An Evaluation of the Franchise Market for Hair Salons

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An Evaluation of the Franchise - Sharkey’s Cuts for Kids

The Franchise Concept

In the US the children’s haircut market is estimated to be worth $5 billion. In 2008, according to the Franchise Times, Sharkey’s was the fastest growing children’s salon franchise. Scott Sharkey, CEO, opened his first salon in 2002 and currently operates 25 premises throughout the US and Canada with a commitment to open another 235 stores worldwide. Their first UK franchise opened in the Isle of Man in 2010.

The organisation aims to provide children’s haircuts in an environment that is relaxed and fun. Children sit in Fighter Planes, Barbie Jeeps or on Harley Davidson Motorbikes, watch DVD’s or play X-Box games. In addition to haircutting, Sharkey’s has a number of other revenue streams. They host children’s birthday parties or “glamour parties”, sell gift merchandise such as a commemorative photos and operate a mini arcade with video games and pinball machines. Appointments can be made on-line and customers are encouraged to repeat visit through a punch-card loyalty scheme.

Sharkey’s is a business format or second-generation type of franchise. The franchisee pays an initial fee and ongoing royalties thereafter. The royalties are described as being “lower than average”. The organisation provides initial training and continuous support.

The minimum investment required to open a salon in the UK is £49,500. This is for a ‘Junior’ style package, with premises in the region of 600-800 square feet. The price includes furnishings, equipment and retail merchandise. The franchisee is only required to pay for the basic interior decoration. The ‘Deluxe’ model which is typically 1500-1700 square feet and costs around £70,000, includes the main salon plus 2 additional rooms which can be used for birthday parties, meetings etc. Financing is available on up to 75-80% of the cost. Franchisees with adequate business skills are encouraged to open multiple salons.

The franchisee’s dependency

Sharkey’s describes itself as offering “unsurpassed, dedicated franchisee support” that includes: • 4 days of comprehensive training
• Site selection & negotiation
• Salon design and layout
• Grand opening and continuous marketing programs
• On-site assistance during grand opening week
Training is provided at a Sharkey’s salon and includes 2 days of hands-on management. Ongoing field support is available as well as ad hoc training sessions. All research and development is shared amongst franchisees and new ideas are encouraged. Owner meetings are held regularly where franchisees discuss operations and marketing issues. In addition there is regular communication via a monthly newsletter. Franchisees have direct access to the CEO.

Training includes:
• Purchasing and inventory procedures
• Quality control measures
• Retail Merchandising
• Point of sale instruction
• How to increase sales through add-on sales
• Financial controls
• Marketing, advertising and grand opening guidelines
• Business development and management
• Human Resources Support

The franchisee is operating under an established brand and it is in Sharkey’s interest to protect their corporate identity however, whilst contractually the franchisee is answerable to the CEO they do appear to have significant autonomy. Stanworth and Purdy (2006) highlight that whilst a franchise relationship may appear to be dependent contractually, operationally the franchisee is likely to operate far more independently than at first seems apparent.

Royalties are paid to Sharkey’s based on a percentage of the salons turnover however the rate is not specified. Whilst in this respect the franchisee is beholden to the franchisor, it is of course in both parties interests to ensure the salon is financially successful.

The franchise affords flexibility. Whilst Sharkey’s encourages owners to be present...
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