Sharkey’s Cuts For Kids: a Profitable Franchise at a $194,500 Cost

Sharkey’s Cuts For Kids is one of the fastest-growing franchise in the hair salon industry: from 54 salons in 2018 it has 117 locations in the US today. We think there are a few good reasons for that: the franchise is not only one of the most affordable, but it can also be a very profitable business.

Indeed, at $194,500 Sharkey’s Cuts For Kids has a low price entry point vs. salon franchises in general (it costs on average $450,000 to buy and open a salon franchise in the US today).

In addition, you would make $230,300 revenue per year on average with one Sharkey’s Cuts salon. This also explains the 8 years payback, in line with similar franchises. Sounds like a great franchise investment doesn’t it?

In this article we are looking at Sharkey’s Cuts For Kids and its latest Franchise Disclosure Document to find out how much it really costs, and how profitable it really is. Let’s find out!

Key stats

Franchise fee	$129,995*
Royalty fee	$1,500 per month
Marketing fee	3.0%
Investment (mid-point)	$194,000
Revenue per unit	$230,000
Revenue per sq. ft.	$196
Sales to investment ratio	1.2x
Payback period**	8 years
Minimum net worth	$300,000
Minimum liquid capital	$144,990

What is Sharkey’s Cuts For Kids?

What is Sharkey’s Cuts for Kids?

Sharkey’s Cuts for Kids is a leading provider of kid’s haircuts, targeting children aged 0-14.

It provides a fun, kid-friendly environment, unmatched haircuts and hair care expertise. 

All kid’s haircuts include complimentary services and products such as wash, cut, fun chairs, mini-cure, balloons, lollipops, Xbox One and PS4 and glamour rings – to name a few.

Sharkey’s Cuts for Kids was founded by Linda and Scott Sharkey in 2001 and is headquartered in Michigan. 

The kids’ hair care brand has been franchising since 2004. 

Today, Sharkey’s Cuts for Kids operates in over 117 locations worldwide, with 114 franchised studios in the US. 

Sharkey’s Cuts franchises pros and cons

Pros

• Passive ownership: the passive ownership model allows franchisees to pursue different business interests. 
• Limited competition: hair care for children has little competition with high revenue potential. 
• Fun to run: an exciting franchise opportunity to interact with kids and their parents, creating a unique experience with high-income potential. 
• Recurring revenue model: frequent haircuts for kids attract constant and predictable income. 
• Multiple sources of revenue: diverse income streams, including haircuts for kids, birthday parties, unique merchandise and hair accessories.
• No mandatory experience: the training department handles the challenging parts of starting and operating a franchise, so you don’t need a hair-care background to get started. 
• Fast-growing industry: children’s hair salons are becoming increasingly popular in the US, Europe, Canada and the Middle East, making this a lucrative franchise opportunity with high growth potential. 
• Franchisor support: the franchisor offers personal, ongoing support to help franchisees start and operate a thriving business.  
• Financial support: Sharkey’s Cuts for Kids partners with third-party financial sources to help franchisees cover the cost of equipment, franchise fee, accounts receivable and startup costs. 
• Simple model: professional haircuts for kids is a simple business concept that franchisees easily emulate to reap the benefits.  
• Exclusive territory protection: the Franchise Agreement protects franchisees from competition against other Sharkey’s Cuts for Kids studios. 
• Longevity: Sharkey’s Cuts for Kids uses a recession-proof business model that thrives even in a downward economy. 

Cons

• Not a part-time investment: the franchisor doesn’t allow part-time ownership. 
• Not a home-based opportunity/a mobile unit: franchises cannot operate from home or as mobile units. 
• Minimum employee requirement: 6-8 employees are required to run a franchise.
• Competition from other children hair care franchises e.g. Pigtails & Crewcuts or Cookie Cutters

How much does a Sharkey’s Cuts franchise cost?

On average, you would need to invest around $194,500 to open a Sharkey’s Cuts For Kids franchise.

Of course, this is an average, as the exact amount depends on factors like location, size, etc. According to the latest Franchise Disclosure Document, the investment ranges between $163,500 and $225,500.

