Not A Barber Shop: A Salon For Men

Friday, August 17, 2012

By Focusing on a Niche Market, Gordon Logan's Sports-Themed Franchise Keeps On Growing

Gordon Logan has built a hair-care company that today spans 41 states. And Sport Clips Inc., his hair-cutting franchise based in Georgetown, Texas, is poised to open its 1,000th store before year's end.

Mr. Logan, 65 years old, started the company in 1993 and hasn't strayed from the men's market. Each salon is designed with elements normally found in a sports bar or a locker room, with flat-screen TVs tuned to sports programming and lockers and sports memorabilia around the shop. The company's tag line: "It's good to be a guy." The company started franchising in 1995 and has since grown to 930 locations. Last year was Sport Clips' best-not one store closed and retail sales at the stores hit $250 million, Mr. Logan said. In 2011, Sport Clips had 819 franchise stores and 22 company-owned stores. The parent company is expected to hit $33 million in revenue this year.

But as the male hair-care industry expands, it may become tougher for Sport Clips to compete. The number of men's establishments grew 5.5% in the past five years, compared with only 2.2% for the broader hair-care industry, according to research firm IBISWorld.

The market "is saturated," says Nikoleta Panteva, senior retail analyst at IBIS. With more than one million salons, barbershops and franchise hair-care shops, "consumers have so many options," she adds.

The Wall Street Journal caught up with Mr. Logan earlier this month to talk about the company's growth and to look back at the earliest days, when the chain was struggling to get off the ground. Edited excerpts: WSJ: How did you get the idea for the sports-theme salon? Mr. Logan: My wife and I have been in the salon industry for 33-plus years. We evaluated industry trends in the early 1990s, and identified that the traditional barber shop was fading away. Men had to go to unisex salons, beauty salons, or one of the chain salons that were positioned as family haircutters. We felt that if we developed a concept where a man or boy would look around when they walked in the front door and said to themselves, "this is my kind of place, I feel comfortable here," there was a huge niche market waiting to be explored.

We realized that men and boys don't typically look forward to getting a haircut, so we place a great deal of emphasis on the overall experience, [including] the ambience [and] stylists who are trained in techniques of how to deal with male haircuts.

WSJ: What was the biggest struggle the company had to overcome at the beginning? Mr. Logan: Running out of cash is the worst thing that can happen to an entrepreneur and it almost happened to us. We were operating three different [salon brands]. In 1994 we had a major loss because of embezzlement by a trusted employee, which almost put us out of business due to unpaid taxes that this employee had covered up and shortage of cash. We realized we had to focus our limited resources on one concept, and we sold the other two. By being focused on [Sport Clips], we were able to bring our full attention to making this one work.

WSJ: You were a franchisee for a hair salon in the 1980s. Is that why you decided to turn your own company, Sport Clips, into a franchise system? Mr. Logan: We wanted to build the brand as quickly as possible, with limited resources that prevented us from opening very many company-owned stores.

The original concept was to award [licenses for six stores at a time]-where we operated the stores for a management fee. It was more of a limited partnership-type arrangement than a typical franchise. We sold one within weeks-and no more for the next 18 months. We realized we needed to shift to a three [store] format and a typical franchise arrangement similar to what we have today. This false start cost us about two years at a very critical time in our development, which we could not afford. We were able to obtain private-equity money to tide us over, which we repaid within a few years and bought back the third-party equity position.

WSJ: Some companies expand into new services as they grow. Why aren't you straying from your core market? Mr. Logan: Having been in full-service before, it's a more complicated business. It's harder to maintain the consistency in the franchise. Here, there are fewer moving parts and less inventory involved because we don't do perms or colors.

WSJ: Coming off your best year, what's next for the franchise? Mr. Logan: We're looking for major international expansion in the next three to five years. We just signed our first master franchisee internationally, in Canada. We're also looking into China, India and Mexico.

WSJ: At 65, are you considering an exit plan? Mr. Logan: My 26-year-old son is actively involved in the business, and he's helping to run the company stores in Austin and Las Vegas. We are grooming him to take over when I step aside. It won't be this year or next year. I'm having too much fun.

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110 Sport Clips Wy.
Georgetown, TX

Phone: (512)869-1201
Toll Free: (800) 655-9679
Fax: (512)869-0366

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