Franchise Report Discover the Fantas/c Sams Franchise Opportunity
2 of 20 The Fantas*c Sams Story How Fantas*c Sams created the first unisex salon franchises, and how we con*nue to lead the way Barbershops have always had a lot of appeal and a loyal clientele, because customers can get what they need quickly and at a reasonable price. Fantas,c Sams founder Sam Ross observed the barbershop phenomenon and thought, why not offer those services to the whole family? So in July 1974, he opened one of the first unisex salons that offered everyone the barbershop formula of convenience, affordability and familiarity. In 1976, he began franchising his concept, making Fantas,c Sams the first na,onal unisex hair salon franchise. As for the name, the story goes that as he finished up a par,cularly det cut on someone in his chair, the client said, That s fantas,c, Sam! and a legacy was born. He felt it could be a place for kids to get their hair cut, where men could get barber-style service and women could get a whole range of basic salon services cuts, color, waxing at an affordable price, says Bob Loffredo, Chief Development Officer. It would be a convenient, one-stop salon where people would be loyal. As a result, the majority of our customer base is families. Much more than a kids hair salon Fantas,c Sams helps make things easier for busy parents with,ght schedules, because it just makes more sense to have the whole family get their hair cut in one salon. That makes it very convenient for a
3 of 20 client to make an appointment for their own cut and color, bring the kids along, and while one stylist abends to the parent, another is working on the kids. Everyone leaves together, looking fantas,c. There are kids hair salon franchises out there that specialize in children s haircuts, but our stylists are trained to accommodate everyone. Why not just a men s hair salon? Men love barbershops because they can walk in, get their hair cut and their beards trimmed, and walk out again to get on with their day. Fantas,c Sams emulated this part of the barbershop experience early on because our founder knew the walk-in experience was an aspect everyone could appreciate. When salons specialize in just one type of customer, they re cugng themselves out of the poten,al revenue streams that an all-service salon like ours can take advantage of. Redefining hair salon franchises In 2012, we became a part of Dessange Interna,onal, the premium-luxury European salon chain. The core of what we do and who we are remains the same, but with Dessange Interna,onal, Fantas,c Sams has entered an unprecedented period of growth. We currently have nearly 1,100 salons in the U.S., and our goal is to double that number in the next few years. Dessange is known throughout Europe as a high-end, cugng-edge trendseber in the area of hairstyles. Evidence of that innova,on comes in the form of our New Image salon a top-to-bobom redesign of the Fantas,c Sams salon experience that includes new logos, imagery and a sleek, ultra-modern salon interior designed to feel like a high-end salon experience without the high-end salon price. We embrace the opera,onal philosophy envisioned by our founder while con,nuing to innovate. We not only offer haircuts and styles. We also provide processes like perms, straightening and color, as well as facial waxing. We sell salon-quality products to our clients, which helps provide an addi,onal revenue stream to our franchisees. Clients love us because we make them look great. Franchisees love us because they can start the business quickly and easily add more salons to increase their return on investment and build their net worth.
4 of 20 Salon Industry Overview: Why It Pays to be More Than a Haircut Franchise Experts see a promising future for salon and haircut franchises The beauty industry is a $75 billion business. The services Fantas,c Sams provides cannot be replaced by technology, streamed through the Internet or outsourced to another country. That s one of many great reasons to invest in our haircut franchise. Our salons are all very stable, says Marilyn Tokatly, a franchisee with six salons in California. We have an excellent staff that preby much runs the show. Fantas,c Sams has excellent training. I took all my managers through the management cer,fica,on program, so they know everything they need to do to run a successful Fantas,c Sams, and they do it. I s,ll do a lot of work, but they handle the daily opera,ons. How Fantas*c Sams bests haircut-only franchises In the stable and growing salon industry, we ve proven our staying power in the past four decades. Now, with our updated New Image salon design, we ve evolved far beyond the familiar brand you might remember from your youth. Today, we are a franchise nearly 1,100 loca,ons strong, and we re growing quickly. This is a category that will never go away, says Ruth Swanson, Vice President of Marke,ng. It will always take one-on-one personal skill. It can t be automated, and it can t be outsourced. In an industry that will always be in demand, Fantas,c Sams stands out. We were the first franchise of our kind in the full-service salon space, and we re s,ll going strong ater four decades in the business. Now, with our more modern salon aesthe,c and full menu of services, we re redefining the value space, abrac,ng scores of new customers and building an en,re new genera,on of Fantas,c Sams clientele.
