SPORT CLIPS Franchisee: Failed Owners Have Themselves to Blame

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• Updabutt states that "this franchise works for a very few." But, of course, the franchise can be sold to new prospects without disclosing these odds to new buyers, and this is the "original sin" of Franchise Regulation by the FTC that misleads the new buyers of franchises. The original sin allows the franchisors to perpetuate themselves in the economy and to hide the failures from the new buyers of the franchise.

  The historical performance statistics available (not gathered by government itself since 1988) indicate that ANY small business, franchised or independent, has a 50% chance of failing sometime in the first five years, and only 29% survive as long as ten years. The franchisor, of course, has a better chance of beating these odds because he doesn't bear the cost of the failure of the physical units in his system and can make it to "big business" status if he can churn some of the failures to new owners out the backdoor and always sell new franchises out the front door.

  There is cooperation between government and the special interests to hide the failure statistics from the Public because all involved, except the founding franchisees, have something to gain. It is really only the franchisee who is the resource of the franchisor who takes the hard fall, and all of the time the founding franchisee is trying to make it to break even, he is feeding the franchisor and the economy with cheap labor and providing cheap venture capital for his franchisor to grow the system into a really big business.

  Read "Franchise Regulation Realities -- Deception or Patriotism" in a Google Search.

  http://thegreatfranchisingrobbery.blogspot.com/

• Apparently Logan has increased the costs to stay in his system by requiring owners to invest more in their stores. Any prospective owner should be sure to ask current owners about the return on investment from these additional costs.

  Logan also keeps touting store openings and tossing out projected store counts. It appears that he never learned to subtract.

  The abysmal renewal rate will only get worse based on the additional costs to renew and the additional costs that he imposes after renewal.

  My screen name says it all. Do LOTS of homework before sinking your life's savings into this endeavor.

• it speaks for itself when "area directors" are leaving the system and can't even make their own stores work. Some of them apparently have a conscience and can no longer look people in the eye and lie to them about how this business will work and be something they can "build" for the "future"....it is all hogwash......It is absolutely wrong that Logan and his corporate robots lure good people into a system they know full well will not work ......people are losing hundreds of thousands of dollars on each store....this is madness.......and to the writer that asks why don't we get a big judgement.......as more and more owners and former owners unite that may be possible with class action. You just can't steal money from hundreds of people each year and get away with it long term

• Jay...you are out of your mind and shame of you for trying to explain this madness away. Your numbers are from one week....give me a break.......how do you explain literally hundreds and hundreds of stores below break even....poor owners putting money back in month after month......owners NOT renewing licenses...........selling stores for pennies on the dollar.......or just walking away completely from the disaster.......shame on you for spewing your lies

• Clete Brewer is leaving Sports Clip. He invested over 2 million dollars in the company, but he'd rather lose that than have to keep bowing to the clown with the big hat, the bigger ego and not heart of a felon.

  The number of Presidents and Veeps who can’t work for the thief and liar Gordon Logan just keeps growing.

  It appears that Logan has in place the weakest “management” team in the history of the company, and that’s saying something.

  They have the core competencies that he craves: not an idea of their own, and they worship/fear him.

  Gordon Logan is the devil.

• Interesting points from both sides. Unfortunately Jay is correct. He's had a successful store or two. Every bad concept has a success or two or else it would be impossible to get the ball rolling and the franchise to grow.

  Sadly, many like me thought how great this concept was, how much sense the model made, then just when you've written the check, you realize there's no way you'll ever hit 350 clients per week by just working 10 hours a week in the 6 months they tell you. Working capital flies out the window and after 6 months you're left scraping your HELOCs, selling your cars, and mortgaging anything you got left because everyone keeps telling you "after the 1st year, it really takes off", 'I mean, after the 2nd year, it just seems to click' ...wait, maybe it's after the 3rd year, yea, that's when you hit that next level and the profits really flow".

  Well, just under 3 years later, I've barely hung onto my home, lost my car and came just days from losing my wife...all this while operating a store in the 5th largest economy in the world...and we're getting no support.

