Moneybox

Supercuts Pioneered a New Kind of Hair Salon

It started out as a modern, unisex alternative to both the barbershop and the beauty salon.

A hand holding a pair of scissors by the nape of a woman with a short blunt haircut at a salon
Photo illustration by Slate. Photo by Getty Images Plus.

The following article is a written adaptation of an episode of Thrilling Tales of Modern Capitalism, Slate’s podcast about companies in the news and how they got there.

The first Supercuts opened in 1975 in Albany, California, just north of Berkeley. The founders were a pair of hairstylists named Geoffrey Rappaport and Frank Emmett.

“I worked the most with Frank Emmett, and he was an extremely laid-back guy,” says Cheryl Robinson, a longtime Supercuts franchisee. “He had that long, feathered hair and he would ride his motorcycle to the office and I’d hear the motorcycle and know that he was coming.”

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Robinson started working at Supercuts early on and has been attached to the company for more than four decades. These days she operates 43 Supercuts franchises in California and Arizona. She says when Supercuts began, it was a revolutionary concept: “Our saying at that point was we’re changing the way America cuts its hair. It was a very different way of looking at the salon business. Not a barbershop, really not a beauty salon, but something in the middle that didn’t take appointments and was open on Mondays. Those were critical things to us 40 years ago.”

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Robinson says that the haircutting landscape of the 1970s was strictly gendered—barbershops for men, beauty salons for women—and it had drifted out of touch with what customers really wanted. For younger guys, the old-school barbershop didn’t offer enough in the way of service. It was gruff, antiquated, and not up on the latest styles. “And then the woman’s salon was completely at the other end of the spectrum,” Robinson says. “It was very froufrou, lots of services. You really never knew how much things were going to cost.”

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Supercuts pioneered a new kind of option that had been missing from the scene. Unisex, not gendered. Kids welcome too. Cleaner and more modern than the barbershops, but simpler and less fussy than the beauty salons. No appointment necessary, walk-ins fine. And an à la carte menu of add-on services, like shampooing or blow-drying, so there was no hiding the ball on what you were getting or what you’d pay for it.

There were two other very practical Supercuts selling points. It offered a low universal price for a basic haircut: $6, no matter what. And to make up for that low price with volume, Supercuts promised a quick, in-and-out experience that wouldn’t kill your whole afternoon. “Because if we really listen to how you want your hair cut, we should be able to finish it in 20 minutes,” Robinson says.

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The speed of the Supercuts haircut grew out of the founders’ focus on training their stylists in a proprietary technique that was streamlined and repeatable. It got into details like how to segment hair, how to palm your shears. Robinson describes it as “a systemic way of cutting hair and not making it be a work of art by a master who would decide what would look good on you, but really a way to hit those everyday haircuts.”

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Most salons in the ’70s paid stylists on commission. If you had a bad day and didn’t cut anyone’s hair, you made zero dollars. To attract recent cosmetology school graduates, Supercuts offered its largely female workforce a more generous deal. “One of the other really big changes at that time was they gave a guaranteed hourly rate to stylists and included benefits,” Robinson says. “For those pink-collar jobs in the ’80s, that was really very different.”

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Put it all together and Supercuts became a winning business concept. Within three years, the founders had opened six stores in California, at which point they began to franchise. Just as the Supercuts haircutting method was effective and repeatable, the Supercuts store concept turned out to be effective and repeatable. Franchisees could run the Supercuts playbook in pretty much any part of the country and have a good shot at success. By the mid-1980s, hundreds of new Supercuts franchises had opened in 39 states, all of them sending franchise fees back to the mothership in California.

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In 1987, the founders of Supercuts cashed out, selling the company for $21.4 million to a venture capital group. The VC group that bought it was led by a man named David Lipson. According to Cheryl Robinson, who dealt with Lipson quite a bit, he once rode into a manager’s convention on a horse. Herb Greenberg, who covered Supercuts as a business columnist for the San Francisco Chronicle, says “he was a quirky guy. He was at a Christmas party and he had a cowboy hat on and he had a pizza on top of it. He would greet people and I guess they could take pizza off the top of his hat.”