5 of 20 How our New Image Salon helps boost boiom line Our sleek Color Bar is the centerpiece of the redesigned New Image salon. Clients come into the salon for a cut, and they can immediately see that we focus on color, too. That usually prompts a conversa,on with the stylist about all the services available and what might work best for the client. They ll also talk about our lines of shampoos, condi,oners, styling clays and sprays and other products designed to boost revenues and help clients keep their style fresh between visits. Everything is designed to feel like a high-end salon, without the high prices but with the aben,on to detail and innova,on clients truly appreciate. That s something haircut-only franchises don t offer, and that gives us an edge in the marketplace. Other franchises are just cugng salons, says John Prichard, a Fantas,c Sams franchisee with 27 salons in Minneapolis. They have a few extra services, but those services are preby minor in terms of what they provide. The guest service and training and development model that we have allows new owners to step into a fullservice hair salon environment and be well supported and stronger than what I ve seen from compe,tors. TISH SHADE PARKER, CO "I have been going to the owner and her staff for over 10 years. I have 8 children and they have all grown up using this salon for haircuts. The owner has a sharp business sense and understands the value in customer service"
6 of 20 What Are the Startup Costs? Startup costs for our salon franchise opportuni*es Star,ng out as a new salon entrepreneur, you can take advantage of mul,-unit incen,ves by entering into a 3-pack, 5-pack or 10-pack agreement, or you can open a single salon if you prefer to scale up at your own pace. This is a great way to carve out your own piece of the market for future growth and opportuni,es. The business model is simple and easy to scale. Here s a look at our startup costs from Item 7 in our Franchise Disclosure Document. Type of Expenditure Amount (Low-High) Method Of Payment When Due To Whom Payment Is To Be Made Ini,al License Fee $30,000 Lump Sum When you sign the License Agreement Fantas,c Sams Franchise Corp (FSFC) New Owner/SFC Training Fee $1,000 to $2,000 Lump Sum Before your Training FSFC Travel and Living Expenses For You and Your Employees During Training $1,500 to $3,000 As Incurred During Training Airlines, Hotels & Restaurants Leasehold Improvements (including architectural fees) $30,000 to $125,000 As Incurred Before you open your Salon Landlord, Suppliers & Contractors Rent $1,600 to $7,000 Lump Sum Before you open your Salon Landlord & Suppliers U,lity Deposit $500 to $1,500 Lump Sum Before you open your Salon U,lity companies
7 of 20 Type of Expenditure Amount (Low-High) Method Of Payment When Due To Whom Payment Is To Be Made Ini,al Haircare Product Inventory (3 month supply) $8,000 to $14,000 As Incurred Before you open your Salon FSFC Other Distributor Salon Equipment $25,000 to $37,500 Lump Sum Before you open your Salon Suppliers Other Equipment, Fixtures, and Furnishings $6,262 to $16,506 Lump Sum Before you open your Salon Suppliers Salon Supplies - Non Technical (3 month supply) $2,500 to $4,500 As Incurred Before you open your Salon Suppliers Salon Iden,ty and Graphics Kit (interior graphics) $500 to $2,000 Lump Sum Before you open your Salon FSFC Other Distributors Adver,sing (first 3 months) $7,500 to $15,000 As Incurred As Arranged Suppliers Insurance $1,000 to $9,000 Nonrefundable as required As Incurred Insurance Company Addi,onal Funds - 3 Months $30,000 to $50,000 As Incurred As Arranged Employees, Suppliers & U,li,es TOTAL $145,362 TO $317,006
8 of 20 Is Mul*-Unit Ownership Possible? Fantas*c Sams franchise hair salons are perfect for mul*-unit ownership We ve created a business model for franchise hair salons that is perfect for two types of owners: the owner-operator with salon experience who has always wanted to own their own business, and the entrepreneur with no salon experience who wants a proven franchise in a stable industry that is experiencing steady growth and is recession-resistant. Our salons are so easily scaled that 70% of our franchisees are mul,-unit owners. Financing made easier The Fantas,c Sams Strategic Bank program makes it easier for franchise owners to scale more quickly. Fantas,c Sams has formed a strategic alliance with The Bancorp Bank and Radius Bank that provides start-up funding for franchisees entering the Fantas,c Sams system, as well as expansion and remodeling funding for exis,ng franchisees. The Bancorp s franchise lending program is a unique approach to franchisee lending. The collabora,ve effort between The Bancorp and Fantas,c Sams was specifically created to