Fantastic Sam’s : Fast Haircuts Quickly Put Franchiser Back on Feet

His home was a tent at Doheny Beach State Park. His clothes closet was an old Ford van. But every morning Phil Randazzo rolled out of his sleeping bag, slapped on a three-piece suit and fooled the world.

That was in 1981, when Randazzo was out of a home and marriage and quit his job as franchising chief for real estate giant Century 21. Nearly penniless, Randazzo borrowed $5,000 and swung a deal for the Southern California operations of an upstart hair-salon franchiser called Fantastic Sam’s. Randazzo didn’t know hide nor hair about the business. But he liked the company’s method of offering quick, inexpensive haircuts to all members of the family.

Today, Randazzo has a luxurious home--and slip for his boat--in Huntington Harbour. He has remarried. And at 35, he is president of the most successful branch of one of the nation’s fastest-growing franchises. F.S. Services Inc., Randazzo’s Garden Grove-based chain of 70 Fantastic Sam stores, projects net income of $500,000 this year on revenues of $23 million.

Three years with Fantastic Sam’s “put me in multimillionaire status” says Randazzo, who, dressed in a Fantastic Sam’s T-shirt, hardly looks the part of a regional hair-care baron.

Fantastic Sam’s success, however, is now being threatened by increased competition in the $20-billion-a-year hair-care industry. More than 800 hair salons are located in Orange County alone. At the same time, Fantastic Sam’s has suffered some of the quality-control problems--especially a lack of consistency in its work--that hinder most franchise businesses, whether they are burger joints or barbershops.

The company’s formula is low-cost haircuts for the entire family. A kid can walk into Fantastic Sam’s and 15 minutes later strut out with a good clip job and change from a $5 bill. His dad can get a shampoo and haircut for $7.95. And the kid’s mom can get a permanent for about $20--less than half the going rate at conventional salons.

“You can make a lot of money cutting hair for $7.95,” said Randazzo. This year, his company, which employs about 700, expects to nearly double its size by adding 67 more stores. It just moved its regional headquarters from the back of a Westminster barbershop to a plush, two-story office building it purchased in Garden Grove.

“A lot of people in the industry don’t like me,” Randazzo readily admits. “You’re looking at the guy who has helped thousands of Californians save millions of dollars on haircuts.”

Indeed, Fantastic Sam’s has its critics. Customers complain that the high volume often results in rapid employee turnover and quality problems. “As soon as you find a hair stylist you like, she’s gone,” said Roy de Koning, a 32-year-old pipe fitter from Midway City. And while few criticize Fantastic Sam’s prices, its bargain-basement haircuts have their detractors. Sherryl Morton, manager of Profiles of Newport, an exclusive Newport Beach salon, said, “Not everyone can afford our prices, so you need places like Fantastic Sam’s, but they won’t give customers as much time or personal attention as we will.”

Even if its haircuts aren’t the most chic in town, the company’s style has been much-copied during the past decade. Mary Atherton, editor of Chicago-based Modern Salon, said that in the beauty industry, Fantastic Sam’s is a winner. “It’s not who’s the best artist that matters, it’s who’s making the most money,” she said.

Randazzo, whose shops are small, clean and aesthetically bland, says the choice is simple. “If you want things like carpeting or wine and cheese you can go to some fancy salon and spend $60 for a perm or $30 for a haircut.”

One of Fantastic Sam’s toughest competitors is Supercuts, a San Rafael-based company that did more than $100 million in business last year. Howard Sherman, a founder of Supercuts, says the low-budget haircut is now a fixture in the industry. Supercuts has 425 shops nationwide and charges each customer a flat $8 fee.

That is small potatoes compared to S.M.R. Enterprises Inc., the Memphis, Tenn.-based parent company of Fantastic Sam’s. S.M.R. has 680 stores and expects to be a billion-dollar operation by 1988. Most recently, the company sold licenses for hundreds of franchises in Japan that are expected to open during the next three years.

First Shop Broke Tradition

Randazzo met Fantastic Sam’s founder, Sam Ross, at a franchising convention in 1982. Ross, a real estate developer turned haircutter, had concocted the Fantastic Sam concept in 1974 and was looking to expand his hair-salon chain in the West.

But it wasn’t until Ross hired Randazzo to expand into Southern California that the growth of Fantastic Sam’s really exploded. “My business is franchising, not hair styling,” Randazzo flatly states. “What I know about hair I’ve picked up by osmosis.”

It didn’t take him long to pick it up, though. During its first four months in California, the company opened 15 stores. But within a year, nearly half of them had closed. All of those that failed were previously existing salons that could not convert to Fantastic Sam’s system of quick and cheap haircuts, Randazzo said.

Now all franchises must follow company specifications. Most of those who do say it’s a profitable venture. Harry Finigan has opened five Fantastic Sam franchises in Orange County and plans to open six more in the next two years. “My bottom line is very good,” said Finigan, whose Huntington Beach shop produces weekly revenues of more than $8,000.

Randazzo wants his franchisees to be business people first, not beauty buffs. “I tell my owners not to learn the beauty business. I ask them to delegate those responsibilities.”

This was not the way Southern California’s hair-care industry generally operated four years ago. When Randazzo attended a hair-care convention in Long Beach, his franchising ideas were mostly ridiculed. “Guys with their shirts unbuttoned and chains hanging to their belly buttons were trying to tell me how to be a businessman.”

Randazzo plowed ahead. Today, nearly 85% of his business is repeat customers, compared to an industry average of less than 50%. He credits much of his success to the company’s knack of catering to children. One-third of Fantastic Sam’s customers are under 12 years old.

“A lot of salons don’t want to cut kids’ hair, but they can grow up to become your best customers,” Randazzo said. Teen-agers, however, won’t always get their way at Fantastic Sam’s. Although the hair stylists are schooled in all the modern cuts, some require parental consent. Said Randazzo, “If a 14-year-old decides he wants to look like Mr. T., we want to make certain his parents want that, too.”