Sport Clips FDD Item 6 is the section of the Franchise Disclosure Document that lists every ongoing fee a franchisee will pay after the initial franchise fee of $25,000. For prospective Sport Clips franchisees, this is where the true cost of ownership becomes clear. The headline royalty rate of 6% is only part of a broader financial obligation that includes advertising contributions, technology fees, insurance requirements, training costs, and other recurring charges that can significantly reduce your operating margin. At Lopes Law LLC, we routinely review Sport Clips FDDs for prospective franchisees, and the conversations we have about Item 6 are among the most important in the entire engagement.

This guide breaks down exactly what Sport Clips discloses in Item 6, explains why the total ongoing fee burden requires careful financial modeling, and walks through the specific line items that every buyer needs to understand before committing capital to a Sport Clips franchise. With total investment ranging from $289,000 to $475,000 and 1,754 locations in the system, understanding the ongoing fee structure is essential to evaluating whether this franchise delivers the return you expect.

What Is FDD Item 6 and Why Does It Matter for Sport Clips?

Item 6 of any Franchise Disclosure Document is titled “Other Fees.” It is required by the FTC Franchise Rule (16 C.F.R. Part 436) and must disclose every recurring fee, contribution, or payment obligation the franchisee will owe during the term of the franchise agreement. Item 5 covers the initial fees you pay to enter the system. Item 6 covers everything that comes after, for the full duration of your franchise relationship.

For Sport Clips specifically, Item 6 is critical because it reveals the true ongoing cost of being a franchisee in the hair salon sector. Sport Clips charges a 6% royalty and 5% marketing/advertising fee for a combined 11% of gross sales. With average sales of $419,485 across 1,669 reporting stores in 2024, the combined fees total approximately $46,143 annually. Additional fees include technology fees, insurance, training costs, and transfer fees. Total initial investment ranges from $289,000 to $475,000.

Understanding every line item in Item 6 is not optional. It is the difference between making an informed investment decision and discovering, after you have committed hundreds of thousands or millions of dollars, that your margins are thinner than you expected. The fees disclosed in Item 6 are contractual obligations. Once you sign the franchise agreement, you are bound to pay them regardless of your profitability.

What Fees Does Sport Clips FDD Item 6 Disclose?

Sport Clips’s Item 6 includes the following major fee categories. Each represents an ongoing financial obligation that will continue for the full term of the franchise agreement:

Each of these line items deserves careful analysis. Let us walk through the most consequential ones for Sport Clips franchisees.

The Royalty Fee: 6% of Gross Sales

The royalty fee for Sport Clips franchisees is 6% of gross sales. This is the primary ongoing payment to the franchisor and is calculated on gross sales, not net profit. Whether your Sport Clips location earns a strong margin or loses money in a given month, the royalty is owed on every dollar of revenue that flows through your business.

For a Sport Clips location generating $419,485 in annual gross sales, the royalty alone represents a significant annual obligation. This fee compensates the franchisor for the use of the brand name, operating system, and ongoing support. However, it is essential to evaluate the royalty in context: what level of support does Sport Clips actually provide, and does the value justify the cost over a multi-year franchise term?

One critical detail that prospective franchisees often overlook is the definition of “gross sales.” The broader the definition, the larger the fee base. Some franchisors include all revenue, while others exclude certain categories. Review the franchise agreement’s definition carefully with your attorney to understand exactly what revenue is subject to the royalty calculation.

Advertising and Marketing Contributions: 5% of Gross Sales

Sport Clips requires franchisees to contribute 5% of gross sales to advertising and marketing funds. This supports national and regional promotional efforts managed by the franchisor. The advertising fund may cover television, digital marketing, social media campaigns, print materials, and brand-level marketing initiatives.

There are several important questions prospective Sport Clips franchisees should ask about the advertising fund. First, how are the funds allocated between national campaigns and local market support? A national campaign may build overall brand awareness, but if your local market has specific competitive dynamics, you may need to spend additional dollars on local marketing beyond the required contribution. Second, does the franchisor provide transparency into how advertising funds are spent? The FTC Franchise Rule requires disclosure of whether the franchisor audits the advertising fund, but the level of reporting to franchisees varies by system.

