Hair Club for Men Ltd.

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Hair Club for Men Ltd.

1515 South Federal Highway, Suite 401
Boca Raton, Florida 33432
U.S.A.
Telephone: (561) 361-7600
Toll Free: (800) 251-2658
Fax: (561) 361-7681
Web site: http://www.hairclub.com

Wholly Owned Subsidiary of Regis Corporation
Incorporated: 1976
Employees: 800
Sales: $110 million (2005 est.)
NAIC: 812112 Beauty Salons

Based in New York City, Hair Club For Men Ltd. is a subsidiary of Minneapolis-based Regis Corporation, the world's largest operator of hair salons. Hair Club offers a number of hair replacement treatments to men, as well as to women and children. The company made its mark with a proprietary hair-fusion technique, called the Non-Surgical Bio-Metrix Hair Replacement System, which fits nylon mesh to a bald patch that allows the scalp to breathe while permitting existing hair to protrude. Real hair, mostly female hair originating from India where it is shorn in religious atonement rituals, is then colored to match and essentially glued to the mesh. It is then anchored to the customer's real hair. Once the system is in place it requires follow-up visits every six to eight weeks, and must be replaced every three to five years. Because hair replacement alternatives have increased, Hair Club has added additional services, including microscopic hair transplants taken from a donor site on the back of the customer's head. The company's "Extreme Hair Therapy for Thinning Hair" offers a regimen of cleaners, conditioners, dietary supplements, and Food and Drug Administration–approved Minoxidl, which may be combined with hair transplantation. The Hair Club for Women unit serves the needs of women dealing with hair loss, while Hair Club for Kids is a nonprofit organization that provides services to children who have suffered hair loss due to illness. Hair Club maintains facilities in some 40 states as well as Puerto Rico and several large cities in Canada.

FOUNDER BUYS HAIRPIECE MAKER: 1968

Hair Club became something of a cultural phenomenon because of television commercials featuring founder Sy Sperling, whose signature line, "I'm not just the president, I'm also a client," became the fodder for humor for decades. It also made Sperling, born in New York's hardscrabble South Bronx neighborhood as the son of a plumber and a homemaker, a wealthy man. Sperling began going bald at the age of 17. According to his recollection a girl he was dating, Sharon Finklestein, ended their brief relationship, the failure of which he attributed to his thinning hair. Sperling soon found a mate and began raising a family in the early 1960s, working as a swimming pool salesman after earning a degree in political science at C.W. Post College. By age 26 he was going bald at an increasing rate. Moreover, his marriage failed, he was divorced, depressed, and back on the dating scene. "I was unhappy with my appearance," he told the New York Times. "And it was destroying my self-confidence. My father had gone bald at a very young age, but I didn't think it would happen to me. All of a sudden there I was, trying to establish myself in sales, trying to date again." Sperling tried the available hair-loss solutions, donning a toupee and trying a hair weave, but he was not satisfied until he came upon a hair-restorer in Manhattan who skillfully weaved in real hair to create a more natural look. Sperling's self confidence returned and he began to take more pride in his appearance, losing about 35 pounds while also giving up a three-pack-a-day cigarette habit and becoming a vegetarian. He also found a new wife, Amy, a hairdresser, and together they decided to start their own business. With just $5,000 in the bank and credit cards, they bought out a Manhattan hairpiece maker in 1968 and launched their own hair-weaving salon.

While Sy focused on the administrative side of the business, called Hair Weave Creations, Amy performed the work and began development on an improved hair-weaving technique. In conjunction with the Fashion Institute of Technology in Manhattan, she found a nylon filament mesh. It was extremely difficult to detect and served as the foundation for the new system. The next step was to create a layered haircut that would hide the boundaries between real and woven hair, followed by the incorporation of a polymer to fuse the acquired hair to the netting.

HAIR CLUB NAME ADOPTED: 1976

After several years of effort, the Sperlings' hair replacement system was perfected. In 1976 Hair Weave Creations became Hair Club For Men, a name chosen to give the business a sense of exclusivity. There was virtually no competition, and by just relying on word of mouth, the business was able to grow, although momentum stalled by the end of the decade because many Hair Club clients were secretive about what they had done to their hair. Sperling decided to turn to television advertising in the early 1980s, hiring a New York City advertising agency, Berton Miller Associates. A television spot was developed that showed "before" and "after" shots of Hair Club clients. Just in case it failed to work, the agency asked Sperling to film a backup spot, one in which he touted the business himself by noting that was a client as well as the president. Sperling resisted at first. "I wasn't overly articulate, and I've got a little bit of a lisp," he told the Albany Times Union in a 1993 interview. Even when the main commercial performed poorly, Sperling was hesitant to let the ad agency run his spot, and only relented because they had to air something while they worked on a new concept. However, a new approach would not be necessary. After the Sperling commercial first aired in 1982, the company's 800 number received 10,000 calls in the first month, despite airing during the early morning hours when rates could be as inexpensive as $100 for 30 seconds.

