One of the leading hair salon franchise, since its founding in 1995 Sport Clips has expanded aggressively and now has more than 1,750 salons in the US. In addition to a rather simple business model, Sport Clips is also an affordable franchise for whoever wants to get into the hair salon industry.
Indeed, you would need to invest on average $353,000 to open a new location, less than salon franchises in general ($450,000 as per our own salon franchises benchmarks).
But is this a profitable business? With a revenue of $379,000 and a EBITDA margin of 23% the average Sport Clips salon makes $86,000 in profits per year. Not bad.
In this article we’re looking at Sport Clips from the perspective of its Franchise Disclosure Document to find out how much it really costs, how much profits you can make and whether it’s a good investment for franchisees. Let’s dive in!
|Revenue per unit||$379,000|
|Revenue per sq. ft.||[franchise_value_revenue_per_sq_ft]|
|Sales to investment ratio||1.1x|
|Minimum net worth||$400,000|
|Minimum liquid capital||$200,000|
What is Sport Clips?
Sport Clips is an American hair-cutting franchise focused on men and boys. It is based in Georgetown, Texas.
The franchise was founded in 1993 by Gordon Logan in Austin, Texas.
It began franchising in 1995 and today has over 1,779 franchises in the US and 1,895 worldwide.
Sport Clips franchises pros and cons
- Pre-opening training: The franchisor offers its franchisees a detailed on-the-job and classroom training curriculum. It trains them about the business system, including launching their salons, operations, equipment use and hiring the right staff.
- Third-party financing: Sport Clips offers its franchisees financing through third-party lenders. Franchisees get funding for startup costs, franchise fees, equipment, inventory and payroll.
- Site selection and build-out: The franchisor provides the franchisees with site selection assistance to identify a viable salon location in terms of traffic and growth demographics. Also, it helps them in the construction and set-up of the salons.
- Stylist recruitment guidance: The brand offers franchisees assistance in hiring, training and retaining the best talents to run their salons.
- Marketing plans: Sport Clips has an experienced marketing and advertising team to help its franchisees promote their businesses and public relations. Franchisees can leverage the brand’s popularity and other promotional tools such as national media, social marketing, email marketing and personalized local salon advertising programs.
- Part-time business: The franchise can be operated on a part-time basis as a side business. Franchisees get the freedom and flexibility of owning a business and can achieve a good work-life balance.
- Extensive support and ongoing coaching: The brand has an experienced team to help franchisees establish and run their salons successfully. Franchisees get help with a proven business model, professional business directors, a network of successful business partners and field coaches.
- Recession-resistant concept: Sport Clips provides franchisees with stability, confidence and growth potential. It focuses on the underserved market which helps franchisees to scale and grow into multi-units fast.
- Manager-run: The franchise allows for absentee ownership. Franchisees can employ managers who are actively involved in the salon’s daily activities as the owners concentrate on growing to multiple units. Therefore, franchisees don’t have to leave their day jobs.
- Not a home-based or mobile business: A Sport Clips business cannot be operated from home or a vehicle. Franchisees need to have a fixed office space, retail facility or warehouse.
- No Exclusive Territory Protection: The franchisor does not grant its franchisees an exclusive protected area to operate in. The franchisees may face competition from franchises granted by the parent company or from competitive channels and brands it controls.
- Competition: The franchise faces stiff competition from brands such as Great Clips, Cost Cutters, Fantastic Sam’s and Hair Cuttery.
How much does a Sport Clips franchise cost?
You have to invest around $352,900 to open a Sport Clips franchise store, which is typically 1,000 to 1,500 sq. ft. in size.
This is an average. Indeed, the investment varies based on a number factors like the location of your salon, its size and other factors.
In addition to the initial franchise fee ($30,000 – $69,500) that you must pay to the franchisor, you would also pay for the leasehold improvements, furniture and fixtures, signage, equipment, professional fees, insurance, etc.
Sport Clips startup costs
Here’s the full breakdown of costs:
|Initial franchise fee||$30,000 – $69,500|
|Leasehold improvements||$90,000 – $150,000|
|Fixtures, and equipment||$58,000 – $68,000|
|Signage||$4,000 – $8,000|
|Professional fees||$1,000 – $3,500|
|Insurance||$1,300 – $2,500|
|Additional Funds- 6 months||$40,000 – $75,000|
|Other||$42,000 – $63,000|
|Total||$266,300 – $439,500|
How much revenue does a Sport Clips make?
A Sport Clips franchise makes $379,054 in sales per year on average, or $303 in revenue per square foot.
This number is the average sales per franchised Sport Clips for 1,439 franchised salons out of the 1,778 that were open for all of 2021 (as disclosed in the FDD).
How much profits does a Sport Clips salon make?
On average, a Sport Clips franchise makes $86,459 in profits per year. This corresponds to a 23% EBITDA margin.
So is Sport Clips a profitable franchise? Whilst 23% EBITDA margin isn’t necessarily bad, it’s not the best profit margin across the industry. Indeed we found that salon franchises have EBITDA margin around 27-30% on average.
We calculated this number using the information available in the Franchise Disclosure Document 2022. Fortunately, Sport Clips provides detailed information on the cost structure of its company-owned stores, to which we added royalty fees.
|Profit and loss||Amount||% of revenue||Source|
|Revenue||$379,054||100%||as per FDD|
|Variable costs*||$(26,534)||7%||as per FDD|
|Royalties||$(22,743)||6%||as per FDD|
|Staff||$(162,993)||43%||as per FDD|
|Rent||$(50,000)||13%||as per FDD|
|Marketing||$(18,953)||5%||as per FDD|
|Other operating costs||$(11,372)||3%||as per FDD|
Source: Franchise Disclosure Document (2022)
Should you invest in a Sport Clips franchise?
So should you buy a Sport Clips franchise? Are the profits worth the estimated initial investment $352,900 you would have to make to open a new location?
Well we think it does. Indeed, the payback for a Sport Clips franchise is 6 to 8 years on average (assuming a 12-15% net profit margin).
This means that you would repay all creditors (banks) and investors only 6 to 8 years after the initial investment by using the profits generated by your salon.
Yet, keep in mind this is an estimation based on both the average performance of the Sport Clips salons as disclosed in the FDD and our own benchmarks. There is no guarantee your salon will perform the same.
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