  It was funny, the other day after I had started my 2nd job (3rd if you count Sport Clips) where I make solely commission...my first pay check was more money than I had made working 2 1/2 years at Sport Clips.

  I've gotten past anger now...like losing a loved one, eventually, you go through the phases of grief and I've now just remember the good moments with some great Team Members and laugh off my life's savings I lost.

• "Unfortunately Jay is correct"

  Say what? You've barely hung onto your home, lost your car and almost lost your wife, while getting no support...and Jay is correct??!! Seems like you lost your touch on reality.

  There is more than a grain of truth in Jay's post. There are no guarantees in business. There are many factors that determine success or failure.

  I remember listening to Jay and his manager at the “huddle” when I was still in the system. I always considered Jay relatively “fair and balanced”, but he has a much different frame of reference than a huge portion of the owners because things are VERY different in Texas.
  Regarding laying things at the feet of Logan and Brewer: they have approved many locations that anyone with just a but of knowledge would know have minimal chance of success. This was all in the quest to open stores. At the last convention I attended, Logan predicted 1000 stores by the end of 2010. I understand that the net increase in store count in 2009 is barely forty, and that 700 is still many months away.

  They also much take responsibilty for the caliber of their staff, including keeping people on who provide no benefit, and the revolving door of veeps and presidents who don’t bow to every word from Logan. There is also the question of why there has been such turnover in the Area Developer ranks. And now Clete is walking away too!

  The major problem with your post relates to Jay's “cold, hard facts.” These facts are for Texas. How about some facts from the southeast or California? Those two regions make up about one-third of the entire system, and the store results there are signifcantly worse than the numbers you post.

  As president of the franchisee advisory council, Jay probbaly has access to the reports for the SE and Calif. Please post those numbers for the same time frame. I can assure you that they will be the mirror image of what you posted. The minority will be over $4,500 a week. The average weekly sales for stores open a year or more will be at least $1,000 a week less. The stores open over 2 years will be significanlty short of $5,743 a week. In Fla, Georgia, and Ala there are very few stores that ever do $5,743 a week, let alone average that much.

  The cold, hard facts need to see the light of day. For the entire system. Not just for Texas.

  The fact that over 150 owners have 2 or more stores misses a signifcant point. Specifically, that until recently owners were required to license at least three stores. In the southeast and Calif, there are very few instances of people opening all the stores for which they bought liceenses. In fact, there are many people who never opened a single store.

  Other factors that point to problems are the number of stores closing: 13 in 2008, and that number will be exceeeded in 2009. Fla and Calif might have more closures than openings in 2009.

  In Texas, and a few other markets, Sport Clips is an opportunity. I am happy for the success of the folks who made it. But in much of the country and in many markets, this is most likely the path to financial ruin. Those are the cold, hard facts.

  "Jay is correct" ???

  Hardly.

• Unfortunately! it appears that franchisors can sell their franchises under cover of regulation that doesn't require them to fully DISCLOSE the risk (the odds) of success or failure of new units that is known to the franchisor!

  This known flaw in Franchise Regulation is destroying many innocents who wouldn't have invested their life savings and their time in these franchises if they knew the actual odds of survival and the odds of making a return on their investment (ROI).

  Try to understand how Item 20 of the UFOC/FDD is just an artifice to protect the franchisor, himself, from having to make disclosure to the new buyer of historical unit performance statistics. New buyers actually buy franchises from a SELLER (who will profit) who has made NO representations as to performance of the franchise in writing in either the UFOC/FDD or the actual contract.

  Prospective buyers are forced to try to perform due diligence by contacting the references provided in Item 20 and rely on these references when they make their decision to buy the franchise. The franchisor, therefore, is protected because he has made no performance claims in writing that you have relied upon to make the purchase, and because you can't buy the franchise unless you agree that you are only relying on the written terms of the franchise. Catch 22!

  The lack of transparency of UNIT historical financial performance statistics of systems means that prospective franchisees invest without any idea of the odds of success or failure of the "founding" franchisees, and with no picture of how regional demographics, etc.. may impact the unit performance as to profitability and survivability of the franchise.