When the first television commercials appeared, there were three Hair Club centers in the New York City area. Within three years the company had spread to six other cities and revenues had increased to $10 million, about one-quarter of which was spent on television commercials. Although Hair Club ran other spots featuring actors, the ones with Sperling resulted in three times the sales volume. Because Hair Club employed a direct-response method, sending a brochure to people who called, it was possible to track the effectiveness of the ads. It was somewhat mystifying to Sperling why he was such an effective pitchman, as he told the Albany Times Union, "People sort of see me as the guy next door. I'm a little rough around the edges with some Bronx left in me, a little bit of street." Whatever the reason for their success, the commercials clearly worked. By the end of the decade, there were 20 Hair Club centers. During this period, Sperling also began giving free hair replacements to children who lost their hair because of cancer treatments, initially for Schneider Children's Hospital at the Long Island Jewish Medical Center. As word of the charitable service spread, Sperling expanded the effort, resulting eventually in the establishment of Hair Club for Kids.

COMPANY PERSPECTIVES

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Hair Club added centers in the early 1990s at the rate of ten each year, spurred by franchise operations that sold for around $150,000 each. By the end of 1993 Hair Club had 40,000 clients and topped the $100 million mark in system-wide revenues. While Sperling remained a client, he was no long president, having turned over the reins three years earlier to George Haggerty, a former top executive at both Dunkin' Donuts and Nathan's Famous. Sperling and his wife Amy also separated after 18 years of marriage, although they both continued to work for the company. By the end of the 1990s they divorced and Sperling married for a third time. Needing money because of the divorce, Sperling decided to sell out.

In 2000 Les Martin, the owner of a Toronto-based hair care product wholesaler that supplied Hair Club, was interested in making a bid for the company, which he hoped to one day leave for his son to run. Other investors in the group were Gilbert Palter, managing partner of Toronto private equity firm EdgeStone Capital Partners, and Steve Hudson, a "boy wonder" in Canadian business circles. In 1984, at the age of 26, Hudson founded Newcourt Credit as a medical equipment leasing company, but soon turned it into a major lender with about CAD $24 billion under management. At the age of 41, however, he seemed to have lost his touch when, according to Canadian Business, he nearly "botch[ed] a crucial 1999 merger with US-based CIT Group Inc." He was forced out of Newcourt and subsequent ventures did not perform well. The Martinled investment group acquired Hair Club in May 2000, but after Martin's son was killed in an automobile accident, Hudson and EdgeStone acquired a 60 percent controlling interest in October 2002. Hudson was installed as chief executive officer, vowing to turn Hair Club into a major success story.

Hudson took over a company that had 85 centers in the United States, half of them company-owned, generating about $200 million in annual revenues, which represented a 30 percent market share. One of Hudson's first acts was to bring back Sperling as a marketing consultant, although he had some initial misgivings. "When I first heard about the Hair Club opportunity," Hudson told Canadian Business, "I recalled Sy Sperling's infomercials. I thought used-car sales and said, 'No way.' Then I met Sperling. He's a bit of a rogue, but one of the world's great grassroots marketers. He understood the psyche of men who are losing their hair and built a great business model around it."

Hudson also accelerated Hair Club's move into the transplant business, which had enjoyed tremendous growth in the previous decade, from less than $200 million to $1.2 billion in that time. To become involved in this sector, Hair Club forged a partnership with Medical Hair restoration and after conducting surgical trials in four Hair Club centers, the company was ready to offer surgical options at all of its centers in the United States. Hair Club also began to open new centers in Canada. Sy Sperling fully supported the move. "I never wanted to do transplants, because they always had that doll's hair look," Sperling told the New York Times. "But today there's so much new technology, it looks absolutely fantastic."

REGIS CORPORATION ACQUIRES HAIR CLUB: 2004

While it may have appeared that Hudson was interested in growing Hair Club for an extended period, his real plan was much shorter in scope. Within two years he was able to double Hair Club's market share and triple its income. Hudson and EdgeStone then sold the business in December 2004 to Regis Corporation for $210 million. Just as Hair Club was the top company in its field, Regis dominated the hair salon trade, its stable of chains including Supercuts, Mastercuts, Cost Cutters, Smartstyle, Vidal Sassoon, Jean Louis David, and Regis Salons. It also operated a growing number of beauty schools. Regis viewed the Hair Club acquisition in a similar way to its 1996 purchase of Supercuts, which provided a base from which to grow both internally and externally to dominate the salon market. The company hoped to do the same thing with Hair Club in the hair-loss services market, which was highly fragmented and included a large number of small local shops. Regis also anticipated cross-marketing opportunities, with the salon offering Rogaine and Propecia to some clients with hair-loss problems while directing others to Hair Club units.

KEY DATES

1968:: Sy Sperling and wife Amy buy Manhattan hair-weaving shop.
1976:: Hair Club for Men started.
1982:: First television spots air.
2000:: Company sold to Canadian investment group.
2002:: Steve Hudson named chief executive officer.
2004:: Regis Corporation acquires Hair Club.

With the deep pockets of Regis to support growth, Hair Club in late 2005 returned to nationwide television for the first time in three years, launching a new advertising campaign to tout the company's greater range of hair replacement options. Not only did the spots appeal to the company's traditional customers, white males 35 to 40 years old, they also targeted older men, African Americans, and women. The spots developed by direct-response advertising agency Karlin & Pimsler did not, however, feature Sy Sperling, although his picture continued to be featured on the Hair Club web site along with the phrase that made him something of a cultural icon: "I'm not just the president, I'm also a client."

Ed Dinger