S1: Deborah Feyerick, thank this morning.
S2: Our producer, Jess Miller, recently visited a Supercuts hair salon in South Portland, Maine, where she was met by two employees, stylist Sara Ganim and Briana Dickinson. They told Jess that they spent their pandemic. Lockdown’s mostly at home doing pretty much what they do when they work in a Supercuts
S3: household members that we were living when they had it golden, they had fresh cuts all the time. They were like, oh, you’re bored, you want to cut my hair. They had more haircuts than they were used to. So I don’t know about you, Brianna, but. Yeah, well, my husband’s bald, so.
S2: As quarantines lifted this spring and people reemerged from their homes, Sarah and Brianna found themselves back behind their Supercuts chairs, standing on the front lines of some interesting hair.
S3: I was more impressed by the at home haircuts than I was appalled. There was definitely a handful of them that came in. And I was like, you know what? These are our options. This is what I can do to help fix this. But a lot of haircuts. I was very impressed. I’m like, how did you do this and how did you get the back? And they’re like, oh, you know, we watched the YouTube video six times in a row and my wife held this and that.
S2: Adam cuts performed by complete amateurs tends to be a little unpredictable. What Supercuts promises for your money is a dependable hair experience.
S3: You could go to a Supercuts in California and you can come to a Supercuts in Maine and you’re going to get consistency because we’re all taught the same thing.
S2: I’m one of many folks who have recently re-entered the market for professional hair services after a long layoff, which got us wondering how desperate is the hair industry to have us all back and have things now reverted to the way they were for hair salons or did a year of at home haircuts change the nature of the business forever? When we thought about which company we could investigate these questions through, of course, one immediately came to mind.
S1: We’re changing the way America got said. Supercuts.
S2: The Supercuts gene is 46 years old. It’s all over the country and it’s almost synonymous with cheap haircut. How did it revolutionize the haircutting industry? How did it stick around so long? Sideburns went from long to short to long and back to short again, and hair went from feathered to gelled. And after the pandemic, must its profits, how will the company smooth things down? Is it getting just a little trim to its balance sheet or a full on buzz? I’m Seth Stevenson. Welcome to Thrilling Tales of Modern Capitalism. Today on the show here today here, tomorrow, the past, present and future of Supercuts. The first Supercuts opened in 1975 in Albany, California, just north of Berkeley. The founders were a pair of hairstylists named Jeffrey Rapoport and Frank Emet.
S4: I worked the most with Frank Emet and he was an extremely laid back guy. He had that long feathered hair and he would ride his motorcycle to the office. And I hear the motorcycle and know that he was coming.
S2: Sheryl 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.
S4: Are 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. So those were critical things to us 40 years ago.
S2: Cheryl 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 Grofe antiquated and not up on the latest styles.
S4: And then the woman salon was completely at the other end of the spectrum. It was very froufrou, lots of services. You really never knew how much things were going to cost.
S2: Supercuts pioneered a new kind of option that had been missing from the scene, unisex, not gendered kids. Welcome to cleaner and more modern than the barbershops, but simpler and less fussy than the beauty salons. No appointment necessary walk ins, fine. And an ala 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.
S4: It didn’t matter what the haircut was. All of our haircuts were six dollars.
S2: 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.
S4: Because if we really listened to how you want your haircut, we should be able to finish it in 20 minutes.
S2: 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.
S4: So they really looked at a systemic way of cutting hair and not making it be, you know, 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.
S2: 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.
S4: And one of the other really big changes at that time was they gave a guaranteed hourly rate to stylists and included benefits. And for those sort of pink collar jobs in the 80s, that was really very different.
S2: 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. In 1987, the founders of Supercuts cashed out, selling the company for twenty one point four million dollars to a venture capital group. The Visy Group that bought it was led by a man named David Lipson. Cheryl Robinson dealt with David Lipson quite a bit.
S4: If you ask any of our managers what they remember about him, it’s that he wrote in to a managers convention on a horse. And to this day they burst into laughter with a with that image in their minds.