Sharkey’s is an affordable franchise: in comparison similar franchises require an initial investment of about $450,000 on average as per our own salon franchises benchmarks.

Also note that the investment may reduce to around $177,000 ($35,000 less) if you get a turn-key package from your landlord. Recommended by Sharkey’s Cuts For Kids, a turn-key is a contract with a landlord whereby the landlord provides the construction and/or remodeling to the franchisee as part of the real estate lease, which eliminates the need for hiring a contractor.

Sharkey’s Cuts startup costs

The investment covers all the startup costs you may need to start a salon. You must need to pay an initial franchise fee of $129,995 to the franchisor. In addition to this franchise fee, the investment also covers:

• Formation Costs: leasehold improvements, blue prints & plans, security deposit, permits, business licenses, professional fees, etc.
• Equipment: computer system & software, indoor & outdoor signage, lighting, washer, dryer, etc.
• Initial Marketing: grand opening advertising
• Operating Costs: insurance, first month’s rent, working capital for the first 3 months, etc.

Type of Expenditure	Low	High
Initial Franchise Fee	$129,995	$129,995
Formation Costs	$1,000	$44,750
Equipment	$15,500	$21,000
Initial Marketing	$10,000	$10,000
Operating Costs	$6,925	$19,750
Total	$163,420	$225,495

How much revenues does a Sharkey’s Cuts salon make?

A Sharkey’s Cuts For Kids franchised salon makes $230,000 in revenue per year on average.

This is the annual median sales of franchised salons operating in 2019 as disclosed in the FDD.

Even though the latest revenue numbers are out for 2020 and 2021, we do not consider they reflect the true performance of a Sharkey’s Cuts For Kids salon in 2023. Indeed, salons were strongly impacted by the pandemic. For example, revenue dropped from $230,000 in 2019 to $136,000 in 2020, a 40% drop.

When it comes to revenue per square foot, Sharkey’s Cuts franchises makes $196 in revenue per sq. ft., slightly lower than the average for salons franchises ($280 per square foot).

Median sales	2019	2020
Top 1/3	$336,686	$192,523
Middle 1/3	$207,087	$141,537
Lower 1/3	$143,031	$70,435
Median	$230,320	$135,870

How profitable is a Sharkey’s Cuts franchise?

We estimate that a Sharkey’s Cuts For Kids salon makes about $44,000 in profits per year.

This corresponds a 19% EBITDA margin, slightly below similar franchises (~25% EBITDA margin for salon franchises on average).

Note that Sharkey’s Cuts provide very little information when it comes to costs in its FDD (only royalty, marketing fees and rent. Instead we had to make assumptions by using salon franchises benchmarks to estimate EBITDA as shown in the table below.

Profit and loss	Amount	% revenue	Source
Revenue	$230,320	100%	as per FDD
COGS	$(6,910)	3%	industry average
Staff	$(92,128)	40%	industry average
Rent	$(42,000)	18%	as per FDD
Royalties	$(18,000)	6%	as per FDD
Marketing*	$(11,516)	5%	industry average
Other Opex	$(16,122)	7%	industry average
EBITDA	$43,644	19%

Should you buy a Sharkey’s Cuts franchise?

At first, Sharkey’s looks like an interesting franchise opportunity: the upfront investment ($194,500) is affordable compared to most salon franchises.

In addition to an affordable cost, the franchise is also a profitable investment. Indeed, one Sharkey’s Cuts salon makes on average $230,320 in revenues per year.

What about the profits? Assuming a 10% net profit margin (since we estimate EBITDA at ~19%), the payback of Sharkey’s Cuts For Kids is 8 years on average. In other words, you would repay all creditors (loans) and investors who funded the upfront investment of $194,500 in 8 years.

That’s a good payback, in line with most salon franchises as per our benchmarks.

Therefore, we can safely say Sharkey’s Cuts For Kids is a good investment when we look at profits and costs. Yet, keep in mind that financials shouldn’t be the only factor when choosing a franchise. Instead, other factors like competition, support or even training are also important factors to take into consideration.

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