancy:  19.96%
• All Other:  24.49%
• Total:  101.18%
• Cash Flow:  -$810 (-0.41%)

Average Annual Sales Range: $250K to $300K

• Count:  235 (11.67%)
• Average Annual Sales:  $277,697
• Labor:  50.67%
• Occupancy:  14.65%
• All Other:  22.16%
• Total:  88.02%
• Cash Flow:  $34,790 (12.53%)

Average Annual Sales Range: $300K to $350K

• Count:  322 (15.99%)
• Average Annual Sales:  $325,578
• Labor:  49.17%
• Occupancy:  12.92%
• All Other:  20.98%
• Total:  83.73%
• Cash Flow:  $55,161 (16.94%)

Average Annual Sales Range: $350K to $400K

• Count:  310 (15.39%)
• Average Annual Sales:  $375,348
• Labor:  48.40%
• Occupancy:  11.44%
• All Other:  20.50%
• Total:  80.84%
• Cash Flow:  ($73,809) 19.66%

Average Annual Sales Range: $400K to $450K

• Count:  270 (13.41%)
• Average Annual Sales:  $423,766
• Labor:  48.27%
• Occupancy:  10.96%
• All Other:  19.98%
• Total:  79.73%
• Cash Flow:  $88,140 (20.80%)

Average Annual Sales Range: $450K to $500K

• Count:  222 (11.02%)
• Average Annual Sales:  $473,741
• Labor:  46.99%
• Occupancy:  9.56%
• All Other:  19.76%
• Total:  76.90%
• Cash Flow:  $112,233 (23.69%)

Average Annual Sales Range: $500K to $550K

• Count:  147 (7.30%)
• Average Annual Sales:  $522,985
• Labor:  46.32%
• Occupancy:  8.77%
• All Other:  19.07%
• Total:  74.69%
• Cash Flow:  $135,139 (25.84%)

Average Annual Sales Range: >$550K

• Count:  268 (13.31%)
• Average Annual Sales:  $644,976
• Labor:  46.43%
• Occupancy:  7.29%
• All Other:  18.63%
• Total:  72.86%
• Cash Flow:  $178,306 (27.65%)

All Reporting 2023 Salons

• Count:  2,014 (100.00%)
• Average Annual Sales:  $398,971
• Labor:  48.31%
• Occupancy:  10.94%
• All Other:  20.22%
• Total:  79.47%
• Cash Flow:  $81,921 (20.53%)

• “Labor” includes all employee-related expenses including: wages, salary, bonus, commission, payroll taxes, insurance benefits, other benefits, and workers’ compensation expenses. Also includes the cost of salon manager but excludes, if identifiable, any labor expense related to general manager or franchisee.

• “Occupancy” includes all rent, common area maintenance, real estate taxes plus percentage rent paid, if any. Also includes any other lease-related charges such as maintenance, security, trash removal, merchant association dues or charges, or shopping center promotional expenses.

• “Products” includes the cost of all product purchased for resale or for back bar customer service usage plus all freight or delivery costs associated with the product.

• All Great Clips salons in the System pay identical Continuing Franchise Fees of 6%. The model is not exactly 6% due to the fact that the franchisees predominately use a cash rather than accrual basis for accounting purposes.

• All Great Clips salons in the System pay identical amounts of 5% of gross sales into the Ad Fund. In addition, virtually all franchisees participate in other discretionary advertising on a local or regional basis.

• This “Other” category includes all other cash expense items and categories not included elsewhere. These would include: travel and entertainment, supplies, dues and subscriptions, telephone, utilities, non-real estate repairs and maintenance, insurance, postage, freight, bad debts, taxes and fees, cash over/short, recruitment expense, laundry, meals, equipment purchase, credit card charges, accounting and legal, payroll processing, employee theft/losses, deposits, bank charges, uniforms, licenses, contributions, meeting expenses, bad checks, printing, inventory differences, computer charges, extraneous gift card and convention expenses.

• “Total Expenses” means the total expenses of Labor, Occupancy, Products, Continuing Franchise Fees, Advertising and Other incurred by a Great Clips salon.

• “Operating Cash Flow” was calculated by subtracting Total Expenses from Total Sales. Operating Cash Flow does not include any provision for income taxes or for non-cash expenses such as depreciation or amortization. It also does not include any reserve for future capital expenditures.

• Some salons have sold and earned this amount. Your individual results may differ. There is no assurance that you will sell or earn as much.

• Newly opened Great Clips salons tend to have average sales and cash flows significantly below the average for the salons included in Parts 1, 2, and 3 above. This is especially true of new Great Clips salons opened by new franchisees in markets that have few existing salons. Markets with many Great Clips salons and correspondingly larger cooperative advertising budgets tend to have salons with higher sales and cash flows than markets with few existing salons.

Section VI – Great Clips Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️