Why are Sport Clips' Financial Requirements So High?

We get asked this question a lot. Sport Clips Haircuts values transparency so we are happy to provide some background information about our process. We are very intentional about setting our franchisees up for success. Ninety-nine percent of our stores that were open for any period of time in the last seven years remain open today. A continuity rate like that is quite uncommon in the franchising industry. This all starts with making sure we select franchisees who are a good fit for the Sport Clips business model, and our financial requirements are a significant part of that.

Sport Clips requires all candidates to verify a minimum of $200,000 in liquidity (cash, non-retirement investments, or rollover eligible retirement funds) and $400,000 in net worth. High credit scores and low debt-to-income ratios are also critical and, because most franchisees maintain their current employment during the initial operating period, strong income is a major factor as well.

“Capitalization is vital in setting team leaders (franchisees) up for success,” says Dave Wells, senior director of franchise development. “Undercapitalization is one of the primary causes of business failure. If we can eliminate that variable up front, then the chances for success for any individual team leader goes up significantly.”

Sport Clips’ selection process is known as being one of the most rigorous in franchising, and that is especially true when it comes to financing. Wells explains, “Our approval requirements are more strenuous than those of many lending institutions. In our 25-year history, we have never had an approved candidate not be able to obtain financing to open their first location. Very few brands can offer candidates that kind of confidence.”

Scalability is one of the great features of the Sport Clips business model. Sport Clips gives high priority to helping existing team leaders grow. The ability to do this is something we look for from the beginning. “We are looking for long term growth potential. We want to make sure the candidate has a plan and ability to open all three locations they are initially committing to and like to see potential for them to grow well beyond that,” says Wells. “This kind of growth doesn’t happen by accident.”

If you think you’ve got what it takes and are interested in learning more about the hair care industry and Sport Clips opportunity, click here.