Cost Cutters
Bottom line
- Total investment $181K – $342K including a $40K franchise fee, 4.0% ongoing royalty.
- Average unit revenue of $280K/year (median $261K).
- Rated CAUTION with a risk score of 74/100. SBA loan default rate of 0.0% across 10 loans (below the industry average).
- 11 litigation matters disclosed in Item 3 — higher than typical. Review the summary for patterns (franchisor-initiated vs. franchisee-initiated).
Item 1 · who you're contracting with
The Franchisor
Yale framework · single-unit ROIC
Returns Analysis
Pulls Item 7 (investment) and Item 19 (revenue) from this brand's FDD into the Yale unlevered-ROIC formula. Override any input to stress-test it against your own assumptions.
The model · Yale framework
What would one Cost Cutters unit return on the cash you put in?
Unlevered ROIC · per unit
21%
Below typical band (30–60%)
Levered LBO scenario · Yale Crease Capital framing
What would 25 Cost Cutters units return on equity?
Equity IRR · 5-yr
49.9%
7.57× MOIC
Year-1 DSCR
1.88×
EBITDA ÷ debt service
Equity required
$840K
on $4.2M purchase
Total debt
$3.4M
SBA $2.1M + senior + seller note
Overview
About
Cost Cutters franchisees operate hair salon and personal grooming service centers offering haircuts, styling, and basic grooming services to value-conscious consumers. Day-to-day operations involve managing staff, scheduling appointments, inventory management, and customer service in a retail salon environment. The model relies on high-volume, low-margin service delivery with significant labor costs.
Item 7 · what it costs
The Vitals
Item 19
Financial Performance
Item 20 · unit dynamics
The Growth Chart
Year-over-year franchised unit counts and net change. Source: FDD Item 20.
Item 20 · 10 states with active franchisees
The Territory Map
Derived from franchisee contact records. Shows states with at least one current operator — not where the franchisor is registered to sell new units (that data is re-extracting in a future refresh).
States derived from franchisee phone area codes (Item 20). Approximate — ported numbers may show the original state, not the franchisee's current location.
Government records
SBA Loan Data
Aggregated from SBA 7(a) loan disclosures, public data unique to FranchiseVerdict.
FranchiseVerdict rating + FDD Items 3, 5, 6, 12, 17
Risk & Legal
Cost Cutters exhibits extreme risk with a collapsing franchise network (-28.9% units), pervasive fraud litigation, undisclosed profitability, and a going concern problem that signals the franchisor itself may be financially unstable.
Score breakdown · what drove the 74 / 100 rating
- 01MEDSevere unit decline of 28.9% YoY indicates systemic franchisee distress and system contraction
- 02HIGHMultiple fraud and misrepresentation litigation claims including build-out costs and financial performance misstatements undermine credibility
- 03HIGHNo average net income disclosure combined with 'Going Concern: False' suggests financial instability and profitability concerns
- 04MINORUnprotected territory creates direct competition risk between franchisees and cannibalization within existing market
- 05MINOREscalating royalty structure (4% to 6%) after year one increases burden during critical cash flow periods when franchisees are most vulnerable
- 06HIGHClass action litigation regarding credit card data security on receipts indicates operational/compliance failures and liability exposure
- 07HIGHCollections litigation against franchisees with counterclaims of fraud suggests adversarial franchisor-franchisee relationship and potential predatory practices
Severity inferred from the FDD text · not a regulatory classification
FDD Items 5, 6, 12, 17 · continued from Risk & Legal
Contract & Territory Detail
Item 11
Training & Operations
Item 20
Franchisee Contacts
Phone numbers extracted directly from this brand's FDD Item 20. After purchase, you'll also receive a list of validation questions tailored to this brand.
Franchisee contacts
97 numbers
One-time purchase · CSV download · Validation questions included
FDD download
Cost Cutters · FDD (2025) PDF