Gordon Logan (right) created a hair care experience especially for the fellas.
Though Gordon Logan owned and operated hair salons in Texas for more than a decade, he never felt completely at ease getting his hair cut in any of them. The smell of coloring chemicals and perms–and the overall environment–did not suit him. “It just wasn’t a comfortable experience for a man,” he says.
So Logan built one that was. Sport Clips, which he launched in 1993, adheres to a concept formulated to appeal to men and boys, melding a barber shop atmosphere with the décor and entertainment of a sports bar (sans beer and Buffalo wings). The focus is on scissors and clippers and wall-mounted TVs broadcasting games. Perms are not offered, highlighting foil is nowhere to be found, shampoo stations are adjustable for taller clients, and the most decadent services provided are a hot face towel and a shoulder massage (for an additional $5).
The flooring, though rubberized, resembles basketball court wood planks; wooden cabinetry is formed and laminated to look like steel lockers; seating in the waiting area could have been taken from the sidelines of a sporting event and the list of clients waiting for their cuts is displayed on a monitor that wouldn’t look out of place on ESPN.
The Sport Clips concept
After almost 25 years, the strategy is working for Logan, now 71, who’s rarely without his signature pale Stetson and a pair of western-style boots (he prefers ostrich leather). Sport Clips’ 1,768 locations are spread across all 50 states, plus five Canadian provinces, and are run by about 500 franchisees. Last year the system added 133 stores and franchisees racked up $625 million in systemwide revenue, paying 6% of their sales in royalties, on top of fees for ads and training. The corporate office netted $4.2 million in profits on $71.6 million in revenue for the year.
Born in Sumter, South Carolina, in 1946, Logan began his entrepreneurial career at age 8 as a collector of refuse, selling old newspapers to moving companies (for packing material at a penny a pound) and discarded clothes hangers to dry cleaning operations. “I was one of the original recyclers,” says Logan, who graduated to selling fire extinguishers and customized Christmas cards door-to-door. “It was about the money, but it was fun too.”
Logan’s father, a Scottish-born operator of sawmills and a furniture factory, encouraged his son’s endeavors. “He didn’t believe in giving allowances,” says Logan, smiling in a chair in his modest office, surrounded by pictures and models of antique cars, NASCAR memorabilia, photos of friends, his Stetson perched atop a massive globe beside his desk. “If you want some spending money, you go out and earn it some way or another.”
Logan graduated from MIT in 1968 before taking a job making carpet fiber in Virginia as part of a joint venture between Dow Chemical and BASF. Though his job offered him an occupational deferment from the draft during Vietnam, he declined, joined the Air Force in 1969 and began training as a military pilot. “A lot of my friends were getting drafted,” he says. “I didn’t feel right getting what I thought was a hokey deferment.” Logan also thought flying planes seemed more fun than engineering. He went on to spend five years flying C130 aircraft based out of Texas, departing for several months a year on NATO support missions across Europe and the Middle East, as well as southeast Asia.
Following active duty, Logan attended the University of Pennsylvania’s Wharton School while continuing to serve in the Air Force Reserve and then stepped into a consulting position with Pricewaterhouse in Houston in 1976, helping companies manage their organizational structure, cost accounting systems and payroll. Though he had an itch to run his own enterprise, Logan had no experience running anything other than a flight crew. “In the consulting business you see a lot of businesses, but you don’t really run a business,” he says. “I thought it made sense to get into a franchise because you had an established business and marketing systems.”
A Sport Clips franchise in Nashville, Tennessee.
In 1978 he bought into a hair salon franchise called Command Performance, swayed by a story he’d seen in the Wall Street Journal that touted the organization’s hipness among a younger demographic and its aggressive use of radio and TV advertising. Almost three years later, however, the company filed for bankruptcy, having leased many locations that franchisees simply did not want and that became company-run shops. “They weren’t good operators, and it turned upside down pretty quick,” says Logan.
