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How 2 hairstylists make over $20,000,000.00, five bucks at a time. Now that’s supersizing!!!

Dave Young:
So, Stephen, we’re going to talk about cheap haircuts today. Is that what I understand?

Stephen Semple:
We talked about dry bar doing no haircuts, and now it’s time to talk about haircuts.

Dave Young:
That was episode one.

Stephen Semple:
That was episode one. For a guy with no hair, we’re talking a lot about haircuts. Yeah. Supercuts is a really interesting story. They now have 2,400 locations.

Dave Young:
That’s a lot of locations.

Stephen Semple:
That’s a lot of locations. They were founded in 1975 by Geoffrey Rappaport and Frank Emmett. And their first location was in Albany, California, which is just north of Berkeley, if I have my geography. I’m Canadian. So I’m making up my US geography here. And the thing that’s really interesting is they were not business people. They were a pair of hairstylists who were working in the industry. They looked at the industry and they said there’s a big problem with consistency.

There’s no consistency in terms of how a haircut is done. Every stylist has got their own idea and their own feel. And they looked at it and said, McDonald’s does not make the best burger. But what McDonald’s does is make it inexpensive and consistent and predictable. And they looked at the hairstyle business and they went, there’s no consistency. And so what they wanted to do is they wanted to create a system to cut hair that was consistent and fast. So they actually developed an operational way of cutting hair that was consistent and fast. And they turned it into a system that could be taught. And we go back to the 1970s. There were basically barbershops for men.

Dave Young:
Yeah.

Stephen Semple:
And beauty salons for women. They saw a big gap in the market because of this because younger guys didn’t want to go to the barbershops, we’re rough, gruff, smokey. You’d be showing old faded pictures of haircuts. Do you want your hair cut like this or hair cut like that? If you remember back in the days.

Dave Young:
Well, I remember in the 70s, my mom would take me to a beautician rather than let my dad drag me into the barbershop where I’m going to be a little kid subject to all the things you just mentioned plus a stack of Playboys in the corner.

Stephen Semple:
Well, there you go. Right. So for the younger guys, it was not enough style and it was rough and gruff. And it was a place that they frankly didn’t want to go to. And for the women, it was the other end. It was all through, through, lots of service, but also no idea what things would cost and all these add-ons. So they pioneered the idea of unisex. They were the first place to come up with the whole idea of unisex and it also being okay for kids, very, very kid-friendly. It was cleaner and nicer than the barbershop and simpler and easier than a salon. They identified a gap.

Dave Young:
Yeah.

Stephen Semple:
They also identified some service issues on Mondays at that time, back in the 70s, most hair salons and barbershops were not open on Mondays. They closed on Mondays and also were by appointment only. So they said, you know what, we’re going to be open Mondays and we’re going to take walk-ins and we’re going to make it fast, haircut in 20 minutes and a low universal price, six bucks.

Dave Young:

Right.

Stephen Semple:
So here you had rough, rumble barbershops appointment only, not open Mondays froufrou hair salons, expensive, everything else. And they came along and said, open Mondays, we’ll take walk-ins, six bucks, done in 20 minutes. And they did have a menu of things and they made it a really simple, easy to understand menu of services with prices next to it. None of that existed before they came along. So they invented the cheap, consistent, fast haircut and turned it into a system that they could teach people to do.

Dave Young:
I can’t help but notice it was an industry full of creative people that are trying to do something artistic or artisanal at least. These were people that came up through it that started it because that’s what they want to do. They were haircutters, but they imposed a system on it.

Stephen Semple:
They created this idea of the everyday haircut. It’s not a work of art.

Dave Young:
Yeah.

Stephen Semple:
If you want a work of art you can go to this other place. If you want the everyday suitable haircut, this is where you can come to get it done. But to your point, David, the other issue that they ran into is they had to change how people were paid. And we’ve seen this with customers as well. When an industry does things in a certain way, and you want people to adapt to this new methodology, there’s often resistance to it. And in the hair salon industry, most were paid commissions. So one of the challenges is when you pay people commission, and then you come along and say, I want it done this way. It’s really hard because people who are paid commission are like, screw you. My customers come to expect this and I’m paid a commission. I’m going to do it my way.

Dave Young:
Yeah.