expedite startup and expansion projects for new and exis,ng franchisees who meet predetermined qualifica,ons. The Bancorp program is limited to franchise systems with measured performance and experience within their opera,ons. The Prichards Story John and Pag Prichard are the largest mul,-unit franchisees in the Fantas,c Sams system, with 27 salons in the Minneapolis area. John knew from the outset he wanted to own more than one salon, based on the research they did before they joined our franchise family. With such an easy-to-scale, simple business model, John, a former CFO for a na,onal bakery, was impressed with Fantas,c Sams performance in an already-stable industry. He and Pag appreciate the level of support offered to franchisees, which makes it easier to be profitable and own mul,ple units. We follow the guest services model very closely, as well as the opera,onal model. We are very ac,ve and involved in leading our teams and holding them accountable for providing a high level of guest
9 of 20 services, and we also expect them to take advantage of training to develop their skills, says John. We get great support from Fantas,c Sams corporate, which offers a lot of coaching, mentoring and training. Although many franchisees start with just a single unit, most of our salons are operated by mul,-unit owners. That s because Fantas,c Sams operates in an industry with long-term economic stability, and we strive to make it easier for investors to own mul,ple units through financial incen,ves as well as our rela,onship with The Bancorp. That s why we re s,ll at the top of our game ater more than 40 years. Manage the manager of your franchise hair salons How do these individuals and our many other successful mul,-unit owners manage? The short answer is our business model, which makes easy work of managing mul,ple loca,ons. Our franchisees don t need any salon experience; they just need a solid business background. Owners typically hire licensed cosmetologists to manage the salon and work with the stylists. A mul,-unit owner can shine by staying on top of marke,ng and managing the manager, a skilled General Manager who can make sure stylists are on top of their game and clients always leave happy. One GM can handle two or three salons, so franchisees can create a,ered management system that makes it easy to understand what s going on at any salon at any given moment. Geographic diversifica,on makes more sense to some owners, who like the idea of inves,ng in mul,ple units so that they can build an interconnected network of businesses that support one another.
10 of 20 Stable industry, diversifica*on strategy In the franchising world, there are almost limitless op,ons to choose from. Savvy investors will be able to spot Fantas,c Sams advantages almost right away. I looked at a lot of business models, and Fantas,c Sams stood out, says John Prichard, the former CFO. I did a lot of due diligence, talking to exis,ng franchisees and going into a lot of detail with them so that I could get a feel for the profit-loss metrics and the cash-flow model things that the franchisor is precluded from talking about. It was easy for me to come up with break-even points and see the upside opportunity. The financial exercise was key to me deciding to get into the business. Fantas*cs Sams Customer Mix 35% 55% 10% Women Children Men
11 of 20 What Training and Support Does Fantas*c Sams Offer? Ongoing training from experienced operators Fantas,c Sams offers our franchisees extraordinary field support. Many members of our support team have 20-plus years as successful managers and owners themselves, so they understand what it means to learn a business from the ground up. We provide educa,onal training to our stylists three,mes a year to make sure they stay at the forefront of hair care. Fantas,c Sams is a state-of-the art salon offering a full array of services and products, and we provide our franchisees with as much guidance and support as possible. That made a difference to Michael Kuryllo, who owns 19 salons in Southern California. I looked at Supercuts, Subway and coin-operated laundromats. I didn t think Supercuts and Subway were user-friendly for new franchisees; Fantas,c Sams was much easier to work with, Michael says. As we looked into it, we liked the educa,on program they had, and it seemed like they had more support for new owners. I chose Fantas,c Sams because they had the best training for owners and their staff. A responsive management team and robust field-level support Franchisees know they can count on one thing from us: Everyone on our execu,ve team always calls back. While some franchise companies frustrate their owners by being nonresponsive, we priori,ze our franchise owners.
