Executive Summary Introduction Mission Vision Strategy & Assessment Management Team Five Year Proforma Business Opportunity Market Product & Services Customers Value Proposition Demographics + Target Markets Site Selection Competition Store Operations Store Front Store Space – Experience Store Staffing Compensation Regulations Supply Chain Cash Back-office Systems Security Key Performance Indicators – KPI’s Branding Marketing Brand Positioning Marketing Financial Structure Organization & Deal Structure Assumptions Financial Model Proforma Return Exit Strategy Next Steps Appendix Store Investment Store Proforma Store Opening Schedule by Market Financial Proforma (Sources and Uses) Master Franchise Agreement Options Agreement PHC Operating Agreement PPM 3 4 5 5 6 7 8 9 10 11 12 12 13 14 14 15 16 17 20 21 22 23 23 24 26 27 27 29 30 31 31 32 32 II. III. IV. V. IV.. i ii iii iv v vi vii ix
This document is not an investment offer nor an attempt to sell a security. 2 Executive Summary This document is not an investment offer nor an attempt to sell a security. 3 Executive Summary || The Introduction || Premier Hair Care LLC I (“The First LLC”) is a licensed franchisee doing business as “The Weave Shop”. This is a retail service business in hair care. The business provides affordable human hair sales and weaves services to moderate income African-American women – The target customers! The proprietary business processes of The Weave Shop were developed to deliver a convenient, consistent, professional, time-sensitive, weave experience.
Of all the global achievements in the last 50 years, economic integration in Europe may be considered as the most notable of all. From a continent separated by war and differences in culture, Europe has proceeded to become an economic and political leader today. The formation of the European Union (EU), the accession of the 15 European countries to the Community, and the introduction of a single ...
This plan outlines the customer need, the proprietary operational components, and the profitability of The First LLC. The First LLC will open 36 stores in four States and the District of Columbia over the next five years, under a Master Franchisee License held by Premier Hair Care, LLC (“PHC”).
PHC, headquartered in Atlanta, Georgia, is a fully-staffed, management services company, and the holder of the Master Franchisee Agreement with The Weave Shop Corporation (“TWS”).
The First LLC will operate under a sub-Franchisee License from PHC. TWS, the founding Franchisor, is a Detroit-based Sub-S Corporation that currently operates seven Franchisor-owned stores, and two franchisee stores.
TWS began operations in 2008 and only recently started franchising. PHC is the first Master Franchisee of this exciting new concept. PHC will provide managed services to The First LLC and all subsequent additional Premier Hare Care, LLC entities. The First LLC will own the actual stores opened throughout the United States. They will be operated by PHC. PHC will have a 20% minority investment carry in The First LLC and will have an operating agreement which charges a fee, without markup or profit, for accounting, HR, training, marketing, and operations services. PHC also holds a fixed-price purchase option right to buy a 10% interest in TWS, which is exercisable after PHC opens 36 stores.
In addition, PHC has the “Right of First Refusal” to franchise any market in the United States, except parts of the Midwest. Executive Summary || The Mission || o Maintain the highest ethical and professional standards in all areas of the business. o Establish a leadership position in human hair sales and weave services by sourcing the best available product worldwide and training the store staff on excellent customer hospitality and hair care execution. o Differentiate the business and services through distinctive branding, marketing, and hair care education. o Raise the industry standards in African-American hair care. This document is not an investment offer nor an attempt to sell a security. 4 Executive Summary || The Vision ||
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The vision of Premier Hare Care is to become the first nationally recognized African-American hair salon network that empowers African-American women with more hair care choices in the form of affordable hair and weave services. PHC will continue to leverage their management services model and create additional LLC entities and reach the goal of 150 stores throughout the United States. This will create lower costs for all LLC entities and create greater operational synergies throughout the Premier Hair Care network. In order to be conservative, the expected future cost savings to The First LLC is NOT reflected in this business plan. Executive Summary || The Strategy & Assessment || Strategy The following “Story Board” captures the strategy assessment of The First LLC: This document is not an investment offer nor an attempt to sell a security. 5
The PHC management will ensure that stores execute the above listed “Keys to Success” by putting in place proper controls and procedures, employing the right staff, and providing the necessary resources to reach and maintain success. The “Risk Factors” will be managed with all due care and attention by staying alert to external threats and business environment changes. We intend to be active in the hair care industry discussions and debates. Indeed, we intend to play a leadership and educational role in all appropriate public forums and the media. We believe the management team assembled is experienced and capable of meeting the needs of this plan. Executive Executive Summary || The Management Team || Michael Stone | Mr.
Stone is currently Founder/Chief Executive Officer of Allied Athlete Group and Co-Founder/ Chief Executive Officer of Coliseum Enterprises. Mr. Stone is a former professional NFL football professional turned entrepreneur/business promoter. During his 7 years in the NFL, Mr. Stone played for the New England Patriots, Arizona Cardinals, and New York Giants. Upon retirement Mr. Stone founded Allied Athlete Group, the premier private membership organization for professional athletes. Mr. Stone’s ability to reach professional athletes coupled with his ability to identify business opportunities, has allowed him bring investments to the athlete community. Allied Athlete Group membership includes athletes from the NFL, MLB, NBA, and the NHL.
This report outlines a very small business of my brother's. It describes his business, target market, financial plans, and marketing plans. I have tried to keep a neutral opinion about his opinions as much as possible. I have tried to keep my inputs and thoughts in the conclusion only. The whole idea of my brother, insert name here, owning a business started in early March of 1998 when one of the ...