S2: 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 haircare 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, Laibson wasn’t satisfied by the pace of growth.
S4: He was excited about the business initially. But I think it didn’t move as fast as he would have liked. He was an investor by trade and wanted the business of Supercuts to be more exciting.
S2: Amid the impressive success engineered in part by his wife, Betsy Burton, David Lipson developed a hankering to take Supercuts public. Burton disagreed with the move, but in 1991, over strenuous objections from his wife Lipson iPod. Anyway, it was right around this time that Betsy Burton quit the company and also divorced David Lipson. Pretty soon after, Lip-Synch appointed himself as CEO of Supercuts. And now things got even weirder.
S5: The one thing I loved was was the story that I repeated multiple times when I would write about the company. I think at least two or three times I mentioned he was a quirky guy and he was at a Christmas party and he had like a cowboy hat on and he had a pizza on top of it. And he would greet people and I guess they could take pizza off the top of his hat.
S2: In the mid 1990s, Herb Greenberg was a business columnist for the San Francisco Chronicle. One of the Beattie latched onto was the unfolding saga of Supercuts and its eccentric owner, CEO David Lipson. One of Lipson central strategic goals when he took charge of Supercuts was to open more corporate owned locations instead of relying on fickle franchisees.
S5: 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 to franchisees. And that way he could have, instead of having a royalty or franchise fee, he could get all the revenue. And so he just started maneuvering the business into what became a rather substantial chain.
S2: 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. By 1996, David Lipson had grown Supercuts to twelve hundred 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.
S5: It’s just so classic. Of course you’re going to overexpanded. That’s what happens. And, you know, 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.
S2: 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. Which one of those lawsuit filings CFOs told Greenberg, was done so Lipson could avoid paying higher California income tax rates.
S5: Red flag, red flag, red flag. And did I tell you the other thing you said was a red flag?
S2: Eventually, Herb Greenberg started asking David Lipson some tough questions.
S5: Looking back at the at the phone call I had with him, I was surprised he got on the phone with me.
S2: 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.
S5: Shortly after my piece ran, things started to change and within short order he was no longer running the company. And then they sold the company to Regis.
S2: David Lip-Synch 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 an allegation that he’d sold his own Supercuts stock in advance of the company, releasing bad quarterly results in 1996 after Ellickson had exited. And with the stock still swooning, Supercuts got bought for about 150 million dollars by the Minneapolis based Regius Corporation, owner of several national hair salon chain’s new management came in. Business practices normalized. The Regius acquisition mostly settled things down at Supercuts until an entirely different sort of disruption shook things up again.
S6: I’m more concerned about my workforce feeling comfortable and what they’re doing than for me to, you know, let some twenty five year old walk in without a mask on.
S2: More on that when we come back.
S6: Back in the mid to late 80s, Supercuts was almost like a cult with the franchisee’s, it was incestuous. Families would bring other family members in, friends, relatives.
S2: In the late 1980s, Mark Muscatel, who got interested in becoming a franchisee of something, he thought about carwashes, but those took too much capital to open. He eventually settled on a hair salon. He picked Supercuts because he saw how well the people who’d gotten in early had done
S6: those first hundred franchisees correct it. In the original days, they were literally able to print money out of these stores. It was crazy
S2: muscatel a refinanced his home, pulled money out and used it to open his first Supercuts in Massachusetts in 1990. He now has 30 of them across New England, including the one in Maine that we visited earlier in the episode. Do you remember when Regis first took over how you felt? Were you optimistic?
S6: I wasn’t worried about it because they were in the business. I felt pretty good about that. And they had some sharp people at the beginning. It was a little contentious until we got to know them, until they got to know us. And it was a pretty good working relationship for a while.
S2: Regis had begun as a single hair salon in 1922 and grown to become a hair cutting giant. Its holdings currently include franchise chains like Best Cuts, MasterCard’s Pro Cuts and the Biggie Supercuts. The deal with franchise owners is that in return for royalties, they provide training manuals, guidance and support to franchisees. They also guard the brand name, controlling the logo, mounting ad campaigns and so forth. Mark Muscatel, though, thinks the marketing has been generally effective in terms of getting the name out there.
