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 23 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 23 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
No recent closures, bankruptcies, or major lawsuits found in the news for COST CUTTERS. That's a good sign — but it reflects news coverage, not a guarantee.
A broker is paid by the franchisor to place you. An independent CPA is paid by you — and the job is pressure-testing COST CUTTERS's numbers, including talking you out of a bad deal.
Talk to an independent CPA before you buy →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 23 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.