What you need to know about buying a hairdressing franchise

By Sarah Stowe | 14 Apr 2016 View comments

Are you thinking about buying a hairdressing franchise? If so, here's what you need to know about the sector.

The IbisWorld industry report on hairdressing and barber franchises (November 2015) outlines the challenges and current successes of the marketplace.

Let's start with the current statistics.

In 2015-16 the sector (which comprises 47 businesses) accrued revenue of $343.2m, made a profit of $38.8m, and paid wages of $86.1m.

Annual growth from 2011 to 2016 is calculated at 1.4 percent; a slightly lower growth predicted for the next five years to 2021: 1.2 percent.

It's not huge growth but it is steady. And because getting a regular haircut really is considered an essential part of our lives, we will continue to visit the hair salon. Of course there are dips in spend when the economy tightens and as a result customers either postpone the cut or choose not to indulge in the more discretionary services such as colouring, treatments and styling.

Who are the customers?

What is driving performance of this sector is population growth. Add to this an ageing population, and it's good news for the industry.

As the IbisWorld report highlights, "As consumers grow older they are often keen to keep signs of maturity at bay, and may opt for colouring grey hair. This boosts demand for hair colouring services, driving industry performance."

Also contributing to revenue growth is the expanding market of increasingly image-conscious male consumers.

The average weekly hours worked is one of the key external drivers for the sector – and the 2015-16 period is expected to show a fall.

When consumers are faced with shorter working hours and less discretionary income, it becomes common for them to cut back their visits to salons and turn to home-based treatments. That was the experience back in 2011-12 when consumer confidence was weak and DIY solutions were popular.

But the busier their lives and the stronger the household income, the easier it is to for consumers to find a salon visit an essential, suggests IbisWorld analyst Arna Richardson.

Customer loyalty

For any hairdressing business the principle challenge is attracting customer loyalty. With a high level of independent salons operating around the country, it's essential for brands to differentiate themselves either through price or service.

Franchisees typically pay advertising fees of about three percent to fund the brand's marketing campaigns, and with a large network, the franchised hairdressing chains can implement effective marketing schemes.    

Increasingly common is the use of digital tools to communicate with consumers, whether that is through apps, mobile websites or social media channels. 

While there are lots of independent hair salons opening and closing the report suggests "franchisees are less susceptible to failure as they receive substantial support from franchise owners."