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FDD Talk 2019: Salons by JC Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

America's Most Lucrative Franchises of the YearAmerica's Most Lucrative Franchises of the Year

In this FDD Talk post, you’ll learn the following:

  • Section I – Background information on the Salons by JC franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Salons by JC franchise, based on Item 7 of the company’s 2019 FDD
  • Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Salons by JC franchise, based on Items 5 and 6 of the company’s 2019 FDD
  • Section IV – Number of franchised and company-owned Salons by JC outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
  • Section V – Presentation and analysis of Salons by JC’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
  • average square feet under management, net rent, free rent (days), free rent total dollars, tenant improvement allowance, total leasable square footage, leasable square footage %, advertised weekly rent per square foot, construction cost per square foot, and gross sales during the 2018 calendar year for the 75 franchised Salons by JC Facilities that were (a) open and actively operating as of December 31, 2018, and (b) leased and built out their respective premises and provided Salons by JC with the aforementioned data
  • average gross sales, rent, payroll expenses, repairs and maintenance, utilities, internet and telephone, estimated royalties, estimated fund contributions, total certain operating expenses and estimated fees, and gross sales less certain operating expenses and estimated fees for the 10 affiliate-owned Salons by JC Facilities that were open and operating throughout the entire 2018 calendar year
  • average number of salon suites leased by the 70 franchised Salons by JC Facilities that were open and actively operating prior to December 31, 2017 as of the following dates: (i) 3 months after the Facility opens; (ii) 6 months after the Facility opens; (iii) 9 months after the Facility opens; and (iv) 12 months after the Facility opens
  • tenant occupancy rate for each of the 10 affiliate-owned Salons by JC Facilities (each, a “Corporate Facility”) as of the end of 2018, along with the average year-end tenant occupancy rate

Section I – Background Information

20 Things You Need to Know About the Salons by JC Franchise

Moving Toward Goal of Nationwide Franchising

1.  At the beginning of August 2018, Steve Griffey, president of Salons by JC, spoke with the San Antonio Business Journal about some of the challenges the business has faced over the last two decades and what’s in store for the future. Griffey said that while the company has signed nearly 350 franchise agreements, only 98 salons have opened (at the time of the interview).

2.  According to Griffey, the lack of more opened salons is due to the changes made by the U.S. Small Business Administration regarding SBA loans, which many small business owners and franchisees depend on for financing. In 2014, the SBA changed its language on so-called passive businesses to include salon suites, making them ineligible for SBA loans and halting further expansion by Salons by JC overnight.

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3.  Following the SBA loan changes, Salons by JC lobbied lawmakers in Washington, D.C., to no avail. Griffey said the company has only recently been able to start sourcing good private capital for franchisees and that the company’s lull in development is over. In the next year, Griffey hopes to begin delivering 25 to 30 new franchised salons across the country before doubling that amount the following year.

4.  Despite the slowdown in opening new salon suites, company revenue has continued to increase over the last half decade, from $9 million in 2013 to nearly $30 million in 2017. Griffey expects revenue to rise by $1.5 million to $2.5 million per year as new salons come online. Some of the markets that Salons by JC is targeting in the next few years include Chicago and Los Angeles.

5.  Griffey added that even though he would like to add a few more corporate-owned locations, a majority of the new salons will be franchised locations. Current franchise fees are $50,000 plus 5.5 percent royalties and 1 percent for the brand fund, which goes toward the company’s marketing efforts that are now done in-house.

6.  Along with marketing assistance, Salons by JC has initiated training to show salon suite owners how to better operate their businesses. Despite greater difficulty in finding capital to start salon suites, Griffey said the business has become much more competitive, and salon suite owners who once averaged 10 to 12 years of experience in the industry are now averaging 2 to 3 years of experience, creating greater need for business training.

Hosts SalonCentric Airstream

Franchises Ranked by Average Revenues and ProfitsFranchises Ranked by Average Revenues and Profits

7.  In early October 2018, Salons by JC announced that it had partnered again with SalonCentric, the dynamic beauty supply distributor, to bring a new attraction to its salon suite owners. The SalonCentric Airstream “Glam on the Go” event traveled to Salons by JC Towson, Maryland, the first franchise location to host the interactive Airstream event. Mark Estep, owner of Salons by JC Towson, said, “The event really boosted morale at the salon and it raised community awareness about what Salons by JC is.”

8.  The SalonCentric Airstream traveled to salons across the East coast, bringing education directly to where beauty professionals are located. The Airstream also helped to connect local SalonCentric locations with salons in the area. The Airstream featured beauty demos on the latest trends and techniques, free samples, and giveaways from SalonCentric. The event was open to any beauty professional in the area, and also open to those looking for services at Salons by JC Towson.

9.  In conjunction with the Airstream event, Salons by JC Towson also hosted an Open House, so new customers and beauty professionals could tour the spacious, luxurious salon in Loch Raven Plaza. Salons by JC Towson concierge, Amanda, was glad to be able to interact with a new audience and introduce them to the Salons by JC environment. Amanda said, “The Airstream and Open House was a rewarding experience for myself and salon suite owners because of the interaction and exchange of information with local beauty professionals and suppliers.”

Working with SalonCentric to Host Workshops Nationwide

10.  In late January 2019, Salons by JC announced that the company had partnered with SalonCentric, a Florida-based distributor of salon professional products, to offer a full year of educational events. Throughout 2019, Salons by JC and SalonCentric will host 11 Empowering You workshops for its suite owners across the country.