12 of 20 We also have regional franchise experts who can step in when someone on the execu,ve team isn t available. Every region has its own regional director, opera,ons specialist and stylist educator. When a new salon opens, the educator helps interview managers and stylists to make sure their technical skills are up to par. Once the staff members are in place, they abend a training boot camp where they learn everything from how to greet customers at the door to the ins and outs of the Fantas,c Sams exclusive product line. The opera,ons team trains franchisees on salon fundamentals like scheduling and increasing their bobom line. In addi,on to monthly mee,ngs for franchise owners and their managers, educators hold monthly mee,ngs and periodic classes on color, cugng techniques and more. Franchisors and franchisees some,mes have conten,ous rela,onships, but at Fantas,c Sams, we believe we re here to serve you. If your business is a success, then so is ours. I love franchising. I think you have to appreciate that the franchisee is a unique individual, says John Costanza, CEO. They re entrepreneurs, and that s what America s built on. It s really their business, and you have to have the mentality of a servant leader. You have to if you re going to be in franchising. You have to be willing to help.
13 of 20 What Makes a Good Loca*on? Opening your hair care franchise where people already shop is key A big part of success in any business is loca,on, and that s key to our strategy at Fantas,c Sams. Our hair care franchise is all about convenience, so that s the most important factor in any of our salon loca,ons. Our business model works well in areas where there s a certain density of middle-income families perhaps 30,000 rootops within a 3-mile radius. Over the years, we ve learned that our customers are looking for free parking and easy access. Fantas,c Sams hair salons work best in shopping areas anchored by high-frequency retailers such as big-box retail or grocery stores, places where people are likely to go shopping two to four,mes a week. That s when our walk-in model pays off. If a customer knows she can drop off her husband and the kids for haircuts while she does the weekly shopping, or pack the husband and kids off to the soccer game while she gets her color done, it s a win-win. Earl Wise owns several Fantas,c Sams salons in the suburbs surrounding Detroit. He understands what it takes to be successful as a franchise owner. Loca,on is extremely important, he says. Having an anchor store in a good loca,on is key. If you can build a 1,200-square-foot shop in retail space that is visible to about 20,000 cars a day, in an easily accessible area near or in the midst of densely populated neighborhoods, you ll be star,ng strong right out of the gate.
14 of 20 Opening your hair care franchise where people already shop is key Part of finding the right loca,on is making sure the shopping center has a lot of foot traffic and includes a high-frequency retailer, which helps us intersect with the customers we want. Our support team helps franchisees pinpoint the best loca,ons to start new salons, reviewing and ra,ng site selec,ons and calling on our exis,ng rela,onships with commercial brokers. One of the things we advise when someone first opens in a new space is to send the stylists to the retail neighbors bearing gits of discount coupons. It s a great way to get to know neighbors, while genera,ng some early business and word-of-mouth. And it s a great way to start carving out your niche in the community, which is an important piece of the marke,ng puzzle. The salon needs to be large enough to accommodate eight chairs, as well as shampoo sta,ons, a front desk and a storage area for products. In our modern New Image salon design, product is strategically merchandised in a prominent part of the store. We cul,vate an atmosphere that communicates to clients that they will have a great salon experience. This idea is reinforced when they begin interac,ng with professional, courteous and knowledgeable salon staff and stylists. Loca*on, loca*on, loca*on LaRonda Hunter owns five salons in the Dallas-Fort Worth area, including one that s in the Fantas,c Sams Top 50. She says she can abribute some of that success to the loca,on of her salon in Saginaw, a suburb of Fort Worth. I knew nothing about the hair salon business whatsoever. That s actually why I decided to buy a franchise versus trying to open my own business, Hunter says. I knew I d need help in learning the ropes. I wanted access to people who could teach me. Fantas,c Sams has certainly done that for me. I have a manager and stylists who always want to do their best. They help me be successful. They work at it, and it makes all the difference in the world to the bobom line. Of course, your loca,on can make a big difference. My Top 50 salon is in a great loca,on with a lot of foot traffic.