The ordeal forced existing franchisees to band together, and Logan found himself sitting on a creditors committee representing about 200 of them. In the end, franchisees came away with a 40% stake in the brand, two seats on the board of directors, a reduction in royalty payments and provisions that made it harder to terminate a franchisee. “We thought we’d won a victory, but in the long term I think it worked to the detriment of the overall system,” says Logan. The board seats, he explained, just caused friction between the franchisees and the franchisor. Meanwhile, the reduction in royalty payments made it impossible for the franchisor to fund support for franchisees; and the more favorable termination language made it difficult to enforce standards, which led to inconsistencies in the system, such as some locations providing different services or offering $6 haircuts while others charged as much as $30. “I learned a lot about how not to run a franchise,” he says, looking back.
The brand changed hands several times throughout the 1980s, and Logan and a partner even owned the brand briefly in a failed attempt to bring order to the system. “The franchisees had gone too long with minimal support and no enforcement of brand standards,” he says. He eventually sold off most of his locations to shift focus to his Sport Clips concept.
The decision to zero in on the tonsorial needs of men was based on Logan’s own experiences in salons but also on data. He retained a market research firm to gauge men’s views on hair care. Says Logan, “Men reminisced about growing up, going to the barber shop with their dads, about the camaraderie and the banter, talking about sports and hunting and fishing.” Those barber shops, and the barbers who ran them, were dying, Logan says, and younger ones were not stepping up to take their places. “Men were being forced to go to salons, or to what were termed as family haircutters, like Fantastic Sam’s or Great Clips or Supercuts”—concepts with gender-neutral environments.
Stylists were interviewed as well, and many admitted to feeling uncomfortable with the use of chemicals in hair care—some had even developed allergies. So Logan decided Sport Clips would eschew chemicals. Stylists also said they liked doing men’s haircuts because of their simplicity and the infrequency of style-changes, which suggested it would be easier to train stylists to cut men’s hair and take less time to service customers. “The more we looked into it the more we liked the men’s business,” says Logan.
Sport Clips grand opening took place in Austin in 1993, at noon instead of the planned 9 a.m. launch (a shampoo station sprung a leak during the night and flooded the building), and though it was planned as a franchise from day one, it took two years before the system enlisted its first franchisee, the former owner of a Nationwide Insurance franchise named Ken Schiller who bought several licenses right off the bat. Schiller was attracted to the Sport Clips concept because he felt it addressed an underserved market and because Sport Clips offered to handle day-to-day operations for the new franchisee–for an additional fee–which freed him up to develop several ideas for restaurants. He also trusted Logan. “I believed in the concept,” says Schiller. “I liked Gordon, his track record, his experience—I just believed that it was a good opportunity.”
Sport Clips took five years to amass 50 locations and another two years to surpass 100. The measured growth, Logan says, was largely a matter of not wanting to overextend the support system of training and supply distribution for the fledgling brand. “At that time you’re trying to figure out which bills to pay this week and how we’re going to make payroll next week,” Logan says. “It’s very tempting to expand too quickly and not be able to support it.”
A corporate-owned Sport Clips in Austin, Texas.
Since 2002, however, the brand’s growth has accelerated, slowing down only a little during the recession, and Sports Clips is now on pace to surpass 1,800 locations within the year (the home office currently owns 69 shops). Potential franchisees—who are expected to have a net worth of at least $400,000—are asked to commit to three licenses—with rare exceptions for veterans, those in low-density areas and existing store managers—for a fee of nearly $60,000. Franchisees also need to be ready to invest between $190,000 and $355,000 to open their first shop. When a new franchisee or location comes online, it receives a visit from members of a Sport Clips’ training team, usually just after it receives its truckload shipment of equipment to help set up shop. Trainers advise the new manager on protocols and setup.