Allied Athlete Group partners with various business organizations to create business synergies that generate educational, investment, networking, and branding opportunities for members both during and after their sports career. Mr. Stone holds a BA in Architecture from University of Memphis and participated in Executive Education Programs at Stanford, Wharton and Kellogg Business Schools. Stephen DuBose | Mr. DuBose is an executive with domestic and international operating experience in the franchise retail business. Mr. DuBose began his career as a banker at Bankers Trust Company; Merrill Lynch and Company; and finally GE Capital, where he built a franchise finance business. Mr. DuBose left GE Capital to start the Anderson DuBose Company, a food distribution business exclusively supplying 480 McDonald’s restaurants. Over the years, Mr.
DuBose was a Master Franchisee of Boston Market; and CFO of a 230 store McDonald’s owned franchise – Donatos Pizzeria. Mr. DuBose holds a BA in Mathematical Economics from Brown University and an MBA from The University of Chicago “Booth” Business School in finance and accounting. Seth Salzman | Mr. Salzman has over 20 years of corporate and franchise experience, including franchise operations support, branding, marketing, purchasing, and product development. Mr. Salzman spent more than seven years as a founding partner of Raving Brands, launching its marquee restaurant concept Moe’s Southwest Grill. He also served as Senior Vice president and Chief Brand Officer.
In addition, Salzman’s tenure at Raving Brands This document is not an investment offer nor an attempt to sell a security. 6 included brand development and operations of Boneheads Grilled Fish and Piri Piri Chicken, The Flying Biscuit Cafe, and Monkey Joe’s Parties and Play. After his tenure at Raving Brands, Salzman held the position of Senior VP of Operations at Stevi B’s Pizza, a 30 store Atlanta-based Franchise Company and most recently, he held the role of COO of Gandolfo’s NY Deli, a 25 year old NY Deli concept. Salzman earned his BA degree in hotel and restaurant management from the State University of New York at Plattsburgh. Executive Summary || The Five Year ProforMa ||
The summary of the financial projections for The First LLC is present below: YEAR Stores New Store Cum All/Stores/Year/Sales/Annualized Comps Yrs 1-5 Total Sales Total Expenses Franchise Fees 3% Marketing Fee 6% Total Franchise Related 9% Contract Workers 45% Other Operating Costs 26% Store EBITDA Store EBITDA $’s Store EBITDA % PHC Management Fees Total PHC Fees Net Income After Tax Cash Tax Estimate 40% Interest Rate / Interest (Exp)/Inc NI A/T Store Investment New Single Store Investment Annual Store Investments CAPEX Cash Less Investments & CAPEX Equity & Debt Calc Funds Needed – / Provided +: Cum Funds Needed – / Provided +: Funds Provided: – Equity Ending Cash+ / Debt – 2011 2012 2013 2014 2015 8 8 8 4 8 16 24 32 36 810,000 835,683 857,935 880,228 908,180 5. 0% 5. 0% 5. 0% 5. 0% 5. 0% 2,492,308 10,542,462 17,686,662 25,188,072 31,506,860 74,769 149,538 224,308 1,121,538 648,000 498,462 20. 0% 2. 0% 1,267,800 0 0 -769,338 2. 0% 96,900 775,200 60,000 -1,604,538 -1,604,538 -1,604,538 1,925,000 320,462 316,274 632,548 948,822 4,744,108 2,741,040 2,108,492 20. 0% 2. 0% 1,293,156 274,935 0 540,402 2. 0% 98,838 790,704 60,000 -310,302 -310,302 -1,914,841 1,925,000 10,159 530,600 755,642 945,206 1,061,200 1,511,284 1,890,412 1,591,800 2,266,926 2,835,617 7,958,998 11,334,632 14,178,087 4,598,532 6,548,899 8,191,784 3,537,332 20.
My post-MBA short-term goal is to get a position in finance at either an emerging technology company of information technology or telecommunication, or an investment bank that finances start-up companies of high technology. I am specifically interested in the finance, because venture capital is one of the core parts of a successful business plan that will lead to sustainable growth. I believe the ...
0% 2. 0% 1,319,019 810,525 0 1,407,788 2. % 100,815 806,518 60,000 541,270 541,270 -1,373,571 1,925,000 551,429 5,037,614 20. 0% 2. 0% 1,345,400 1,374,486 0 2,317,729 2. 0% 102,831 822,648 60,000 1,435,080 1,435,080 61,510 1,925,000 1,986,510 6,301,372 20. 0% 2. 0% 1,372,307 1,856,426 0 3,072,639 2. 0% 104,888 419,551 60,000 2,593,088 2,593,088 2,654,598 1,925,000 4,579,598 This document is not an investment offer nor an attempt to sell a security. 7 The First LLC stores collectively throw off a great amount of cash after the first two years. The 20% EBITDA on $810,000 in per store annual sales is a strong performance for any business. The per-store investment of $95k is paid back within 12 months by EBITDA in excess of $162k.
We start accumulating sufficient cash in the third year to pay for new store investments and pay all PHC management fees – Burn. We believe that these projections are conservative. We recognize that early store openings are critical to reducing this Burn (PHC Management Fees) and reaching near term profitability. PHC’s objective is to generate high returns for The First LLC investors. We provide a valuation estimate based on a conservative 3. 7X multiple of store-aggregated EBITDA (earnings before interest taxes and amortization) of $6. 3 million, showing that the business will be worth $23 million dollars in five years. This is 50% plus internal rate of return (“IRR”) for the investor and a return equal to 10x money invested.