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David Lipson was mostly a numbers guy, a deal guy. Shortly after buying Supercuts, he brought in a woman named Betsy Burton to handle the day-to-day brass tacks operations. Burton ran the company well, maintained peace with the franchisees, and made one particularly shrewd decision: She pushed stores to sell more hair care products from their shelves, something that’s continued to be a profit center for Supercuts to this day. In her first two years on the job, Burton boosted Supercuts’ sales by double digits. In her third year on the job, she married her boss, owner David Lipson, and things went downhill from there. Even though Burton had managed to expand Supercuts with 100 new locations, Lipson wasn’t satisfied by the pace of growth. He developed a hankering to take Supercuts public. Burton disagreed with the move. But in 1991, over strenuous objections from his wife, Lipson IPO’d anyway. It was right around this time that Betsy Burton quit the company and also divorced David Lipson. Pretty soon after, Lipson appointed himself as CEO of Supercuts. And now things got even weirder.

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One of Lipson’s central strategic goals when he took charge of Supercuts was to open more corporate-owned locations, instead of relying on fickle franchisees. Greenberg explains: “The franchisees were not expanding as quickly as he had hoped, so he shifted the strategy to aggressively opening company-owned stores and then buying back the franchisees. That way, instead of having a royalty or franchise fee, he could get all the revenue. So he just started maneuvering the business into what became a rather substantial chain.”

A big retail chain might have all its locations owned by the corporate mothership, or it might have some of its locations owned by franchisees who pay a royalty to the mothership—a 10 percent royalty, in the case of Supercuts. The advantage of letting franchisees run your locations is you offload a lot of the risk and the work onto them—dealing with employees and landlords and so forth. If the location goes out of business, it’s the franchisee who loses her life savings. On the other hand, if the corporation owns the location, it deals with all these complexities and the added risk, but it also keeps all the revenue from the location instead of just the royalty.

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By 1996, David Lipson had grown Supercuts to 1,200 locations, and 500 of those were corporate-owned, more than 10 times the number of corporate-owned stores there had been just a few years before. A lot of his new stores were around New York City, an area he was bent on conquering. But the expansion moved too quickly, and performance of the stores faltered. And the company began to record losses, which Herb Greenberg says should have been no surprise. “It’s just so classic. Of course you’re going to overexpand. That’s what happens. Overexpansion is the bane of retail, especially public entities. Because you come back to the stock. It’s all about trying to push the stock higher. And it works until it doesn’t.”

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Meanwhile, curious stuff was going on. After marrying and divorcing one Supercuts executive, Lipson became engaged to a different Supercuts executive. Also, it came out that Lipson, though he was CEO of the company, had somehow made himself an independent contractor, paid a consulting fee by Supercuts—a move Lipson told Herb Greenberg was for tax purposes. And Lipson was operating the California-based company from Chicago, reportedly so he could avoid paying higher California income tax rates. “Red flag, red flag, red flag,” as Greenberg put it.

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Eventually, Herb Greenberg started asking David Lipson some tough questions. Lipson denied any wrongdoing, but Greenberg’s resulting column was scathing. He wrote, “Trying to figure out how David Lipson runs Supercuts is like trying to keep up with the latest hairstyles.” And shortly after the piece ran, Greenberg says, “things started to change, and within short order, he was no longer running the company and then they sold the company to Regis.”

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David Lipson’s role in the Supercuts saga had ended. In addition to his other controversies, Lipson was found guilty by a federal jury of insider trading in a civil case related to a Securities and Exchange Commission allegation that he’d sold his own Supercuts stock in advance of the company releasing bad quarterly results. In 1996, after Lipson had exited and with the stock still swooning, Supercuts got bought for about $150 million by the Minneapolis-based Regis Corporation, owner of several national hair salon chains. New management came in; business practices normalized. The Regis acquisition mostly settled things down at Supercuts.

