So Gordon Logan (“Logan”) did some research . . . and according to his research, concluded that men were uncomfortable in hair salons, the barber shop was a thing of the past, and gender-neutral haircutters didn’t really fit the bill, either. Cue: Sport Clips.
Today, more than 1,768 locations later, Sports Clips is one of the most successful midpoint franchises, paying 6% of their sales in royalties and with corporate office reports of $4.2 million in net profits. But before taking the Logan Plunge to franchise a successful corner store, consider the following questions.
With any business structure, there are pros and cons to be considered. Why might you consider franchising your company? You may have a penchant for growth and key organizational and managerial skills, but don’t want to get bogged down in breaking ground and incurring continual start-up costs. After the initial legal costs of getting your business “franchise ready,” franchising can be one way to avoid outside investors, avoid new debt, and grow your business. Rather than incur the expense of getting each new store off the ground, time is spent on providing and refining operating instructions, trademarks, and ongoing support. And, although not the only factor for consideration, market reports may advise whether your business industry is conducive to franchising. In general, those businesses that are simple with readily replicated services tend to do well. Limited service restaurants, cleaning and maintenance companies, real estate companies, and senior care facilities have all been popular franchise industries.
Even if you have built a successful company in an industry ripe for franchising, the internal framework must be conducive to franchising. Although Sport Clips was expressly created to be franchised, it took two years for the first franchisee. Internal systems need to be established, easily replicated policy and procedure must be created, and the brand needs to be strengthened.
Establishing your franchise is a marathon, not a sprint. Grow slowly. Begin small, observe the business model, and then adjust. “Sport Clips took five years to amass 50 locations and another two years to surpass 100. ‘The measured growth,’ Logan says, ‘was largely a matter of not wanting to overextend the support system of training and supply distribution for the fledgling brand . . . It’s very tempting to expand too quickly and not be able to support it.’” [†] Most importantly, stay involved with the franchisees. Require that franchisees strictly adhere to franchise agreement terms, including policies on store appearance and products. Often, the key to success is slow growth and maintaining culture. Educational training and annual events are another great way to maintain contact and uniformity.
With all business endeavors, there can be significant legal and financial risks, so partner up with the appropriate professionals. Your legal, tax, and business advising team can help you navigate through state-specific regulations. For questions, call one of our attorneys at our Sioux City, Sioux Falls, or Omaha office.
[*]Strauss, Karsten (2018, June 1). How Gordon Logan Reinvented The Barber Shop And Made Sport Clips One of America’s Best Franchises. Retrieved September 25, 2018, from https://www.forbes.com.
[†]Strauss, Karsten (2018, June 1). How Gordon Logan Reinvented The Barber Shop And Made Sport Clips One of America’s Best Franchises. Retrieved September 25, 2018, from https://www.forbes.com.