Supercuts

[salonfrog]

Can’t believe that Supercuts has gone into administration, and really feel for all the employees who work there. I hope it works out well for them.

So I decided to look into why it’s got to where it is, and put the below together:

Supercuts: why the hairdressing chain has entered administration

With over 200 salons and 1,400 employees, Supercuts went into administration this week. We look at why this has happened, what a CVA is, and what administration means.

Background
Supercuts (which is owned by Regis UK) has been struggling for the last few years. Last year, Regis had warned that a “perfect storm” of factors (including falling customer numbers and higher wages) had hurt the business, leading to “cash flow issues.”

On top of this, the rise in the legal minimum wage rate, the apprenticeship levy, higher business rates and an increase in the cost of product as a result of the Brexit-led fall in the value of the pound, would also be likely factors.

In 2017, Regis UK was sold by its American parent to global salons operator called the Beautiful Group, which is backed by a US private equity firm called Regent. Its most recent accounts show the business making a loss of £5m on sales of £65m in 2017.

CVA
To battle against its issues, the company embarked on a restructuring process called a company voluntary arrangement, or CVA.
With the CVA law on its side, it demanded its landlords to reduce their rent bills, including asking the landlords of more than 20 of its salons for free rent, as well as cuts to all the others.

Two of the four largest land owners in the UK (British Land and Hammerson) has mounted a legal challenge to overturn the company’s CVA and the outcome of this is yet to be decided. Rob Harding, joint administrator at Deloitte, said:
“Unfortunately, these trading challenges, coupled with the uncertainty caused by the legal challenge to the CVA have necessitated the need for an administration appointment. This is in order to provide protection for the business whilst restructuring and sale options are fully considered and explored.”

Administration
Administration (which is different to liquidation) is a process of creating a legal ringfence around a struggling, insolvent company to prevent further threats to its creditors (which includes the salons’ landlords, its suppliers and its staff).
To do this, it appoints an administrator (in this case the accountancy firm Deloitte) who will need to establish whether the company could remain viable (i.e. could become profitable again). Deloitte will then establishes a timeframe for the administration and implement further restructuring measures to improve the company’s position (which in this case includes looking for a buyer).

What happens next
The salons are expected to trade as normal for the time being and industry sources told Sky News that they expect a buyer for the chain to be found.

 

[Piercednige]

I spent 10 happy years with Regis and managed some of their highest turn over salons in the north with great success (to blow my own trumpet). They started to struggle then and started restructuring back when I first started.

When I started for them they had 211 Regis branded salons and last year they had 91 Regis branded. They condensed their brand portfolio seeing the likes of Hair Express, Trade secrets and HCUK go.

Unfortunately they don't invest in their teams like they used to and with only offering minimum/living wage they will never attracted the most skilled workers thus finding it difficult to building up clientele in some salons. Managers are very low paid too compared to alot of other management roles so once again aren't going to always get the best people for the job, alot of them used to struggle to understand a P&L report so are running salons blind. They dont know how to budget and don't know how to manage and appraise their team effectively.

Because they buy in such volumes their cost of products have the best margin I have ever seen coming in at less than half of what I purchase like for like.

Alot of salons are poorly maintained so doesn't create a comfortable environment for clients to sit in and get their hair done.

Jackie Lang is a great director despite the situation the business is in and Pauline Tait (general manager for Regis) is fantastic at her job with a real passion for the business and a great regional team underneath her and I'm sure they will have a buyer soon but I think we will see huge changes for the brand and possibly alot more closures with the loss making salons seeing a very small salon portfolio across the uk ready to be re-built from the ground up.

I'm keeping everything crossed they survive.

 

[Piercednige]

Also, I think it's the rise of the independents too. People are more aware if supporting their local economy more than ever these days so would much rather go to an independent salon than support a huge chain. We have alot of independent businesses in my town and they have all seen a positive growth in the last few years.

 

[salonfrog]

I spent 10 happy years with Regis and managed some of their highest turn over salons in the north with great success (to blow my own trumpet). They started to struggle then and started restructuring back when I first started.

When I started for them they had 211 Regis branded salons and last year they had 91 Regis branded. They condensed their brand portfolio seeing the likes of Hair Express, Trade secrets and HCUK go.

Unfortunately they don't invest in their teams like they used to and with only offering minimum/living wage they will never attracted the most skilled workers thus finding it difficult to building up clientele in some salons. Managers are very low paid too compared to alot of other management roles so once again aren't going to always get the best people for the job, alot of them used to struggle to understand a P&L report so are running salons blind. They dont know how to budget and don't know how to manage and appraise their team effectively.

Because they buy in such volumes their cost of products have the best margin I have ever seen coming in at less than half of what I purchase like for like.

Alot of salons are poorly maintained so doesn't create a comfortable environment for clients to sit in and get their hair done.

Jackie Lang is a great director despite the situation the business is in and Pauline Tait (general manager for Regis) is fantastic at her job with a real passion for the business and a great regional team underneath her and I'm sure they will have a buyer soon but I think we will see huge changes for the brand and possibly alot more closures with the loss making salons seeing a very small salon portfolio across the uk ready to be re-built from the ground up.

I'm keeping everything crossed they survive.

Thanks @Piercednige
What a good insight into the brand and how it changed. Really interesting.

 

[RED STAR]

The problem we all have in this industry is saturation.
Folk wanting ‘cheap as chips’
Minimum wage..... yes I said it!
Back in the day our wages were sh*t - but our commission / our ‘incentive’ was HIGH!
We worked our arses off to please the client to keep them coming back to us - to ‘our salon’
We were a TEAM.
The rise of the independent - self employed/rent a chair/ mobile has changed the industry beyond recognition - and imo - not in a good way.
We need to understand that in order to earn a good wage, you need to bring something to the table folks

 

[AcidPerm]

I agree with @RED STAR that having a good TEAM is vital to a well run salon, although I also think that minimum wage is a good thing and in my opinion, it’s still too low in the UK. It’s higher here in Ireland. Some clients want ‘cheap as chips’, but many clients still prioritise spending on personal care and will pay higher prices if they feel they’re getting a premium service. Perception is everything these days.

In my experience of managing staff, they are motivated to an extent by money but also by being appreciated and respected by management and their colleagues. If you work in a salon with a high staff and client turn-over, it’s usually down to having a poor manager and a dysfunctional team.

As @Piercednige says, salon owners have to invest in their staff and incentivise them with opportunities for personal growth through training and development. For a large salon chain, there should be ample opportunity to support keen staff to progress through the ranks from being a junior to more senior roles. Unfortunately, being a good hairdresser isn’t a prerequisite for being a good manager as a slightly different skill set is needed although having excellent people skills is vital to both roles. If you promote a stylist to a managerial position, ensure that you supply suitable training so that they aren’t going to drown trying to steer the boat and that they have the confidence to tackle difficult issues and manage their staff fairly.