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11.  The Empowering You event series kicked off at the beginning of March in Charlotte, North Carolina, with events planned for every month after in different markets. The schedule below shows the days and markets for the events:

  • March 4 – Charlotte, North Carolina;
  • March 23 – Dallas, Texas;
  • April – Minneapolis, Minnesota;
  • May 13 – Houston, Texas;
  • June 1 – Orlando, Florida;
  • June – Atlanta, Georgia;
  • July 15 – San Francisco, California;
  • August – San Antonio, Texas;
  • September 14 – Philadelphia;
  • October – Nashville; and
  • November – Miami.

12.  In addition to the Empowering You events, Salons by JC said that the SalonCentric Airstream is slated to visit several Salons by JC franchise locations during the year. Jo-Lynn Greenman, salon business coach for Salons by JC, has been dedicating much of her time to making sure these events are successful.

13.  Greenman said, “I truly believe these training events can be life-changing for our suite owners if they apply what they learn to grow their business. SalonCentric is connecting us with some of the best educators in the industry to bring the most relevant information in a fun and exciting way. You don’t want to miss these!”

14.  The Salons by JC marketing team has been working directly with Jo-Lynn and SalonCentric to make sure all marketing initiatives are well represented across the brand. According to Marlene Romo Flores, franchise marketing coordinator for Salons by JC, “We have created a salon media kit geared at streamlining the process for each franchisee and also letting them know what they should expect and how we can assist them in getting the most engagement and participation. This event series is priceless and should be attended by all suite owners.”

Company History

15.  Salons by JC was founded in 1998 by Jack Griffey and Cecil Miller in Dallas, Texas. Griffey developed the idea for Salons by JC – which is a salon franchise that offers individual suites to hair and beauty professionals instead of the traditional open-floor salon layout – after the salon where his wife worked closed down.

16.  When Griffey’s wife realized that she would have to relocate her clientele to another salon, she decided to look at alternatives. Griffey’s wife found a place that offered salon suite ownership and while the space was no larger than a closet, it gave her the opportunity to take her clients with her to a space she could call her own.

17.  After visiting his wife’s new salon suite and crunching some numbers, Griffey knew that this was a business idea he wanted to pursue. Griffey recruited Miller, who was his good friend and fellow retail businessman, to help him launch the Salons by JC concept.

18.  Following the success of the first Salons by JC location, the team opened a second salon in 2001, after Griffey’s son, Steve Griffey, moved back to Texas and was interested in opening his own salon. Franchising of the Salons by JC concept began in 2008 and over the next decade, the brand has opened salon suites in more than 26 states as well as Canada.

19.  According to Salons by JC, the company plans to add 15 more locations throughout the U.S. and Canada in 2019 and is committed to developing over 200 stores in all major markets over the next several years.

Entrepreneur’s Franchise 500

20.  Salons by JC ranked No. 188 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

  • Please click here for detailed estimates of Salons by JC franchise costs, based on Item 7 of the company’s 2019 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

  • Please click here for detailed information on Salons by JC’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

  • Outlets at the Start of the Year:  44
  • Outlets at the End of the Year:  63
  • Net Change:  +19

2017

  • Outlets at the Start of the Year:  63
  • Outlets at the End of the Year:  74
  • Net Change:  +11

2018

  • Outlets at the Start of the Year:  74
  • Outlets at the End of the Year:  82
  • Net Change:  +8

Company-Owned

2016

  • Outlets at the Start of the Year:  10
  • Outlets at the End of the Year:  10
  • Net Change:  0

2017

  • Outlets at the Start of the Year:  10
  • Outlets at the End of the Year:  10
  • Net Change:  0

2018

  • Outlets at the Start of the Year:  10
  • Outlets at the End of the Year:  10
  • Net Change:  0

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

  • Part 1 of this Item discloses certain historical data regarding the premises and construction costs, as well as Gross Sales and certain other information, for the 75 franchised Facilities that were (a) open and actively operating as of December 31, 2018, and (b) leased and built out their respective premises and provided Salons by JC with the data detailed in Part 1 so that Salons by JC could disclose it in this Item (the “Part 1 Franchised Facilities”).
  • Part 1 excludes (i) 4 of Salons by JC’s first franchised Facilities that are governed by a different form of franchise agreement that does not require them to report the relevant information to it (the “Non-Reporting Franchisees”); and (ii) 3 franchised Facilities that purchased their premises and therefore were not able to provide Salons by JC with certain information disclosed in Part 1.
  • Part 2 of this Item discloses the Gross Sales generated, as well as certain material operating costs and expenses incurred, by the affiliate-owned Facilities that were open and operating throughout the entire 2018 calendar year.
  • Part 2 excludes all franchised Facilities because Salons by JC does not have certain of the operating costs/expense data from the franchise owners of these Facilities as would be necessary for inclusion in Part 2.
  • Part 3 of this Item discloses the number of salon suites leased by each of Salons by JC’s 70 franchised Facilities that were open and actively operating prior to December 31, 2017 as of the following dates: (i) 3 months after the Facility opens; (ii) 6 months after the Facility opens; (iii) 9 months after the Facility opens; and (iv) 12 months after the Facility opens.
  • Part 3 excludes: (i) the 8 franchised Facilities that were not open and operating prior to December 31, 2017 because they did not have a full year of data as of December 31, 2018 to share with Salons by JC; and (ii) the 4 Non-Reporting Franchisees.
  • Part 4 of this Item discloses the average tenant occupancy rate for all 10 of Salons by JC’s affiliate-owned Facilities (each, a “Corporate Facility”) as of the end of 2018, as well as an average overall tenant occupancy rate for each Corporate Facility amongst the applicable years that Corporate Facility was open.

Part 1 – Premises, Lease, and Construction Cost Information for Part 1 Franchised Facilities

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