15 of 20 With more than 1,100 loca,ons across the country, a 40-year history in the salon franchise business and a solid posi,on in a very stable, $75-billion-a-year industry, Fantas,c Sams has much to offer for the experienced investor. How Do I Finance My Fantas*c Sams? Franchise owners can choose among a variety of financing op*ons Financing your own business may not be as difficult as you think. We have more than 1,100 loca,ons na,onwide, and our franchisees have tapped a variety of financing sources over the years conven,onal loans, SBA loans, re,rement loans and home-equity loans, as well as unconven,onal funding sources. Fantas,c Sams has dedicated partnerships with large lending ins,tu,ons that help streamline the loan process. Here s a look at some of the ways you can finance your Fantas,c Sams franchise: The FantasTc Sams Strategic Partnership Financing. Through our strategic partnerships with The Bancorp Bank and Radius Bank, poten,al Fantas,c Sams franchisees can obtain financing approval during the applica,on process without the hassle normally associated with obtaining a business loan. Since The Bancorp Bank and Radius Bank have already partnered with Fantas,c Sams, franchisees will benefit from a streamlined approval process, dedicated bank loan officers and the convenience of avoiding considerable financial filings with the banks.
16 of 20 Local and community banks. The biggest single source of financing is local banks, which are supported by guarantees through Small Business Administra,on loan op,ons. Local banks are oten less restric,ve with candidates who are building loca,ons in their communi,es. TradiTonal Small Business AdministraTon (SBA) loans. Fantas,c Sams is an approved franchise on the SBA Na,onal Registry, which is accessible to all SBA commercial lenders. The SBA registry offers a list of franchises that have had their Financial Disclosure Documents and opera,ons vebed by the SBA, giving lenders access to informa,on that minimizes their risk. Fantas,c Sams presence on the registry saves several steps in the SBA lending process for franchisees. 401(k) or IRA. A franchisee or a franchisee s family member can tap into 401(k) or IRA re,rement savings to fund a business without facing financial penal,es for early withdrawal as long as they do it the right way. Using re,rement funds requires a series of legal steps, including the crea,on of a C corpora,on and corporate re,rement account, and movement of corporate stocks. It has become a popular financing op,on because it allows you to, in effect, lend money to yourself..a close-up of a shampoo sink. Cash. While Fantas,c Sams requires a minimum liquidity of only $100,000, you may have more capital you could use to get started. If you have the liquidity, cash is always a great way to invest. Your savings could be the key to unlocking a rewarding investment without the hassle of third par,es, tax penal,es or interest rates. Home equity line of credit. Depending on the housing market in your area, you may be able to leverage the equity in your home and pull out enough capital to purchase your franchise. You also might be able to secure a line of credit based on a por,on of your home equity, which can help with ramp-up costs. Minimum requirements for star*ng a salon franchise Startup costs for Fantas,c Sams range from $145,362 to $317,006, according to our Franchise Disclosure Document. Franchise candidates need a minimum net worth of $300,000 and at least $100,000 in liquid capital. The numbers will vary depending on how many units are purchased, since we offer deals on three-, five- and ten-salon packages. The investment is also dependent on whether you will renovate an exis,ng salon or build a new one, as well as a number of other factors.
17 of 20 FAQs Answers to common ques*ons about owning a Fantas*c Sams franchise How much does a Fantastic Sams franchise cost? The total investment for a Fantas,c Sams franchise ranges from $145,362 to $317,006, including ini,al franchise fee and working capital. How much is the franchise fee for Fantastic Sams hair franchises? New franchisees pay a $30,000 franchise fee upon signing the franchise agreement. Mul,-Unit Development Agreements (MUDAs) are available at a significant discount. What are the financial qualifications to become a franchisee? We are seeking someone with a minimum net worth of $300,000 and at least $100,000 in liquid capital. How long does it take to open a Fantastic Sams? On average, from the,me you sign a franchise agreement to the,me you open is 90 to 120 days. Do I need to have salon experience before opening a salon? No. We re looking for entrepreneurs and managers with prior business experience. Fantas,c Sams provides an easy-to-operate, scalable investment. You ll hire others who understand the hair care and salon business; your primary focus will be on handling the business side of things. What is the best location for a Fantastic Sams? Our salons work best in places where busy people are already doing their errands three or four,mes a week, like shopping centers anchored by big-box retailers and grocery stores. Earl Wise BRIGHTON, MI I never thought I d own a hair salon. It was the furthest thing from my mind. But it made total sense, especially from an affordability standpoint. As it turned out, I didn t really need to have experience in the hair and beauty field. It probably would have helped me if I had, but it wasn t necessary.
