Verified — real FDD extraction
SBA-eligible · directory code S2161 since 2017
COST CUTTERS
Beauty & Personal Care · independent · est. —
Cost Cutters is a value-priced family hair salon chain offering haircuts, color, and styling for men, women, and children without appointments needed. A franchisee operates a salon, hiring licensed stylists and managing walk-in traffic, scheduling, and retail product sales.
COST CUTTERS net unit count declined -33.1% from 2022–2025 per its FDD Item 20.
New to franchising? Start here
A franchise is a business where you (the franchisee) pay a company (the franchisor) for the right to open and run a location using their brand and system — think a local Anytime Fitness or Taco John's owned by a small-business owner, not the corporation.
Before you can buy in, U.S. law requires the franchisor to give you a Franchise Disclosure Document (FDD) — a long legal filing covering its fees, finances, and history. The numbers on this page come straight from that document:
- Franchise fee — the one-time cost to buy in.
- Royalty — the ongoing cut of your sales you pay the franchisor.
- Item 20 — how many locations opened and closed, the basis for our verdict (from Proven & strong down to Distressed — or Too new to judge).
The verdict
Showing strain
Distress
The disclosed record shows weakness — shrinking units, elevated exits, or churn — worth reading closely before going further.
Exit rate · latest year
11.4%
vs 5.4% across 21 beauty & personal care systems
Cost to open
$181K–$342K
Item 7 total investment range
SBA loan defaults
Too few resolved
11 loans exist; too few resolved to rate
Behind the verdict
the record, factor by factor · Item 20
3-yr trend · Item 20 Table 1
terminations + ceased-ops vs. all exits · Table 3
transfers vs. base · Table 3
actual vs. projected openings · Table 5
Item 19 disclosure + completeness
Systemwide units
2022–2025
Survival record
FDD Item 20 · outlet status by year
In fiscal 2025, 53 of 463 franchised outlets left the system — a 11.4% annualized exit rate, vs 5.4% across 21 beauty & personal care systems. Not every exit is a failure — but this is the measurable floor.
Show the outlet tables ↓Hide the evidence ↑
| Status (FTC) | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Outlets at start | 644 | 605 | 521 | 463 |
| Opened | 6 | 0 | 2 | 0 |
| Transfers | 52 | 38 | 7 | 18 |
| Terminations | 0 | 0 | 0 | 41 |
| Non-renewals | 0 | 0 | 0 | 12 |
| Reacquired by franchisor | 0 | 0 | 0 | 81 |
| Ceased — other reasons | 40 | 83 | 60 | 0 |
| Outlets at end | 605 | 521 | 463 | 405 |
| Net change | -39 | -84 | -58 | -58 |
The lender's view
SBA 7(a)/504 loan performance · FY1991–present
Banks have made 11 SBA-backed loans to COST CUTTERS franchisees since 2015. Most are still open, so there is not yet a resolved cohort large enough to rate.
—
7 resolved · too thin to rate
—
avg. charged-off $ ÷ approved $
—
default rate × loss severity
$729,533
what recent franchisees borrowed
—
approval → charge-off, defaulted loans
1 vs 7
distinct banks — pulling back
Charge-off rate by loan approval year (%)
SOURCE: SBA 7(a)/504 FOIA LOAN DATA (DATA.SBA.GOV), FY1991–PRESENT · MATCHED TO COST CUTTERS BY FRANCHISE NAME · RESOLVED = CHARGED-OFF + PAID-IN-FULL
What it costs — and what it drags
FDD Items 5–7 · fees, investment, royalty
Buying in means a $40K franchise fee (Item 5) and a total investment of $181K–$342K (Item 7). The franchisor publishes an earnings claim (Item 19) — read its methodology closely.
To open (Item 7)
$181K–$342K
all-in investment range
Franchise fee (Item 5)
$40K
upfront, one-time
Royalty (Item 6)
6%
of sales, ongoing
Your figure — cross-check against this brand's Item 19 and current-owner validation.
Royalty you'd pay / yr
$60K
6% of sales, before profit
Over a 10-yr term
$600K
royalties alone, excl. ad fund
This is not profit. It's the only money the FDD actually pins down — what you put in, and the royalty you owe on every dollar of sales. Your real take-home depends on labor, rent, food cost, and ramp-to-breakeven, none of which any FDD discloses.
Build a real pro-forma for COST CUTTERS with an independent CPALabor record
US Dept. of Labor enforcement · franchisee-level · FY2005–present
Federal investigators have concluded 9 wage cases against operators of this system, recovering $35K in back wages for 87 workers. These cases name franchisee-owned locations, not the franchisor itself.
Concluded cases
9
Back wages owed
$35K
Employees affected
87
Since 2020
0
Read this carefully. The employers in these cases are individual COST CUTTERS franchisees — separately owned businesses operating under the brand name — not COST CUTTERS itself. The franchisor is not the respondent and in most cases is not a party. What the record shows is how this system's operators run their payrolls, which is worth knowing before you become one of them. Counts rise with system size and with age: a 20-year-old, 10,000-unit system will out-count a young one regardless of conduct. Source: DOL Wage and Hour Division concluded compliance actions, FY2005–present, most recent finding 2012.
Modeled risk
FDD Risk Score · modeled from the public record
The public record puts this brand toward the middle of the systems we score — but the evidence is thin, so treat it as a range, not a number.