Regis had begun as a single hair salon in 1922 and grown to become a haircutting giant. Its holdings currently include franchise chains like Best Cuts, MasterCuts, ProCuts, and the biggie, Supercuts. The deal with franchisers is that in return for royalties, Regis provides training manuals, guidance, and support to franchisees. It also guards the brand name, controlling the logo, mounting ad campaigns, and so forth.

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Mark Muscatello, a Supercuts franchisee, thinks the marketing has been generally effective in terms of getting the name out there. “Supercuts has brand awareness, good, bad, or indifferent,” he says. “It’s hysterical—if you look back over the years, there’s been more late-night talk show hosts that have busted on our chops. And why? Because they know that everyone knows what Supercuts is, so they’re able to pick on you. That’s what it comes down to if you really look at it. It’s the old ‘any publicity is good publicity’ type of bit.”

For 30 years and outlasting several Regis CEOs, Muscatello has done pretty well with his Supercuts franchises. There have been bumps. Regis started pushing its franchisees to offer color services, which Muscatello feels take too long and slow down the core business of lightning-quick haircuts. Regis also cut down the amount of training support it offers to franchisees, which might be a problem for franchisees who are new to the game. And some formidable competitors have emerged, like Sport Clips, which took the Supercuts model and made it more explicitly male, plastering salon walls with big-screen TVs showing games. There’s also been a boom in upscale, retro men’s salons. Muscatello says, “A lot of the younger guys gravitated back to the barbershops over the last five years because that’s the hip, chic, and trendy thing to do. Until, guess what, they had to make an appointment, and then the guy isn’t there, and they have to wait too long. And then they go, ‘Oh, screw it,’ and they come back.”

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Muscatello’s franchises, and Supercuts in general, kept chugging along until 2020. COVID shut everything down. And though the country is now opening up again, business hasn’t fully recovered. “We’re still 25 to 30 percent off in all our stores versus 2019 numbers,” Muscatello says.

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He feels like he was able to protect his employees and support them through the pandemic as best he could. He’s lost a lot of his stylists because they couldn’t find child care, and he’s had trouble recruiting people to replace them. But when he looks to the future, there are two main looming questions for him and for Supercuts in general. The first isn’t so much about Supercuts stores; it’s about the stores near Supercuts stores and the office buildings and all the other things that generate foot traffic: “We have salons that were strategically placed into locations surrounding malls and huge office parks where you had 50,000 people within a mile radius of the salon. And it’s a ghost town. Those stores were doing 100 haircuts a day, 365 days a year, and they’re doing 30. It’s like, oh, my God, what do you do?”

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On a recent earnings call, the Regis Corporation said the main factor affecting the hair salon business is “the disruption of daily routines. … Customers are socializing less and working from home more.” If you’re not going to the office and you’re not going to the bar, well, maybe you don’t care so much what your hair looks like. The only remedy here is for people to start getting out in the world more.

The second question about Supercuts’ future is trickier. During the pandemic, lots of people figured out ways to cut their hair at home. They even bought haircutting and hair coloring tools off the internet. As those people start needing their hair cut more regularly, and for more formal occasions than a Zoom call, will they keep having their spouses do it or keep doing it themselves to save money, save time, save a trip, maybe know they won’t get a bad haircut from a stranger? Muscatello thinks there’s no way.

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“It’ll get to a point where the spouses don’t want to do it anymore,” he says. “When we have a recession and money gets tight and jobs go away, that always happens. The clipper sales at Walmart or Target or all this all of a sudden start leaping off the shelves for the same reason. And then it comes back. Ultimately, there’s a reason that we have licensed hairdressers, because it is not that easy to cut your hair unless you’re giving yourself a straight buzz cut. It can get funky, and you can jack yourself up.”

Listen to the full episode using the player below, or subscribe to Thrilling Tales of Modern Capitalism on Apple Podcasts, Overcast, Spotify, Stitcher, or wherever you get your podcasts.

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