Joe Klimek, Independent Area Developer for Sport Clips, talks about being an area developer for a franchise and how he can get new stores up and running with a well thought-out systematic approach.
Please excuse any typos in this hasty transcript.
Matt Register: Welcome back to the show, Texas Business Radio. 844 814 8144 is our 24 hour call-in line, get your calls in. We’re going to get the experts on here to get those questions answered. I’m your host, Matt Register. Jay Curry had to step out. He’s going to join us here again shortly, but we’re talking about franchises today. Franchises, if you’re looking for a business that have had all of the kinks worked out, all of the lessons learned, all of the best practices already established, a franchise may be something that you’re interested in. Now, a very interesting fold on this is a gentleman we have in the studio right now, Joe Klimek, is the area developer for Houston for Sportclips Haircuts. Area developer, think master franchiser. These are guys that basically control and area, a piece of geography, and help you get rolling if you end up buying a franchise, correct?
Joe Klimek: Absolutely, Matt.
Matt Register: So, Joe, welcome to the show, sir. Tell me a little bit about the area developer position and what it is that you do.
Joe Klimek: Well, sure, Matt. We came out of zero developers back over in 2004, and we were franchisees first. Back in 1999, we opened up three stores, and we had a great time opening up those stores, learned a lot, and in 2004, we transitioned into the area developer role. So we are independent area developers for Sportclips in the Houston market. And we move outside of Houston. We go out to Victoria, up to Huntsville, Orange, College Station, so we have a broad area, and one of the major roles that we do as a area developer, and especially since we’ve owned stores before, we help a new franchisee, we call them team leaders, come into the market. They come to us, we talk to them, we award them licenses, and we help them from the ground up. From the day they sign up, we’re right with them from day one.
We take them through the process of going through Discovery Day, we go out, once they’re signed up, we’ll help them find their real estate, we’ll help them with their contractors. We’re basically going to have coaches working with them, we have store opening processes, but it doesn’t stop there. Once we take them to the point where they get their store open, and mind you, it takes time. Once they sign a license and get they get everything lined up, it may take six months before they open their store.
Matt Register: Sure.
Joe Klimek: So we’re going to go ahead. We have what’s called an SOP, which is a store opening process, and that’s four to six months before they open their store. We’re going to go ahead and help them, take them through all the various steps to help them have a great store opening.
Matt Register: Now, how many Sportclips exist in the United States? A lot of them, right?
Joe Klimek: When we got started, there was 15. Back in 1999, 2000, we opened up three in one year. We were the first ones to go do that and we learned a lot, but there is now 1600 stores, and we’re opening about 140 to 150 stores a year.
Matt Register: That’s [inaudible 00:03:29]. So in the Houston area, the Houston metro area how many are-
Joe Klimek: Well, across the country we’re opening that, but we’re opening about seven stores a year in Houston.
Matt Register: Okay. How many are there in the Houston area?
Joe Klimek: We have 86 stores in Houston now and we’ll have 92 by the end of 2018.
Matt Register: So you’ve opened a few of them. I mean, you’re not having to reinvent how to do this, you’ve done this multiple, 60, 70 times, getting a store open and rolling, right?
Joe Klimek: Absolutely. We have a process and it works very, very well. Gordon Logan, the founder set this up. He came from Command Performance, so he had been in the industry before, so, when he came on, he set this up so it’s almost paint by numbers. If you follow the system, it works, and we always say, if you want to come into the system and you want to change it, it may not be the right business for you, because the system really works and that makes the biggest difference.
Matt Register: Well, it only works if you do it, right?
Joe Klimek: Absolutely. Yeah, why change it? And especially with as many stores that are open, and, again, we have so many tools and metrics that we follow that we can know, and we help … We have coaches that actually … We have four coaches on our market, and so we’re working with team leaders, the managers. I’ll give you for instance. We hold about 400 classes a quarter. We have leaderships. We do what we call success checks. Success checks are nothing more than our coaches going in and working with the managers, and they’re looking at the store operations, we’re looking for opportunities to help them improve. So if we see something … We kind of all work together, so it is one big family, and we have 13 franchisees in our Houston market.