S6: Supercuts has banned awareness good, bad or indifferent. It’s hysterical. If you look back over the years, there’s been more late night talk show hosts that have busted out 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 and see all any publicity. Is good publicity taken that morning because Catholic Arizona Congressman and Supercuts test model Paul Gosar
S2: for 30 years and outlasting several regia CEOs, Mark has done pretty well with his Supercuts franchises. There have been bumps. We just started pushing its franchisees to offer color services, which Mark Veals take too long and slow down the core business of lightening quick haircuts. Regius also cut down the amount of training support it offers to franchisees, which Mark says isn’t a problem for him, but might be 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.
S6: A lot of the younger guys gravitated back to the barber shops over the last five years because that’s a hip chic and trendy thing to do until guess what? They had to make an appointment and then the guy is in there and they have to wait too long and then they’re going to go, oh, screw it, and they come back.
S2: Markes franchises and Supercuts in general kept chugging along until twenty, twenty covid shut everything down. And while there are a lot of things you can do over the Internet while you’re stuck at home, one thing you can’t do over the Internet is cut your hair. Just taking myself as an example, I went from getting my hair cut professionally every six or eight weeks to getting my haircut. Never. Well, OK. My wife took a shot at trimming my overgrown mane, but that didn’t help people like Mark.
S6: We didn’t make a dime last year, not a dime.
S2: And though the country is now opening up again, Markes franchises haven’t fully recovered.
S6: We threw money in, thank God for the cheap loans. We’ve been able to float the company and keep it going, but we’re still twenty five to thirty percent off in all our stores versus twenty nineteen numbers. That’s still serious.
S2: Mark 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 stylist’s because they couldn’t find child care and he’s had trouble recruiting people to replace them. But what 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.
S6: We have salons that were strategically placed into locations surrounding malls and huge office parks and where you had, you know, fifty thousand people within a mile radius of the salon. And it’s a ghost town. Those stores are doing 100 haircuts a day, 365 days a year, and they’re doing 30. You know, it’s like, oh, my God, you know, what do you do?
S2: On a recent earnings call, the Regius Corporation said this The main factor impacting the hair salon business is the disruption of daily routines. Customers are socializing less and working from home more. It makes sense this would hurt the hair industry. 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 hair cutting and hair coloring tools off the Internet. As those people start needing their hair cut more regularly and for more formal occasions than a Xoom call, will they keep having their spouses do it or keep doing it themselves to save money, save time, save a trip, maybe? No, they won’t get a bad haircut from a stranger. Mark thinks there’s no way
S6: it’ll get to a point where the spouses don’t want to do it anymore. They will say, OK, Seth, I’m not doing this anymore. Go get your damn haircut, OK? When we have a recession and money gets tight and jobs go away, that always happens. The Clipper sales that 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 cut. It can get funky and you can jack yourself up.
S2: Sheryl Robinson Marks, West Coast franchisee counterpart, agrees she thinks home haircuts are perilous.
S4: Did you smile at your wife when she was done?
S2: You know what? She did a pretty good job, I have to say. I wouldn’t want her to do it every time.
S4: There you go. You know, we all took care of each other and we did our best. But there’s professionals for a reason.
S2: I tend to agree with her. I think the hair salon business isn’t going anywhere, and my wife’s not eager to resume her job as a part time stylist with a single client. That’s our show for today, next week on the show, what happens when your brand gets a little too popular?
S6: They’ve run out of milk in Brooklyn. I’m like, oh my gosh. Like, what is happening?
S2: This episode was produced by Jess Miller and Cleo Levin special thanks to Grace Woodruff technical direction from Merrett. Jacob Gabriel Roth is Slate’s editorial director for audio. Alicia Montgomery is the executive producer of Podcast and Slate. June Thomas is senior managing producer of the Slate Podcast Network. Lucia is managing producer. I’m Seth Stevenson. See you next week for more thrilling tales of modern capitalism.