African hair sculpture is what they call it and Africa and to them it is an art. Africans hardly ever leave their hair or their body plain or in the book, it says "natural" state. It says that they spend a lot of time and energy on grooming and self-admiration. Sounds like it's the same way there as it is here because I love to "groom." Ha ha. Anyway, it says they spend a lot of time on their hair ...
As outlined in the Sources and Uses sheet, (see the appendix), we need $2 million equity dollars (Sources) to fund (Uses) the investment cost of the first stores, the overhead management fees until breakeven, and deal closing costs. We do not anticipate needing any additional equity funding, nor any bank debt for this venture. We may open a bank revolving credit line of $100k to manage any short-term cash needs. We encourage you to read this full business plan, which outlines the market, the customers, the competitors, the operations, the marketing, and the profitability. We believe we have a solid executable plan and the right team to deliver the projected results. This document is not an investment offer nor an attempt to sell a security. 8 Business Opportunity This document is not an investment offer nor an attempt to sell a security. 9
Business Opportunity || The Market for Human Hair and Weaves Services || It is estimated that women in the Afro-American community spend $9 Billion a year on hair care products and services annually. In fact, it is reported 30% to 34% of all hair products and services in the U. S. are purchased by African-American women (African-Americans make up 13% of the total population).
This means African-American women spend nearly 3 x’s more on hair care than other women in the U. S. The business focus is branded packaged human hair sales and weaves services. This is a small, but profitable, niche within the lengthening/straightening segment of the hair care market.
The use of weaves has gained notable acceptance among African-American women, reflecting today’s trend toward high-fashion, sexy-glamour, and the emulation of numerous AfricanAmerican celebrities that wear weaves. The purchase of high-end human hair (not synthetic hair) and weave stitching services in the U. S. is growing. The latest import statistics recorded $50 – $60 million in human hair entering this country. It comes from a variety of sources: India, Asia, Russia, Brazil, Mongolia and Malaysia. After wholesale and retail markup, this amounts to $250 million in human hair retail sales. In addition to the sale of human hair, there are sales for service involved in weaves: 1. Wash; 2. Braid; 3. Stitch; and, 4. Style.
G-six Hair and Beauty Salon prides on providing a high standard of customer service. In addition to the quality hair and beauty services, the customer service has been found to be one of the main reasons of clients keep coming back to the salon. Today, beauty care becomes a big business, which can contribute to an economy significantly (Peiss 2000). Large scale production, global distribution ...
The typical hair purchase transaction can be $100 to $500; while weave preparations, with styling, can be another $100 to $600 per transaction. We estimate that this brings the weave market size in total to nearly $600 million in the U. S. We will charge $50 for basic weave service and will sell human hair more affordably at around $80, making us a major disrupter in this market. While the sale of human hair is a commodity, weave stitching requires a unique skill that is not found in most hair salons at an affordable price. Good reliable weave service is also difficult to find at any price. The service is often performed by small “Mom and Pop” venues or by select individuals who are self taught.
We intend to change the weave market not unlike the “Super Cuts”, and “Great Clips” which are now large multi-unit hair care providers that changed the hair care landscape. Great Clips, Inc. was established in 1982 in Minneapolis. Today, Great Clips has nearly 3,000 salons throughout the United States and Canada, making it the world’s largest salon brand. Great Clips salons employ nearly 25,000 stylists who receive ongoing training to learn advanced skills and the latest trends. Supercuts is part of the Regis Franchise family of brands. With over 2,100 locations across North America, Supercuts provides hair-care services to men, women and children at convenient locations with reasonable prices and no appointments necessary.
Supercuts offers a broad selection of professional hair care products including Paul Mitchell, American Crew, Nioxin, Tigi, Redken, Biolage and more. The First LLC stores will sell “The Weave Shop” branded high-quality human hair and other private label “African-American Supplier” hair products, at a very competitive price. It will This document is not an investment offer nor an attempt to sell a security. 10 provide a no-frills facility that delivers a, fast, convenient, high-value, quality weave stitching experience! PHC, and its network of managed stores, expects to win 15 – 20% of the market by opening 150 stores in select cities, throughout the U. S. , over the next ten years.
When you combine the hair sales, and stitching, to the other add-on branded product sales – lotions, oils, and shampoos – total sales are projected to reach $200 million dollars. The First LLC 36 store sales, which are a part of this $200 million, are projected to reach $33 million annualized in five years. Business Opportunity || The Products and Service Description || The revenues will come from several categories of offerings: 1. Branded prepackaged human hair; 2. weave services and styling, including maintenance and removal of weaves; 3. other “up-sell” services that complement hair sales and weave services; and 4. private label “AfricanAmerican Supplier” hair products.
We will also offer a unique VIP service, which is a time-saving, by-appointment-only service, delivered in a separate space within the shop (adds $50 premium to below).
This VIP Service also has other benefits: It promotes styling skill building and creativity among the in-house stylist who want to earn a reputation with their exclusive clients. These clients are usually the highly-valued heavy-user customer that bond with their stylist. Weave Service Options (Partial List) Types of Weave Quick Weave Silver Weave Silver Weave+ Gold Weave Platinum Weave Price Point Description The weave is glued in and comes with trim and flat iron Standard weave with a portion of your own hair to cover the track.
