Denis McFadden Just Cuts


established 1990; 1500 employees; $80 million-plus turnover

In 2007 Denis McFadden thought he was in trouble. The bank had called. His presence was required in the city.

It sounded bad. But this was the Denis McFadden, founder of the Just Cuts hairdressing franchise. Whatever the problem, he would answer the bank's summons with shoulders squared, chin up and hair gelled.

Something was a little odd, though. The

meeting would not be in the bank manager's office. Instead, he was to present himself just after midday at Times on the Park, an upmarket steakhouse in Sydney's Sheraton Hotel. When McFadden arrived, he found two other bank clients already there. 'I realised I was sitting around the table with some very wealthy individuals—and it dawned on me that I must now be classified in the same way,' he says. Far from being in trouble, Denis McFadden had arrived. He had attained the level of affluence at which bank managers cast off their polite indif-ference and adopt a solicitude bordering on the obsequious.

Two months after he was born, McFadden's father died.

About the next ten years he says very little. His formative years, as far as he's concerned, didn't begin until he was eleven, when his mother married a Qantas pilot. 'I benefited from a wonderful life from then on,' he says. Most of his youth was spent in the United Kingdom and he began working in London as a hairdresser, later opening his own salon in Marble Arch, at the top of Oxford Street. 'It was the Swinging Sixties, and we were doing Lady So-and-so and also doing the nannies, so it was a real mix of people,' he says. Clipping the locks of English aristocrats kept McFadden in London for ten years.

During that time he married an Englishwoman who already had two daughters.

They had two sons together, and in the late 1970s the family came to Australia after deciding it was a better place for the children to grow up. McFadden began cutting hair at Hurstville. 'In those days, there was either a basic barber shop or the full-works chemical salon—nothing in between,' he says. 'So, I started in 1983 with the idea of something in the middle—something with broader appeal.'

His idea came to him when Hurstville Council ran a promotion to get people to shop locally. McFadden painted a sign on his window that read: 'If you're paying more than $6 for a haircut, you're getting clipped.' More than 100 people trooped through the door that week. 'I'd seen these people before. They had come in and asked if we did dry haircuts. I'd say: "No, I'm an artist. I need to wash it and I need to blow-dry it, and it's going to cost you." But these were busy people, time poor, and all they wanted was a haircut. I realised after that promotion that there was an angle here, a need in the community for people who just wanted a haircut.'

He later moved his main business to the new shopping centre at Hurstville. With him went the sophisticated equipment and the clients who made appointments. But, with three months remaining on the lease at the old premises, he put up a sign saying: 'Just Cuts—$7.' While he indulged his artistry at his salon, he didn't aban-don his cost-effective cutters down the road. He devised little scripts for them to deliver so they could glean information from the people responding to the $7 enticement. McFadden wanted to know about these customers. Who were the people who didn't care that much about their hair? And why were there so many of them?

At this point in the late 1980s he still saw his full-service salon as his core business. But McFadden would soon down tools forever. He looked at franchising and went as far as meeting people who were in the business, but he wanted a simpler business model. His first franchisee was a young hairdresser who worked for him.

After she approached him with the idea of starting out on her own using his Just Cuts model, her father, a wealthy property developer, asked McFadden about franchising agreements and business manuals. McFadden got busy writing and came up with a simple formula. 'What we came up with was a fixed fee—equivalent to just twelve haircuts a week,' he says. 'That first franchisee had to give me cash for twelve haircuts a week, and I think at the time a haircut was $11.'

So in 1990 he became a franchisor. 'I wanted an easy life, but I knew the only way to do that was to have lots and lots of franchisees. The way I've done that is by working out what my franchisees wanted.' In the early days, they were interested in lifestyle. 'I had single mums with four kids, and all they wanted to do was spend time with their kids,' he says. 'Today it's slightly different. They've got expenses. A big house and a mortgage. Kids in private schools. They say they need to earn $150,000, $200,000 a year and that's difficult in franchising. We can't guarantee something—they could come back in a few years' time and sue us. It's making it more difficult.'

So, with the economic downturn McFadden decided to make some changes: 'While everybody was hunkering down, we got Saatchi & Saatchi on board for a rebranding exercise. Like Woolworths, we wanted a new image to ensure we're looking fresh when the recovery kicks in.'

The business he's in may be a perennial, but he can't afford to be complacent. 'The good thing is that hair grows in good times and bad, but it's become more competitive. We are in a number of shopping centres, and shoppers have dropped off, so our business has suffered a little in some locations. We've had to move a little up-market and compete not so much on price but on service. It's crucial that we stay fresh and relevant for the next ten years.' Meanwhile, the company was still about 10 per cent up in the 2008/09 financial year.

McFadden is closing two salons, which he says were not performing very well anyway, but he'll be opening three others in different locations, all with the new logo and store design.

He is also expanding his product range—offering DIY salon-standard colouring kits for just $14.95, instead of the $200 charged for many in-store colouring services.

'It's about being convenient, competitive and innovative,' he says.

As for new franchisees, he continues to receive between two and four applications a week. They pay between $150,000 and $200,000 up front to invest in Just Cuts. The company has a small consortium of banks prepared to lend 50 per cent to franchisees, and the owner has to find the balance. The money pays for the shop fit, a month's rent in advance, furniture, the grand opening strategy and McFadden's fee. The average Just Cuts franchisee owns 2.4 outlets, although one owns fourteen, and 70 per cent of franchisees own more than one outlet. 'It's not about ego, it's about making money,' McFadden says.

And making money he is, with 174 salons in Australia, New Zealand and India. Multiply

the 150 salons in Australia by the $288 a week they pay him and McFadden's local owners are

bringing head office

С I needed the numbers to more than $43,000 make the money, and a week. Throw in when there are 174 of the twenty-three Just them it adds up. Cuts franchisees in New Zealand and the newly opened New Delhi Just Cuts, and the artiste from Marble Arch looks to have shorn franchising's golden fleece very deftly indeed. 'I needed the numbers to make the money, and when there are 174 of them it adds up.' Keeping costs down is not too hard, either. McFadden has seven people in his office. There are no auditors policing his franchisees, and he keeps in touch with them through meetings of the franchisee advisory council, which meets about five times a year.

The most visible sign of his personal success is the thirty-two-hectare property he bought two years ago in the New South Wales Southern Highlands. While he might be a hairdresser, McFadden likes his fun. He's got a chainsaw and tractor, quad bikes and motor bikes, and he works three days a week, from Tuesday to Thursday. If his banker wants to take him to lunch in the city it will need to be on one of those days.

Peter Gosnell

golden rules

Use an economic downturn to refresh your branding.

Always consider change—don't get stuck in a rut.

Do your homework.

Think about your business in a global sense.

Be passionate and think big.

Give your clients what they want, and they'll give you what you want.

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Источник: Nick Gardner. How. I made-.my first million. 26 self-made millionaires reveal the secrets to their success. 2010

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