Matt Register: Well, one of the interesting things about this and one of the ways this is a little different to some of the other franchises is it is a, I think you described it as a manager driven model, where the owner of the franchise doesn’t necessarily have to be there every single day to open up the store, correct?
Joe Klimek: Yeah, we have a saying, “You work on the business, not in the business.” The team leaders out there helping with recruiting, they’ll be out there doing marketing, they’ll be helping out with ordering supplies, but, really, what a team leader will do to support the team is to just make sure they have all the tools to be successful. So sometimes they’ll go in and team leaders will be active, they’ll be vacuuming the floors, they’ll come in and bring pizzas, they’ll come to the pep rallies, because sometimes once a month or every quarter team leaders are having pep rallies, so it’s great way to bond with the team, but what’s nice about the Sportclips franchise is it’s a manager driven model.
An individual that comes in can still keep their day job until they get to a certain point where maybe they have five stores, seven stores or ten stores, if they want to go ahead and exit from their corporate job or whatever else they’re doing, they can then focus on their Sportclips business or adding additional stores as it becomes opportunistic.
Matt Register: Interesting that you have 87 stores and 13 franchisees, right?
Joe Klimek: Right.
Matt Register: So that means that they own several stores, right? I mean, these guys don’t necessarily just open one store and leave it. These guys open up multiple locations?
Joe Klimek: Absolutely. The intent is when they come aboard is that they buy a three pack. They’ll buy three stores. In the early days, they might sell one, but, as we matured, three packs were the norm. And then the goal after that was they get the three open, they’ll successful, then they’ll add more stores. Whether a new area’s opened up … I’ll give you for instance. The Grand Parkway opened up. We never knew anything about the Grand Parkway, and then that came along, that opened up 10 new sites for us, so that was great opportunity for existing franchisees, we call team leaders again, to pick up additional licenses to open up stores. But the average team leaders own five stores. We have one that owns as many as 23 right now in our market.
Matt Register: Sure, wow.
Joe Klimek: And he started with three and he just kind of built it up from there.
Matt Register: Now, I just want a kind of a scale from you, but say I was interested in buying a three pack and opening up three stores, what is the scale of level of capital I need to have on hand to be able to adequately do that?
Joe Klimek: Right, good question. Liquid capital. $120,000 liquid capital, net worth of 400k.
Matt Register: Okay. And that’s, I think, a reasonable level of capital that somebody can hope to achieve working in a nice corporate job, right?
Joe Klimek: Yeah, absolutely. A lot of people come in and they need the cash up front to buy the three pack, right, the licenses, and then they need that additional capital for their loan to get the store going, and then they open the second one, and then usually, typically, they’re going with SBAs. And as we move on down the road, people will either use … They’ll go back to the SBA, or they may go to conventional loans or use cash. The SBA loves us, because we’ve closed, I think, three stores in the last three years across the whole country, so we got a very high rating with the SBA.
Matt Register: No, that’s very interesting. I mean, this is a very interesting deal, and with you guys being there to support. So this isn’t having to wait and calling somebody at the national corporate headquarters, this is somebody right there within an easy drive to get there and be able to help, right?
Joe Klimek: Absolutely, yeah. We’re feet on the ground and our coaches are pretty much 24/7. They gets texts, they got a problem, they’re responding right away. And, again, we have a vested interest, as being the area developers, we want to see them grow, because it benefits everybody.
Matt Register: No, absolutely, makes a whole lot of sense. Joe Klimek is an area developer for Sportclips Haircuts. Joe, what’s the easiest way for somebody to get in touch with you should somebody want to?
Joe Klimek: You can go ahead and you can email me at email@example.com.
Matt Register: All right, or sportclips.com, sport clips.com is the website. We’re going to have linked right there from texasbusinessradio.com. We, unfortunately, are running out of time, do have to take a break. Thank you very much for joining us, this has been interesting.
Joe Klimek: Matt, my pleasure. Thank you.
Matt Register: We’re talking franchises today and we have a whole lot more coming up. Don’t forget, go to social media, get your questions in there. Go to the website, we monitor #tbr on Twitter. We’ll be back right after we pay a couple of our own bills. We got a whole lot more Texas Business Radio coming on right after this.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.