  These are the cold, hard, and brutal facts!

  Please read: "Franchise Regulation Realities -- Deception or Patriotism" --"Buying a Franchise! The Great Franchise Hoax -- a Business of Your Own?" and "Disadvantages of Buying a New Franchise" in a Google Search.

  http://thegreatfranchisingrobbery.blogspot.com/

• I concur that Sport Clips is a scam for Gordon Logan to build a personal empire on the retirement savings and college education funds of "duped" franchisees. People who invest in a franhise concept only do so with the expectation that they will be profitable because the concept has been market tested in their area. This is simply NOT the case with Sport Clips.

  Here are the hard, unembellished facts:

  1. Gordon Logan (Sport Clips CEO) is delusional and will not deal with the fact that the vast majority of stores are unprofitable.
  2. Sport Clips is in the business of selling franchises, NOT in the business of operating stores successfully. Their only marketing strategy is "give away a lot of free haircuts and maybe they'll come back".
  3. Sport Clips targets the least profitable half o the population - "males". This is why all of the old style barber shops have been disappearing for the last 10 years. A male-only salon generally cannot turn a profit without the more expensive services purchased by women.
  4. Sport Clips blames franchisees who do not turn a profit for "not following their syste,". This is complete B.S. The fact is that success is mostly determined by location, competition, and demographics. Haircutting is a commodity business with very low barriers to entry.
  5. In my humble opinion, if a franchise can't demonstrate at least an 80% success rate and TEST each market they enter, they have no business soliciting their concept to the general public. Gordon Logan absolutely KNOWS that this is generally NOT a viable business model. Pointing to the few stores that turn a profit is not evidence of success if 90% or more are losing money. Sport Clips will not disclose financials for their portfolio of stores. Selling franchise licences is NOT a measure of success, profitability of individual units is!

  If you are thinking about investing in a Sport Clips, my advice is put your money back in your pocket, turn around, and RUN as fast as you can!

• Bent over says: "Sport Clips will not disclose financials for their portfolio of stores. Selling franchise licences is NOT a measure of success, profitability of individual units is!" Right On! But why did you bend over? Were you tricked by appearances and the constructive fraud of an adhesory sales contract (the franchise agreement) that was packaged with a government mandated disclosure document that didn't disclose the "known" risk to you?

  But, of course, you now realize that Sport Clips IS LICENSED by the state and federal government to sell franchises without disclosing the "material" historical success/failure, profitability or lack of profitability of units within their system to new buyers of the franchise.

  The criteria for being a franchisor has been set very low by the regulators in order to encourage franchising in the economy. Protection from claims of fraudulent inducement by failed and failing franchisees is an inducement for the franchisors to try to franchise rather than "license" their "proven" business formats. Franchisors can achieve success if only 50% of their franchisees make it to break even (if they sell enough franchises) and they judge themselves, always, on the basis of their successful units, Franchisors can always sell new units because of the lack of transparency and are able to expand based on their ability to use the franchisee contracts (their portfolio) as collateral to borrow money to expand in new markets.

  Notice that government didn't regulate "licensing" and only especially regulated "franchising" and franchisors in order to protect the franchisors from any claims by franchisees of fraudulent inducement to contract in the sales process. As indicated in the Article "Franchising Fraud - The Continuing Need for Reform" in the American Business Law Journal 01 Jan 2003, how can franchisees sue for fraudulent inducement when neither state nor federal law requires the franchisors to disclose material historical unit performance statistics of their systems to new buyers?

  Notice that under federal law (which is said to preempt state franchise laws) and some State franchise laws there is NO private right of action permitted even when the franchisor fails to disclose in compliance with the law. Apparently, only the State or the Federal government have the standing to sue the errant franchisor and this enables the government to protect the franchisors and their units who are thriving from those franchisees who have failed or who are failing and who believe that the franchise was misrepresented to them in the sales process.

  http://thegreatfranchisingrobbery.blogspot.com/