Silver Weave plus detailed cut Silver Weave with complete closure with no hair left out Best weave with hair net and cut included. Made for longer wear. $45 $50 $65 $75 $85 UpOther Up-Sell Services (partial list) Shampoo $25 Loose Ponytail $45 Flat Iron $20 Layers $15 Spirals Silver $80 Ponytail $25 Razor Cut $20 Feathers $25 Wig Sew-on $50 Spiral Gold $90 Sew in Ponytail $50 Cut $15 Spiral Curls $15 Trim $10 Spiral Platinum $100 This document is not an investment offer nor an attempt to sell a security. 11 Business Opportunity || The Customer Profile || With The Weave Shop’s affordable cost and its walk-in service, the primary target customer is any African-American female of virtually any age.
The African-American woman is interested in having straight long hair that they can style without using repeated chemicals on their hair. The customer want longer, straight hair that will last for a considerable period of time until the weave is replaced, which is usually 2 to 3 months; or, even more time with on-going maintenance through our up-keep weave services. (See Value Proposition) The shop may also attract a small portion of non-African-American women. It may also attract hair-only sales and product sales from beauty supply shop retail customers, who come in to buy the high quality “Weave Shop Branded” hair and private label products.
The marketing efforts will adjust to maximize potential sales from all manner of products we offer. Getting a weave is generally an expensive and involved process. For this reason, historically, a weave was often used only for that limited “special occasion” when someone wants to look exceptionally glamorous. Except for the wealthy and high-fashion women, a weave was not the permanent preferred day-in, day-out, hair choice, for the average woman. The availability of The Weave Shop will change that. The Weave Shop will reach more people that could not otherwise afford a weave. It will increase the use of weaves and will increase choice available to African-American women. Business Opportunity || The Value Proposition ||
A weave customer is unique. They choose to have a weave rather than use the other alternative hair treatments for specific reasons. The alternative treatments range from: 1. Infusion, 2. Keratin, 3. Perm, 4. Braids, 5. Clip-On Extensions, and 6. Wigs. The “value proposition” of a weave stacks up favorably against all of these alternatives. We have mapped the features and benefits of a weave against the other alternatives in the following table: Features Lengthen Straighten Styling Flexibility Flowing Natural Look Minimal Damage Infusion(1) X X X X X X X X X X X X X X X Keratin(2) Perm(3) Braids(4) X Clip –On(5) X X Wigs(6) X X Sew-in Weave X X X X X
This document is not an investment offer nor an attempt to sell a security. 12 Note that the combined benefits and the affordable weave service cost, tips the scale towards weave. For an affordable cost, they avoid unwanted chemicals, gain long-term ease of maintenance, and add dramatic styling possibilities. Business Opportunity || The Demographics and Target Geographic Markets || We have identified large population concentrations of African-American women on the eastern seaboard and selected eight of the top cities and regions. We considered household income minimums and maximums and household types i. e. single no kids, single mother, home ownership, and education level.
We considered the fashion trends in the area by identifying the number of high fashion venues and special events that support a high-style hair look. We have estimated the number of shops to open in each market based on the population of African-American women and locations of other “indicator” retailers and venues. Here are the cities and the numbers of stores the market can support based on these demographics. We have estimated a low penetration/concentration rate of stores to population to be conservative. The actual store opening schedule will depend on availability of affordable leased properties and other factors – hiring, training, marketing, zoning. We intend to open at least 16 stores in the first 24 months. DEMOGRAPHICS @ STORE LOCATIONS 1
Stores Penetration Total population Black population Male Female Black Median Age Stores Penetration Total population Black population Male Female Black Median Age 1 2 3 13% Charlotte, NC 1,582,627 24. 2% 47. 2% 52. 8% 383,566 23. 2% 181,043 46. 6% 202,523 53. 4% 30. 8 3 14% Richmond, VA 1,211,608 30. 5% 48. 7% 51. 3% 369,408 27. 1% 179,902 46. 5% 189,506 53. 5% 34. 1 3 13% Raleigh, NC 1,638,019 379,599 25. 6% 176,893 46. 9% 202,706 53. 1% 31. 7 11 13% Washington, DC 5,306,125 1,440,106 29. 5% 669,649 46. 3% 770,457 53. 7% 34. 2 2 19% Greensboro, NC 705,684 180,576 21. 1% 84,690 47. 9% 95,886 52. 1% 31. 8 6 13% Baltimore, MD 2,668,056 787,811 32. 9% 364,756 47. 1% 423,055 52. 9% 32. 5 8 12% Miami, FL 5,413,212 1,141,434 546,747 594,687 30. 4 12% Norfolk, VA 1,658,215 546,192 257,256 288,936 30. 0 Stretch Goal –> 16 24 40 Census Bureau 2007 American Community Survey as shown BlackDemographics. com 9,000 Transactions per year per store as percentage of female population This document is not an investment offer nor an attempt to sell a security. 13 Business Opportunity || The Site Selection Criterion || The mandatory site criterion is as follows: o o At least 5,000 African American women within a 1 mile radius and 25,000 within a 3 mile radius. Approximately 1,200 square feet with at least 30 feet of frontage and well lit parking for 15 cars. We will consider a larger space if the rent is low.