Risk percentile (range)
39–63 / 100
Directional
Modeled SBA charge-off
12.8%
Observed SBA charge-off
0.0%
Top drivers: Net unit growth (raises) · Item 3 litigation (log) (lowers) · System size (log units) (lowers) · Item 20 exit rate (raises). Thin loan history — treat this as a range, not a number. A linear scorecard built from this brand's own disclosure figures plus the federal loan record behind its franchisees; full spec and cross-validated accuracy on the methodology page. A score is context, not a verdict.
Distress signals
news-sourced · bankruptcies, closures, lawsuits
Cost Cutters Class Action Says Haircut Text Ads Violate TCPA
news:Top Class Actions · 106mo ago
11 questions to ask a COST CUTTERS franchisee
Built from this brand's own disclosures · take it to your validation calls
The franchisor will give you a list of owners to call. Most buyers ask whether they like it. These are the questions built from what COST CUTTERS has actually disclosed — each one carries the number it came from, so you can tell whether the answer squares with the record.
- 01
COST CUTTERS’ own Item 20 shows 53 of 463 franchised outlets left the system in fiscal 2025 — about 11.4%. Do you know any of those owners, and do you know why they left?
A franchisor will call these “transitions.” An owner three doors down usually knows whether they sold at a profit or handed the keys back.
FDD Item 20 · FY2025
- 02
18 units transferred to new owners in fiscal 2025. When you look at those, were they people cashing out a good business — or getting out of a bad one?
Transfers count as neutral in every ranking. They are the single easiest place to hide distress.
FDD Item 20 · FY2025
- 03
The system went from 605 units to 405 over 4 disclosed years. What's the explanation you've been given, and do you believe it?
A shrinking system means fewer owners funding the ad fund and support staff you're paying for.
FDD Item 20 · FY2022–FY2025
- 04
Item 7 says the low end to open is $181K, but the average recent SBA loan to a COST CUTTERS franchisee was $730K. What did you actually spend to open, all in?
Lenders size loans to real project costs. A large gap between the disclosed floor and what banks actually fund is the most common way buyers get underfunded.
FDD Item 7 vs SBA approvals FY2020+
- 05
You pay 6.0% royalty on gross sales, plus the ad fund, before any of your own costs. On your actual revenue last year, what did you take home as the owner — not revenue, take-home?
Royalty is charged on sales, not profit. This is the number the brochure never shows and the one your life actually runs on.
FDD Item 6
- 06
COST CUTTERS makes an earnings claim in Item 19. Does your unit look like that number — and do you know which units they included to build it?
Item 19 is legal to build from a flattering subset. Ask whether they excluded new units, closed units, or company stores.
FDD Item 19 · 2025
- 07
How many months did it take to cover your own costs, and how much cash did you burn getting there?
Ramp-to-breakeven working capital is the most underestimated line in any franchise purchase, and the most common reason otherwise-good units fail.
Not disclosed in any FDD — ask an owner
- 08
Item 3 discloses 11 legal matters. Do you know what those were about, and were any brought by franchisees?
Franchisee-brought suits over territory, fees or support tell you how the franchisor behaves when there's a disagreement.
FDD Item 3 · 2025
- 09
What does the franchisor charge for that you didn't expect — required tech fees, mandatory remodels, approved-supplier pricing?
Required spending appears across Items 6, 8 and 11 rather than in one place, so buyers routinely miss the total.
FDD Items 6, 8, 11
- 10
If your agreement came up for renewal tomorrow at current terms, would you sign again?
The single most predictive question you can ask. A hesitation is the answer.
Ask every owner you speak to
- 11
Who else should I call — including someone who left?
The franchisor's list is curated by definition. Former franchisees are where the unflattering truth lives, and current owners usually know how to reach them.
Ask every owner you speak to
Want this as a checklist you can take to the calls?
I'll email you the printable version, and tell you if COST CUTTERS’ numbers move — a new filing, a rising exit rate, a distress signal. Unsubscribe in one click.
A broker is paid by the franchisor to place you. I'm paid by you — and the job is pressure-testing COST CUTTERS's numbers, including talking you out of a bad deal.
This page is what buyers see before they call you for validation. If the record above is wrong — or right in a way the numbers can't show — say so. Corrections are checked against the filings; nothing you write is published with your name unless you agree to it.
COST CUTTERS franchise questions, answered from the filings
What percentage of COST CUTTERS franchises closed last year?
In COST CUTTERS's latest FDD Item 20 (fiscal 2025), 53 of 463 franchised outlets left the system — an annualized exit rate of 11.4% — compared with 5.4% across 21 beauty & personal care systems tracked here. That counts terminations, non-renewals, and "ceased operations — other reasons." There is no official failure rate, and not every exit is a failure, but this is the measurable floor.
How much does a COST CUTTERS franchise cost?
Per COST CUTTERS's 2025 FDD, buying in requires an initial franchise fee of $40K (Item 5) and a total initial investment of $181K–$342K (Item 7).
What royalty does COST CUTTERS charge?
COST CUTTERS charges an ongoing royalty of 6.0% of gross sales, per Item 6 of its 2025 FDD.
Does COST CUTTERS disclose earnings (Item 19)?
Yes — COST CUTTERS makes a financial performance representation in Item 19 of its 2025 FDD, reporting a median unit volume of $261K. Read it closely: franchisors choose which units and which metrics to include.