Stephen Semple:
When you come along and you say, I’m going to give you a guaranteed hourly rate with benefits, do it my way. It’s much easier for people to go, I’m going to do it your way. You want me there on Monday? Monday’s a slow day, but you’re paying me an hourly rate with benefits. I’ll be there on Monday.

Dave Young:
Yeah.

Stephen Semple:
In the first three years that they did this, they grew it to the six stores in California. Then they started the franchise. So by the mid 80s, 10 years later, they had hundreds of franchises and they’re in 39 states. This idea took off.

Dave Young:
I think it’s a good indication too of the right kind of business for a franchise. Right. I’ve seen people do franchises where they mess it up because it’s not something that’s really systematized. And you’re looking for an artisan, you’re looking for somebody that can apply some creative. It’s like, you’re not going to see a franchise interior design company unless it’s somebody that’s building thousands of homes then it’s like, oh, we design it once and replicate it. But in this case, it’s like, we created a system where there was none. And now we can just put that system in place and somebody else can take the playbook and run with it.

Stephen Semple:
Yeah. In 1987, so basically we’re talking 13 years after they started the business, along came a venture capital company who paid these two hairstylist, 21.4 million dollars for their business. That ain’t bad. That’s ain’t bad for a couple of people who cut hair.

Dave Young:
That’s a nice cashout. And the company’s still around. They’re part of the international intergalactic global hair conglomerate called Regis Corporation now.

Stephen Semple:
Now it owns a bunch of different hair franchises. Yeah.

Dave Young:
Yeah. If you can name a haircutter, they probably own it.

Stephen Semple:
Yeah. So they’re part of that group. They were the pioneers of the idea of an inexpensive, consistent, haircut walk-in done quickly, convenient type of idea. But there’s a hidden lesson. And the hidden lesson is this, we often see people come along who want to compete on price and want to build an empire on price. And you can build an empire on price, but when you’re building an empire on price, it’s not about making it a little bit cheaper. It’s not about, oh, everybody else is doing it at $10. I’ll do it at nine. No, everyone else was doing it at $20 and they did it at six.

When you are doing things that’s significantly less expensive, the thing that’s driving it is an operational idea that allows you to do a haircut profitably at $6. When we’ve looked at these empires that have built a business by being significantly cheaper, it has always been supported by an operational change that allows that price to be driven, which is also the reason why it’s a killer because it’s not easy for anybody else to all of a sudden go well, I’ll copy that. Because they would have to create the hair cutting system. They would have to change the compensation. They would have to do all of these crazy operational things in order to meet them at that price point, which is the reason why they were able to do it for so long before they had competitors.

Dave Young:
That’s a great observation. If they opened up across from your barbershop, you couldn’t change your business model to match them,

Stephen Semple:
Right.

Dave Young:
Without blowing up your business.

Stephen Semple:
Correct. There’s a secondary thing I want to talk about. We hear people a lot of times about teams, and I want my employees to do things in a certain manner. Commissions have a real drawback when you want to build a team and a lot of businesses I get it, it’s easier to pay people commission, fits the financial model better. But commissions reward individualism. Commissions reward the person doing it their way, not the company way. So if you’re building something that’s repeatable and systematized and you want people to do it, commissions work against that. It is a question you sometimes need to ask yourself if you’re doing things commission-based. Commissions does not reward teamwork. It rewards individualism, not doing it the company way.

Dave Young:
When I think about modern barbershops, unless they’re a one off-kind of place, the kind that we’ve been talking about that Supercuts came in and competed against, a lot of modern barbershops are really Supercuts with dark wood paneling and a little fancier chair. And it’s just really Supercuts.

Stephen Semple:
Essentially what Supercuts did is they took over the inexpensive, convenient, consistent part of the marketplace. What we know is there’s always two types of consumers. It’s a consumer that’s interested in that and the consumer who wants the experience. So some of these places have taken the Supercuts model and then yes, they put these other things in place to make it a nicer experience so you can charge that premium price. But it speaks to the impact that Supercuts had on the marketplace because what it did was it eliminated the middle. So we have success is now you’ve either got to be the Supercuts model or a variation of it, inexpensive, consistent, fast, or a really, really great experience.

Dave Young:
Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five star rating and review at Apple Podcast. And if you’d like to schedule your own 90 minute empire building session, you can do it at empirebuildingprogram.com.

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