18 of 20 How stable is the salon industry? The $75 billion hair care salon industry is growing at a steady annual pace. Even when the economy is tough, people s,ll need haircuts, and they s,ll want to look good. Hair color and haircuts at Fantas,c Sams are affordable and convenient, which brings clients back again and again. What kind of marketing support do you offer? Our Marke,ng Department and Region Teams work with each franchisee to tailor the perfect plan to promote Fantas,c Sams salons within their communi,es providing printed materials, coordina,ng mass mailings and helping with limited-,me promo,ons and grand openings. Jerry Dalzell SCOTTSDALE, AZ I think it s recession-resistant. Everybody needs haircuts. We offer family hair care at a mid-range price point. We are not going ater the high-income folks, but I have stylists I d put up against anybody stylists who are very skilled and talented, as well as some who are young and whom we are developing. We offer a great value at a reasonable price. How can I get a copy of the Franchise Disclosure Document (FDD)? Now that you have filled out the form on the site, a member of our franchise development team will be in touch with you as soon as possible for an ini,al conversa,on. ATer having a brief interview with a development representa,ve, we will send you a copy of the FDD. Who are my main customers? Fantas,c Sams salons offer a full slate of salon services, including on-trend haircuts, styling, facial waxing and our specialty, hair color. When a new salon opens, the clientele is made up primarily of men and children. As the salon begins to mature, the percentage of female customers increases, as does average,cket price. Can I hire someone to run my salon franchise? Yes. Many of our franchisees start out as owner-operators and hire a General Manager as they add more salons. Others hire a GM right away to help them manage opera,ons.
19 of 20 Next Steps What to expect when you buy a Fantas*c Sams salon franchise 1. Initial welcome and pre-qualification call You will be asked to submit an applica,on, and we ll conduct an introductory interview to discuss your desired market territory, financial qualifica,ons and mo,va,on. We ll agree to a process,meline during this call. 2. First interview During this call, we ll review your background, discuss your long- and short-term goals and discern whether you re a good fit for Fantas,c Sams. We ll provide a process overview and discuss your financing op,ons. We will send you a copy of our Franchise Disclosure Document (FDD). 3. FDD review A Franchise Development Representa,ve will provide an overview of the FDD, explain the terms of the franchise agreement and talk about expecta,ons. 4. Region Director call Our Region Director (RD) for your area will schedule a call with you. You ll be able to ask ques,ons about on-boarding; site selec,on, construc,on, marke,ng and field support; and what to expect as a Fantas,c Sams franchise owner. 5. Validation You will have an opportunity to call, email or visit exis,ng Fantas,c Sams franchise owners to gain a beber understanding of what it s like to be a franchisee in our system. We will schedule a salon tour and a Discovery Day, and you will be able to meet with the Regional Field Team.
20 of 20 6. Operations Specialist call You will gain a more in-depth understanding of your role as a franchise owner, how our Opera,ons Team supports you in that role and how your success will be measured. You will also prepare a business plan summary and pro forma ater this call. 7. Finance strategy call We ll discuss how to properly capitalize and grow your business. You ll speak with our Brand Capital Strategist about your best financing op,ons and how to complete your loan applica,on or take the next steps toward securing financing. 8. Final candidate approval We will conduct a background check and prepare the final documents for you and your legal representa,ve to review before signing. We will set a signing date, and at the scheduled,me you will sign your Franchise Agreement. 9. New franchise owner on-boarding Our experts will help you choose the best possible site for your Fantas,c Sams and walk you through the construc,on process. You and your designated manager or managers will abend New Owner Training to learn Fantas,c Sams Salon Fundamentals, which cover everything from back-office processes to guest service protocol. 10. Grand opening You can expect to open your Fantas,c Sams franchise in approximately 90-120 days.