Learning lessons from his experience with Command Performance, Logan has enforced strict adherence to policies on store appearance and products used. Avoiding animosity between franchisor and franchisee is also a priority, and Sport Clips is careful not to profit from selling its licensees products, even those they’re required to have, like shampoo, styling gel and wash basins. The company buys some products in bulk and sells to its locations at cost plus overhead. Sport Clips also doesn’t take money from suppliers of mandatory products or equipment for supplying its franchisees as customers, lest it be seen to profit from its franchisee’s expenditures.
Sport Clips most recent annual convention, or “Huddle.”
Since 2001, Sport Clips has hosted an annual convention for the entire organization to network, view styling demonstrations and party—and franchisees and store managers are obliged to attend. The most recent gathering, or “Huddle” as it is known, was held in San Antonio in May and attracted 3,100. “One of the most important things about a company, certainly any franchise system, is developing a culture and making people feel like they’re part of something bigger than their immediate location,” Logan says. “It connects everybody at least once a year.”
Gordon Logan’s collection of classic automobiles is on display in a building adjacent to his… [+]
Success has allowed the company and its founder certain indulgences: there is an official Sport Clips business jet, and Logan maintains a collection of 15 classic automobiles in a building adjacent to his office, including his late father’s 1928 Packard. The company also sponsors NASCAR and Indycar racing teams, another of the founder’s interests (and also a marketing investment).
Compared with competitors like Supercuts, Great Clips and Fantastic Sam’s, Sport Clips’ royalties, franchise fees and franchisee obligations are competitive or better, says Jeff Lefler, CEO of Franchise Grade, a data research company that analyzes franchises for investors and consults for franchisors. The company’s ability to keep key leadership with the company for years is also a positive sign, he adds.
But the term of license for franchisees—five years—allows Sport Clips to make alterations to its franchise agreement frequently and could spell big changes if the brand were acquired. “If a larger private equity group came in that had franchising experience,” says Lefler, “there could be significantly different terms and, potentially, royalty changes, cost of goods changes.”
Also, because Sport Clips generally requires franchisees to buy three licenses at the start, the company oversells its capacity and has a large pipeline. As of last year Sport Clips had 642 locations sold but still unopened, while only 125 were expected to open the following year, which is not necessarily something to worry about yet. “That’s not a bad problem,” says Lefler, “as long as those numbers aren’t scaling significantly.” But if the gap between locations sold and the ability to open them widens, it could lead to franchisees getting stuck in the pipeline, he explained. “It’s a potential red flag.”
It’s no secret that the future of the company lies with its current president, Edward Logan—Gordon Logan’s 32-year-old son—who has observed his father’s salon businesses for as long as he can remember. “Early on, he was the real estate department, the marketing department and the ops department,” says Edward. “Any time I could be, I was on the road with him doing real estate tours, looking for new locations.”
Despite working at the company while growing up—in middle school he was dubbed Chief Landscape Officer and tasked with tidying up the office—Edward’s path was not direct. After college he moved to Dallas to do consulting work with Deloitte, but soon after returned to Austin to enter the family business as manager of a single Sport Clips store owned by the home office. Then he was put in charge of a handful more, and eventually all 25 corporate-owned locations. On his watch, the number of corporate locations swelled to 69.
Gordon and Edward Logan.
“I think that about 50% of my job is not to mess it up,” Edward says, perched at his desk in his office, next to a tall steel shelf stocked with business titles, “to make sure we stay true to the culture and the values, the things that got us here and that are still working.”
The other 50% is about improving business in little ways, like increasing the chain’s use of technology. This year Sport Clips launched its online check-in system, which reduces wait times for haircuts, and an app is on the way. Online surveys have informed business to a degree—clients who opt for the hot towel and massage upgrade are more likely to write good reviews, regardless of extra cost, so they are pushed intensely—and as the technology to gauge customer sentiment gets more sophisticated, Sport Clips will use data to develop its services more profoundly.
But Edward Logan isn’t expecting to take the top spot from his father anytime soon. “Not a chance,” says Edward. “He loves it.”
Gordon Logan (right) created a hair care experience especially for the fellas.