We will consider many types of real estate, including: o o o o o Strip centers Urban “downtown” store fronts Affordable existing free standing buildings Second generation or urban malls Preferred co-tenants include: Grocery stores, major discounter, shoe stores, lowincome fashion stores, rent-to-own business, nail salon, dollar store, check cashing. Business Opportunity || The Competition || We have mapped the number of phone-listed salons in the targeted markets and have flagged specifically any salon that mentions weave service. Charlotte Total Salons Salons w/ weave (SWW) Total black women Salons / SWW # of black women / SWW Raleigh 1,254 9 201,086 138:1 22,342
Greensboro 863 12 95,886 71:1 22,342 Miami 2,516 10 593,546 250:1 59,355 DC 1,424 35 770,456 40:1 22,013 Norfolk 1,357 31 288,935 43:1 9,320 Richmond 1,030 17 193,200 60:1 11,364 Baltimore 1,715 31 423,055 54:1 13,646 Atlanta 3,532 150 919,272 23:1 6,128 1,496 30 202,522 49:1 6,750 * Salon numbers gathered from yellow pages (yp. com) * Census Bureau American Community Survey 2007/2008 as shown BlackDemographics. com In these markets, the ratio of listed total salons, to salons that list weave service, ranges from 250:1 to a low of 23:1. The large variation in the range is an indication of the difference in weave availability and service in the various markets.
It also suggests that there are a number of hair weave services that do not advertise, if they do exist. There may also be a high This document is not an investment offer nor an attempt to sell a security. 14 concentration of Mom and Pop shops and single individuals performing weave services. This data is a high-level look at the weave service competition. We will make a more detailed analysis of the competition before we decide the exact location to put a store. It is worth noting that in Atlanta, which is arguably one of the toughest weave markets in the U. S. , has demonstrated strong acceptance of the concept and service (currently four stores).
The sales figures and traffic counts in the stores have exceeded the Proforma numbers we have used in this plan. We have mapped the pricing and product/service offerings of weave salons in these markets. COMPETITIVE PRICES – SAMPLING Total Salons SSW Stitch Styling Prices $’s 1,496 30 Charlotte 195 150 150 100 100 85 1,254 9 Raleigh 150 150 100 90 863 12 Greensboro 145 145 100 80 65 2,516 10 Miami 350 125 85 1,424 35 DC 350 200 150 150 120 120 1,357 31 Norfolk 160 150 150 130 130 116 100 95 8 26% 1,030 17 Richmond 200 150 120 105 100 95 1,715 31 Baltimore 250 250 250 200 200 200 125 120 100 9 29% Sample # Sample % 6 20% 4 44% 5 42% 3 30% 6 17% 6 35% *(Red Bold) Salons do NOT offer styling. (Black Bold) Few Salons that DO sell packaged hair. Competitive prices are 2 to 3 times higher than what we plan to charge. We will be extremely price competitive at $50 and a major price disrupter within all these markets. In most cases, the low price competitor does not offer styling (numbers in bold red).
More significantly, only a few competitors sell hair in their store (numbers in bold black).
We offer low prices, styling, and branded packaged hair, which makes us distinctly different. Again, this is a high-level view of the competitors. We will examine each of these markets and the locations of our competitors before we decide on a specific site.
This document is not an investment offer nor an attempt to sell a security. 15 Store operations This document is not an investment offer nor an attempt to sell a security. 16 Store operations || The Store Front || The typical store retail space is a 1,200 square foot, in-line, leased space that meets the aforementioned site criterion. It has plenty of free parking and secure lighting. The outside signage and window treatments are inviting and contemporary. The look is appropriately professional, understated and simple. It is noticeably superior to a local Mom and Pop venue. We want appropriate car traffic and ingress and egress access. The store will have available public transportation.
It will be conveniently visible to other venues and shops which reflect the hip urban-trend, affordable, high-fashion life style. Store operations || The Store Space (Experience) || When you enter The Weave Shop, you are greeted by a consultant stationed at the kiosk located immediately to the left of the door. You are registered into the system and then guided to a reception area to the right of the front door. The consultant pulls the customer’s existing computer profile or starts a new computer profile for a new customer. This starts the service process. The reception area is comfortable with a relaxed atmosphere and a mood fostered by soft music, internet access, various magazines, and other glossy hair style periodicals.
There is adequate seating and a pleasant color palette of pinks and muted browns surrounding you. This area is physically separated from the interior service area and cleanly delineates the reception process from the actual service experience. When you are ready for processing, your consultant will escort you to a semi-private area along the left wall adjacent to the kiosk. This area will be set up very similarly to a stylist booth with a stylist chair and large mirror on the wall. You will sit in the chair while the consultant and perhaps the lead stylist presents ideas, suggests specific products and describes all of the available service offerings of The Weave Shop.
This document is not an investment offer nor an attempt to sell a security. 17 All packaged hair and other assorted beauty products are on display at a neatly arranged “retail rack” against the wall. The packaged hair display has samples of every size and variety of hair. When a customer makes their purchase decision (perhaps with the assistance of the consultant), the manager will note the sample model number and retrieve the product. The product is stored in a locked cabinet in the inventory room off of the service hallway that runs along the left exterior wall of the store. This room is flanked by the office and neatly cleaned and appointed lavatories.
Once the customer has selected their hair, they are ready to begin service. The weave consultant will guide them from the more relaxed reception area to a noticeably vibrant and fastpaced braid-prep service area. It is an open central area. The shampoo and hair drying will be done near this area along the back wall of the space. Immediately after the braid-prep work is done, you are guided to a pre-styling area. This area is a space for all the clients who are at various stages of service. It has a floor to ceiling wall separating it from the general reception area and all onlookers. When your stylist is ready, you are escorted to one of the 8 to 16 stylist booths along the exterior walls.
Your prep and styling experience is sprinkled with scripted conversation centered on new store programs, marketing of shop services and overall advocacy and education about weaves and The Weave Shop. This document is not an investment offer nor an attempt to sell a security. 18 When all of the work is done, you are guided by your stylist back to the front kiosk, where we complete the exit process and schedule a next appointment. The store flow and design is meant to give the customer a unique personal hair care experience that takes them away from the daily pressures of the outside world. This flow design also helps mute any unwanted wait time.
