Supercuts Franchise

Financing Details

Supercuts generally does not offer direct or indirect financing to franchisees. However, if a franchisee requests and Supercuts agrees to guarantee their lease obligations, Supercuts reserves the right to charge a monthly fee. This fee would be 12% of the franchisee's monthly gross sales, minus their monthly lease payments, for as long as the guarantee is in effect.

Litigation Summary

Supercuts has been involved in several legal matters. Currently, Supercuts is engaged in two cases. One is a collection dispute against a franchisee with counterclaims, which is in the process of being settled for $95,000 to be paid to Supercuts and Regis. The other is a class action lawsuit filed in November 2019 concerning receipt data, where class certification was denied, and the parties are now working towards mediation. In the past, Supercuts has concluded several disputes. Five collection cases against franchisees were settled, with Supercuts and Regis agreeing to pay amounts ranging from $29,500 to $280,000 to the franchisees. Additionally, a lawsuit filed by a point-of-sale system supplier against Regis (Supercuts' parent company) for alleged improper access and misappropriation of trade secrets was settled, requiring Regis to pay a total of $2 million, with further extensions for additional payments. Another arbitration case from 2018, filed by a franchisee alleging fraud, resulted in Supercuts refunding $25,000 and rescinding agreements. A group of six separate arbitrations from 2015-2016 involved Pro-Cuts Sports franchisees (an affiliate brand) alleging fraud and misrepresentation against RPC Acquisition Corp. (an affiliate) and Regis. These cases were settled, with Regis and its affiliates paying individual franchisees between $115,000 and $300,000 and assuming some lease liabilities. Supercuts has reported no outstanding rent or royalty collection lawsuits.

Renewal Conditions

The franchise term for Supercuts extends indefinitely, provided the franchisee's lease or sublease has not expired and they are in good standing without any defaults. If a franchisee's lease or sublease expires, they must relocate to a new location approved by Supercuts within 180 days. Additionally, if Supercuts updates the terms of the franchise agreement, the franchisee may be required to sign an amendment or a new agreement, which could have materially different terms. An 'Anniversary Fee,' essentially a renewal fee, is assessed every 10 years after the store's opening date. This fee starts at 1% of the franchisee's cumulative net monthly revenues for the preceding 12 months, payable in annual installments over five years, and increases to 2% for subsequent 10-year periods.

Staffing Notes

Supercuts locations require a competent, conscientious, and trained staff. Each new haircutting employee must attend a mandatory 5-day initial training course, conducted by Supercuts or a Certified Technical Trainer (CTT), and pass it to Supercuts' satisfaction before working. Employees receive a 'Certificate of Competency' valid for one year, requiring annual recertification through an additional course. Franchisees are responsible for employee wages and travel expenses during training. At least one on-site manager, who can be the Managing Owner or another designated manager, must be present. The Managing Owner is responsible for overall store management, but is not necessarily required for day-to-day operations. Supercuts also requires Managing Owners and other store managers to attend periodic training courses and an annual convention. Franchisees are solely responsible for all employment decisions and must ensure employees meet Supercuts' minimum standards and hold valid 'Certificates of Competency'.