Sport Clips Presents Big Opportunity for Multi-Unit Franchisees

At its core, franchising is a business model designed to grow a brand through the continued development of new units. The most successful franchises have leveraged that formula to encourage brand growth not only through new franchise owners but through existing owners who take on additional units. While many franchise brands recognize and take advantage of that economy of scale, few have crafted their system around it the way Sport Clips* Haircuts has.

According to Dave Wells, Sport Clips’ senior director of franchising, the salon brand was founded with the explicit intention of cultivating multi-unit ownership.

“When Gordon Logan launched Sport Clips, he saw it as a concept a seasoned business person could invest in, grow over the course of a few years, and eventually replace their entire executive level income with,” Wells said. “And that’s exactly the model we’ve built. When a franchisee for any brand invests in their first unit, they’ve essentially bought themselves a job. It’s a salary replacement, and it can be profitable, but it’s limited. Once they start taking on multiple units, then the volume really starts to exceed the work they are putting in on a daily basis, and there’s no cap to that.”

To help Sport Clips franchisees quickly move from their first unit to their second and third, Wells says the franchise’s operational model is designed to allow franchisees to work on their business rather than in it.

“The biggest advantage is our manager-run model,” Wells said. “That’s what allows owners to step back from the daily operations of their salon and focus on the big picture of growing the business. The store manager is empowered to make day-to-day decisions, and the owner will monitor the salon’s performance and check in with the manager to make sure everything is running smoothly. So Sport Clips owners should never get so bogged down in the operations of any given store that they can’t focus on opening their next unit.”

To make sure Sport Clips is partnering with like-minded franchisees, the brand’s development team requires new owners to commit to a minimum of three units over a three-to-five-year period. Nick Powills, chief brand strategist for franchise PR company No Limit Agency*, says that initial commitment to opening multiple units is crucial to the success of the franchisee.

“Every new franchisee should have a strategy in place to become a multi-unit operator before they open their first unit,” Powills said. “It can be painful to take the earnings from your first store and invest it into a second if that wasn’t part of your investment strategy from the beginning. A franchisee who decides to take on one unit and sets aside growth plans until later may find that later never comes. There is no limit to the amount of effort you can put into running a single unit, so you may never feel comfortable stepping back from the first unit to open a second.”

Franchisees who do enter the business with a plan to open multiple units see a significant upside for their investment. Franchising is an economy of scale, and multi-unit franchisees typically see a much larger return on their second and third units than they do on their first.

“When you take out all of the costs of operating a business, it can be difficult to achieve significant wealth with a single unit,” Powills said. “When you start adding units, you are parlaying the initial investment to increase your total volume. Your marketing dollars benefit every unit, your customer acquisition costs benefit every unit, basically all of your spending is now benefiting all of your units, but you are getting separate volume from each, so with each new unit, your volume further exceeds your investment.”

There is also safety in numbers when it comes to franchising. “Diversification is crucial,” said Wells. “It doesn’t make sense to put all of your money into one stock, and the same goes for your business. If you only have one store and that store has a bad month, that’s going to really hurt. If you’ve got three or five stores and one has a bad month, it’s pretty easy to absorb that.”

Sport Clips three-unit requirement for new franchisees is not an arbitrary number. When a Sport Clips franchisee reaches three units, they can start thinking about hiring an area manager, allowing them to focus exclusively on high-level operations.

“When a Sport Clips franchisee hires an area manager, that’s when they are really managing a business from the executive level,” Wells said. “Three units also offers a number of benefits in terms of resources. If one store is low on staff, your area manager can reassign staff from another store, and the same goes for equipment and inventory.”

Sean Fitzgerald, No Limit Agency’s chief development strategist, says three is the magic number in multi-unit ownership.

“Three is really the elbow of the curve,” Fitzgerald said. “I’ve worked with hundreds of franchise brands. The most successful franchisees are always multi-unit operators, and three units is always where they start to take off. Once you have three units, the system is in place, and adding new units is solely about capital, which you now have coming in from three separate locations. Moving from three to ten units is a lot easier than moving from zero to three.”

While Sport Clips requires a three-unit minimum commitment from new franchisees, that has proven to be just a jumping off point for many of the brand’s owners. Today, Sport Clips largest franchisee owns 57 units, and dozens of other franchisees have unit counts in the double digits.

Fitzgerald says of all the franchise brands he’s worked with Sport Clips is among the best equipped to cultivate multi-unit ownership.

“Their business model is ideal for multi-unit,” Fitzgerald said. “There are a number of factors that go into that. One is simply the stability of the industry. Haircuts are not a trend business, they aren’t going anywhere, and because customers need to keep coming back, you’ve got that recurring revenue model. That allows franchisees to confidently build their business without fear of a turn in the market. Additionally, you’ve got the sophistication of a franchise system that has more than 1,700 units. The technology and operational systems they’ve developed in building such a sizable franchise system make it really easy for franchisees to get one store on its feet and then move on to the next. Then, of course, there’s the brand awareness that comes with a brand of that size.”

Most franchise systems encourage multi-unit ownership. It’s easier for a franchisor to work with fewer franchisees operating multiple units than more franchisees operating single units, and the cost of training and support is reduced for experienced franchisees, but Sport Clips has taken the lead in supporting multi-unit ownership in a way few other franchises have.

“We know the franchise model dictates what franchisees expect to achieve,” Wells said. “We want our owners to expect big things from Sport Clips. We’re not looking for franchisees who want to run a hair salon, we’re looking for franchisees who want to grow a business.”