We use the wait time to get to know the customer and provide personalized hospitality. This document is not an investment offer nor an attempt to sell a security. 19 Store operations || The Store Staffing Model || The store staffing model is efficient with a weekly team of at least 8 – 10 people. They are trained to exceed all hospitality requirements and service requirements. o o o o A Manager will be in the store at all times. An Assistant will be in the store during all customer receiving hours. The (active) service staff will be in the store until the last customer leaves. The service staff will be 1099 contract employees if permitted by state law. Store operations || The Compensation Model ||
We recognize that the business is completely dependent on the employees and their successful efforts in delivering customer hospitality and service. We believe the pay structure is competitive and we will have a worker friendly environment. The following charts show the standard and extended store opening hours and illustrates the implied hourly, weekly, and annual compensation (before bonus) of the staff. (Standard Model) STORE HOURS (Standard Model) Day Monday Tuesday Wednesday Thursday Friday Saturday Sunday Total Weekly Hours Open 900 900 900 900 900 900 1100 Last Customer 1900 1900 1900 2000 2000 2000 1900 Total Daily Hours. 10 10 10 11 11 11 8 71 This document is not an investment offer nor an attempt to sell a security. 20
Model) Store hours (Extended Model) Day Monday Tuesday Wednesday Thursday Friday Saturday Sunday Total Weekly Hours Open 900 900 900 900 900 900 1100 Last Customer 1900 1900 1900 2400 2400 2400 1900 Total Daily Hours. 10 10 10 15 15 15 8 83 The last customer time is different than when the last customer leaves. We have estimated the number of store hours in the imputed hourly rate including any “after hours” worked. Also, we have focused on standard (not extended) store hours in the imputed hours chart below. We will train the managers how to create and execute proper labor scheduling. We recognize the importance of proper scheduling both to manage costs and to provide raving customer satisfaction.
Base Salary Exempt Staff Position Manager Lead Manager 2nd Lead Manager Swing Weekly Hours 40 40 20 Imputed Hourly $ 15. 38 14. 42 14. 42 Weekly Salary $ 615. 38 576. 92 288. 46 Annual Salary $ 32,000 30,000 15,000 Base Imputed Salary Hourly Position Stylist (2) Braider (2) Assistant (2) Weekly Hours 148 148 80 Imputed Hourly $ 18. 50 11. 50 8. 50 Weekly Salary $ 740 460 340 Annual Salary $ 38,480 23,920 17,680 • The Stylists/Braiders are paid a contract share equal to 45% of Weave Service Revenue. This document is not an investment offer nor an attempt to sell a security. 21 Bonus and Tips Policy The management staff will earn bonuses by hitting key metrics; the most important of which is store cash, EBITDA.
All of the metrics have not been defined, nor have the weightings; but, some of the factors for the bonus structure development will include: o o o o o Customer Return Frequency New Customer Campaign Success Customer Service Comments Product Sales (packaged hair and beauty products) Selling Upgrade Services (VIP, shampoos, oils, etc. ) The stylist, braider, and remaining staff will all be eligible for tips. Tips are generally directed by the customer to go to a certain person or persons. Company Car Benefits We are considering a company car program for the Lead Manager. We believe that this program will be a strong motivator for the Lead Manager and a powerful incentive to retain them.
In addition, we believe that there are compelling marketing reasons to have a car embossed with “The Weave Shop” driving in the neighborhood and standing parked outside the store. We view this as a roving billboard. o o o The lead managers receive a company car after 30 days service. The car will sport Weave Shop Branding. The car will be obtained through a lease program. Store operations || Regulations and Licensing || This business is regulated and licensed on a State and Local government level. We will meet all requirements at all times. As mentioned above, we hire licensed hair care workers where required and even when not required, if we can (preference is given to licensed individuals).
The general regulations and licensing is centered on sanitary/health operational practices which we will address and enforce vigorously. Here are some of the major areas that we stress in the training – Maintenance and Sanitation: o o o o o o o Hand washing between patrons with soap and warm water A clean towel shall be used for each patron Used linens and towels shall be laundered at temperature All instruments cleaned with a detergent, hot water and rinsed All instruments treated with an effective disinfectant Curlers cleaned / sanitized All preparations accessed in a non-contaminating manner 22 This document is not an investment offer nor an attempt to sell a security.
We provide specific training to augment their external schooling. The employee’s external school training hour requirements vary, but in D. C. , as an example, the Cosmetology License Requirements are 1500 hours. We have a listing of all of the accredited cosmetology schools in the relevant markets and plan to build relationships with each placement office. Store operations || Supply Chain and Inventory management || Product procurement (packaged hair and beauty products) and its related supply chain activity is managed by the Franchisor, with PHC input. The packaged hair vendors will ultimately be overseas manufactures (before wholesalers/importers).
The private label African-American Supplier beauty care products will most likely be U. S. based vendors. These on-going relationships with suppliers will be heavily influenced by the PHC network. We will make sure that the packaging and branding of the packaged hair, as well as hair products, mirrors the marketing messages and the customer desires at all times. This includes having adequate supply and variety available at all times. These supplier relationships will be under constant review. We expect to leverage the store distribution network to attract the best-of-breed manufactures. The purchase terms and ordering cycles will be set in a manner which benefits all of the stores throughout the U. S.
