Sport Clips Franchise

Financing Details

Sport Clips, Inc. does not directly offer financing for the initial franchise fee or for the build-out, inventory, or equipment for new stores. However, Sport Clips, Inc. may, in certain cases, guarantee a franchisee's lease with a third party, particularly if the franchisee has acceptable credit and the location is exceptional. For this lease guarantee, a fee is charged (two months' rent for new franchisees, one month for existing; adjusted for 10-year leases). Franchisees must also provide a personal guarantee and grant Sport Clips, Inc. a security interest in their equipment and fixtures. If a franchisee defaults on rent, Sport Clips, Inc. can collect the unpaid rent plus an additional two months' rent as liquidated damages. For additional (second or more) stores, Sport Clips, Inc. may also guarantee a franchisee's loan from a third-party lender, under similar credit and location conditions. This loan guarantee carries a fee of 5% of the loan amount, and also requires a personal guarantee and a security interest in the franchisee's equipment and inventory. In case of loan default, Sport Clips, Inc. can collect the unpaid note payment plus two months' payment as liquidated damages. Sport Clips, Inc. does not sell or discount its financing arrangements and does not receive payments for placing financing with other sources.

Litigation Summary

Sport Clips, Inc. had one material litigation case filed against multiple Sport Clips franchisees and their guarantor on June 25, 2024, in Williamson County, Texas. Sport Clips, Inc. initiated the lawsuit to seek a declaratory judgment regarding its rights under the Franchise Agreement, stemming from the defendants' alleged failure to operate the franchises in accordance with the Sport Clips Operating Manual. The parties involved subsequently settled the lawsuit, with the defendants agreeing to transfer the rights to their franchised stores.

Renewal Conditions

To renew their Sport Clips franchise agreement, franchisees must provide written notice of their intent to renew 6 to 12 months before the current term ends. They must renovate and modernize their business to meet Sport Clips, Inc.'s then-current standards, including new signs, equipment, furnishings, and decor. Franchisees cannot be in default of their agreement and must not have received more than three written default notices in any 24-month period during the current term. They are required to sign the then-current Sport Clips Franchise Agreement (which may have different terms), pay a renewal fee of $5,000 (or $3,500 if owning three or more stores), and attend any required training courses. Additionally, franchisees and their managers must attend Sport Clips, Inc.'s then-current qualification and training programs, paying a $1,000 training fee per person plus out-of-pocket expenses. They must also execute a general release of claims against Sport Clips, Inc. and provide proof of continued possession of the business premises and compliance with all applicable licenses and permits.

Staffing Notes

Sport Clips, Inc. requires that each franchised business be under the direct, on-premises, and full-time supervision of a manager who has successfully completed the Sport Clips, Inc. training program and is approved by Sport Clips, Inc. to manage the location. The franchisee is not required to personally supervise the business, but remains ultimately responsible for all operations. All employees must be trained using Sport Clips, Inc.'s training program, which includes provided materials. Sport Clips, Inc. offers this employee training to the franchisee's manager at no charge for labor. Franchisees are responsible for hiring, managing, and compensating their employees in compliance with all applicable laws and are encouraged to seek legal counsel for these matters. Sport Clips, Inc. clarifies that it does not dictate or control labor and employment matters for franchisees or their employees.