PHC will put in place the necessary warehousing and transportation services to minimize costs and maximize regional replenishment flexibility for its stores. We plan to effectively utilize the inventory control module within the Salon Iris management system described below. We plan to maintain a week’s of sales worth of inventory in the store and turn the inventory forty plus times during the year. Store operations || Cash management and back office systems || Cash Management The stores use a closed-loop, Brinks “CompuSafe” Service system which is designed for cashintensive businesses like The Weave Shop. It is installed at the point of sale terminal. Cash is deposited directly into a safe at time of a sale.
This virtually eliminates discrepancies, reduces theft and shrinkage and saves staff from time-consuming tasks such as counting and auditing cash. The service also includes deposit processing, Web-based reporting, and cash reconciliation. For safety, we intend to also use Brinks to pickup cash on a regular weekly armored-car route. This document is not an investment offer nor an attempt to sell a security. 23 BackBack-office “Salon Iris Systems” The store Salon Iris System is the guts of the back-office management system. It provides all sales transaction data, customer tracking, employee scheduling, and inventory control information with which we can manage the business in real time, and remotely, on the web.
Here are some of the key features of the Salon Iris back-office system: Multi-computer multi-locations networked Five employee’s Employee password protection Appointment tracking Client profile, and purchase history Client picture manager Online booking compatible Automatic appointment reminder Remote Access and iPhone App Employee scheduling and time clock Complete finance, payroll, and wait list Systems Point of sale management Service / product transactions Inventory tracking Sales totals and sales tax reporting Business performance reports Automatic database backups Product ordering / auto-reordering Print barcode labels for any product Gift card usage and tracking Integrated credit card processing Marketing campaign management Security In-store security and outside perimeter security is extremely important to the business. We will have stores accessible to lower-income clients, in lower-income neighborhoods, which may mean that some stores are more susceptible to undesirable elements. We intend to have 24 hour video surveillance in all of the stores inside and out. The video stream will be accessible via the web and will be stored for a period of time and in a manner that can be reviewed by date and time. We will add more to security, including guards, if circumstances warrant.
The site selected will not compromise security and safety. || Key Performance Indicators || Performance PHC will implement a “mystery shopper type” system to continually monitor the customer hospitality care performance of the store staff. We will have a “third-party managed” feedback process like the one offered by “Tell Us About Us” Company which will give us information about a customer’s hair care service experience. This will be joined with a loyalty rewards process that will encourage the heavy users to keep coming back! Store managers and staff will be paid incentives for attaining high customer satisfaction scores monthly, and quarterly.
They will also be held accountable for maintaining frequent communication contact with the customer, which we will closely monitor. This document is not an investment offer nor an attempt to sell a security. 24 We pay particular attention to customer wait times, customer traffic counts and frequency of use by all of the customers. We will also pay attention to average check, and more specifically the sale of packaged hair sales. We will track the percentage of hair weave services that use packaged hair bought into the weave shop versus that packaged hair bought outside of the store. In addition, we will pay close attention to the “up-sell” product sales, the VIP transactions, and all sales of branded beauty products, which improve revenues and profitability.
This document is not an investment offer nor an attempt to sell a security. 25 Branding/Marketing / Positioning This document is not an investment offer nor an attempt to sell a security. 26 Branding/Marketing / Positioning || The Brand Positioning || o o Value Education o o Community Empowerment o o Service Convenience The marketing efforts will include creating overall visibility in the industry based upon our dedication to education, community and value. We intend to join and be active in the PBA (Professional Beauty Association) and any other “black hair” supportive associations (which are very limited) and all relevant hair, beauty, conventions, and events.
In addition, we plan to create educational materials for the customer which will be available both in the stores and on the website. This effort will include at least two “Blogging” sites which promote hair weaves and black hair care technology and invention. We will also build relationships with researchers and academicians that are active in the industry through an active involvement in the North American Hair Research Society. The marketing efforts will center on private labeling “world class” human hair under the trade name The Weave Shop. We will look to promote and private label other beauty products – hair lotions, oils, shampoos, conditioners. We want to source African-American suppliers whenever possible.
Branding/Marketing Branding/Marketing / Positioning || The Marketing Budget || Apart from the usual and ongoing marketing, every store is contractually obligated under the franchise agreement to set aside a Grand Opening Fee in an amount of no less than seven thousand five hundred and no more than ten thousand dollars ($7,500. 00—$10,000. 00), payable upon payment in full of the Initial franchise fee. TWS will use those funds exclusively for marketing and advertising the stores opening. The fee shall be used directly by TWS to advertise, promote and market the grand opening of Franchisee’s store within the initial thirty (30) day period leading up to the grand opening.
This fee is included in the investment number of $95k per store in the Proforma. We will augment these grand opening advertising monies with additional marketing dollars from regional and coop marketing funds. PHC management staff has expertise and experience in delivering an exciting marketing experience to existing and potential customers using in-store point-of-sale materials, traditional media materials (radio broadcast and print) and web/digital/cell based advertising and marketing. They will bring, in cooperation with the Franchisor, best practices to every element of marketing utilizing the full $48,000 per store annual average marketing budget.
This document is not an investment offer nor an attempt to sell a security. 27 We recognize that creative marketing and continual marketing is essential to success in exploiting “first-to-market” advantage and locking out later competitors. We will be very deliberate about building awareness and trial to be successful in converting customers from their other hair care service providers to The Weave Shop and then retaining them! Each store has a minimum marketing spend commitment of 6% of gross revenues. This commitment is in 3 categories: The National Advertising Fund will have a target audience of all African-American women between the ages of 14 and 48.
The Regional Co-Op Fund will be used to this same demographic within a narrow geographic region. The Local Spend will be the independent responsibility of each store and will be used to promote awareness within a 5 to 25 mile radius of a particular store. This document is not an investment offer nor an attempt to sell a security 28 Financial Structure This document is not an investment offer nor an attempt to sell a security 29 Financial Structure || The Organization / Deal Structure || The First LLC will enter into a comprehensive management operating agreement with PHC. As stated in the Executive Summary, PHC is the Master Franchisee. It is wholly-owned by the cofounders and the sponsors of this deal.
PHC makes income from its 20% ownership interest in The First LLC. It incurs expenses related to providing the management services to the First LLC. These expenses are charged to The First LLC and will be actual pre-approved (We will submit a budget to The First LLC Board. ) budgeted expense, without profit or markup. Expenses will be reduced if and when additional LLC entities are added. The First LLC will be capitalized with equity contributions of $2 million dollars. The entity will have 10,000,000 authorized units. PHC will receive approximately 20% of the authorized units (before allowance for warrants/options).
The balance will accrue to the investor members that contribute the $2 million.
The First LLC profits and losses, after payment of expenses to PHC, will accrue to the membership. Cash distributions for taxes are planned as needed. This document is not an investment offer nor an attempt to sell a security 30 Assumptions of Store Financial Model / Investment and Economics The store investment estimate totals $80,000 plus $15,000 for packaged human hair inventory for a total of $95,000. This investment includes a reduced franchise fee of $10,000 (normally $20,000 outside a Master Franchisee Agreement), leasehold improvements, equipment, prepaid expenses, and deposits. (See appendix) Individual store sales are targeted to reach $810,000 annualized.
The breakout of sales is divided into roughly two parts: 1. packaged hair sales 30%; and, 2. Weave service sales 70% (The Proforma does Not include other private label beauty products, which may add 5-15% to the top line. ).
These numbers are achieved with 9,000 transactions a year. Weave and related services average $62 a transaction. Packaged hair transactions average $80. We conservatively estimate that only 35% of customers buy packaged hair at The Weave Shop (customers may bring in hair purchased elsewhere) or 3,150 transactions. The margin on hair sales is 40%. Royalties to TWS are 3% of gross sales (normally 6% outside a Master Franchisee Agreement).
The required National, co-op, and regional marketing spend will be 2% (each) of gross sales, totaling 6%. All remaining store expenses from rent to labor, including packaged hair costs, are approximately 71% of gross sales, leaving a 20% EBITDA margin. This amounts to $162,000 in free cash flow in a full year of operations, which is a per store investment payback of less than one year. The management overhead fees, paid to PHC as a percentage of sales, starts at a high of 12% in year two, and reduces in year five to below of 5% – after the overhead is spread over more stores. These costs will be reduced further after we launch Premier Hare Care, LLC II (The Second LLC”) and open more stores.
Cash flow in the early years is directly related to store openings and the number of weeks a new store is opened in its first year. We have layered the new store openings at 20 to 25 weeks in the first year opened. Financial Structure || Multi-Store And Multi – Market 5 yr. Proforma || MultiOperations of The First LLC cover the PHC management fee – “Burn” – after the first eighteen months after the first twelve stores. Net income is positive in the second full year. The rapid cash accumulation from the first stores covers the expense of new store investments without the need for additional funds. By the end of year five, the cash accumulated after store investments, equals over two times the original $2 million equity infusion.
This document is not an investment offer nor an attempt to sell a security 31 Financial Structure || Investment Return / Exit Strategy || Equity Return ($000) Store EBITDA MULTIPLE x Valuation Cash Less Debt Warrants / Options ENTERPRISE VALUE Funding Equity Amount Funding Return Objective x Investor Ownership PHC Warrants / Options * Available but unissued Legal / Org Fees Total Warrant / Option Price Begin/End Share Price / IRR *Preferred Membership Interest Yr 0 $CF / Yr 5 Owner % 6,301 3. 7 23,063 4,580 181 27,823 # Shares Out % Out $’s 2,000 10. 0 20,000 5,319 1,391 1,113 (75) $ 1,925 $ 27,823 30% $ 0. 36 $ 0. 28 $ 2. 78 71. 9% 19. 1% 5. 0% 4. 0% 100. 0% 58. % 7,188,176 1,911,824 500,000 400,000 10,000,000 74. 9% 19. 9% 5. 2% 0. 0% 100. 00% 59. 8% 20,833 5,541 1,449 $27,823 The valuation of the business is estimated using a multiple of store cash flow. Conservatively we have used a 3. 7x multiple of store EBITDA (earnings before interest depreciation and amortization).
We have adjusted the multiple by cash less debt on hand and any exercise of available preferred units held for performance bonus paid to PHC. The objective is to earn the investor a 10x their money dollar return, which is a 50+ internal rate of return (“IRR”).
The numbers of units reserved for the investors are based on meeting this objective.
Exit Strategy The exit and/or liquidity event projection for the investment in the business will depend on the interest of all unit holders. The possible options are: 1. ) recapitalize with debt; 2. ) sell to PHC; 3. ) sell to other third party management firm; or 4. ) sell to another franchisee or franchisor. Conclusion || next steps || We hope after reading this, you are excited as we are about this new venture. We welcome any questions you have concerning this plan and encourage you to share your thoughts with us. You can contact us by phone or e-mail as provided on the cover sheet. This document is not an investment offer nor an attempt to sell a security 32