Third, and perhaps most importantly, is any portion of the advertising fee used for administrative expenses? Some franchisors use a portion of the advertising fund to cover the cost of managing the fund itself, which means not every dollar you contribute goes directly to advertising.

Technology Fees

Sport Clips requires franchisees to use designated technology platforms, which typically include point-of-sale systems, customer management software, scheduling tools, and reporting platforms. These technology fees may be charged as a monthly subscription, a per-transaction fee, or a combination of both.

Technology fee escalation is a concern that many franchisees do not adequately address before signing. As the franchisor rolls out new digital initiatives, upgrades proprietary systems, or transitions to new platforms, the technology costs borne by franchisees can increase. The franchise agreement may give the franchisor broad discretion to mandate technology upgrades at the franchisee’s expense with limited notice.

Insurance Requirements

Sport Clips’s FDD requires franchisees to maintain specific insurance coverages at prescribed minimum limits. These typically include general liability, professional liability (where applicable to the hair salon sector), workers’ compensation, property insurance, and commercial auto insurance. The cost of insurance varies significantly by state, claims history, and the specific coverage requirements mandated by the franchisor.

Before signing, get actual insurance quotes based on the specific coverage requirements in the franchise agreement. Many prospective franchisees use rough estimates for insurance costs in their financial models, only to discover that actual premiums are 20% to 40% higher than projected. In the hair salon sector, insurance costs can be particularly significant due to the nature of the business operations.

How Do Item 6 Fees Add Up for a Typical Sport Clips Location?

To illustrate the real financial impact of Item 6 fees, consider a Sport Clips location generating $419,485 in annual gross sales. The combined royalty and advertising fees alone represent a significant ongoing obligation that reduces the revenue available for operating expenses and owner profit.

When you add technology fees, insurance minimums, training expenses, and other required expenditures, the total Item 6 burden can reach 12% to 18% or more of gross sales. For a Sport Clips location generating $419,485 annually, that translates to a fee burden that can range from $100,000 to over $200,000 per year before you pay for staff, rent, supplies, utilities, or any other operating expense.

This is why reviewing Item 19 financial performance representations alongside Item 6 is essential. Item 19 tells you what locations earn. Item 6 tells you what you owe the franchisor. Together, they allow you to model what you actually keep after all franchisor-related obligations are met. If you subtract Item 6 fees from the revenue disclosed in Item 19 and then subtract your operating expenses, the resulting owner income is your realistic return on the investment of $289,000 to $475,000.

A Client Scenario: When Sport Clips Item 6 Fees Changed the Analysis

A prospective franchisee contacted Lopes Law LLC after receiving initial approval from Sport Clips to develop a new location. The buyer had constructed a financial model based on the royalty fee of 6% and the advertising contribution of 5%, arriving at a combined franchisor fee percentage that seemed manageable against projected revenue.

During our FDD validation review, we identified several additional Item 6 obligations the buyer had not fully modeled. Technology fees, required training costs (including travel and lodging for both initial and ongoing training programs), insurance premiums at the coverage levels mandated by the franchise agreement, and the costs associated with audit provisions added approximately 3% to 5% of gross revenue to the total fee burden.

When we recalculated the total franchisor-related costs against conservative and moderate revenue scenarios, the projected owner cash flow at the conservative scenario dropped below the buyer’s minimum acceptable return. At Lopes Law LLC, we presented the buyer with three scenarios: optimistic (above-average performance), moderate (average system performance), and conservative (below-average performance). The buyer was comfortable with the risk at the moderate scenario but wanted to understand the downside protection. The conservative scenario showed that if the location performed in the bottom third of the system, the owner would earn less than a salaried manager at a comparable business.

The buyer ultimately decided to proceed but negotiated several protective provisions based on our recommendations and adjusted the business plan to account for the full fee burden. That informed decision, supported by a complete analysis of every Item 6 obligation, is exactly what a thorough FDD review is designed to produce.

How Does Sport Clips’s Fee Structure Compare to Other Hair Salon Franchises?

When evaluating Sport Clips’s fee structure, it is important to benchmark against comparable franchises in the hair salon sector. Royalty rates across hair salon franchises typically range from 3% to 8%, with advertising contributions adding another 1% to 5%. Sport Clips’s combined fee burden of 6% royalty plus 5% advertising places it within the range of its direct competitors, but the total cost of franchise ownership includes more than just the royalty and advertising percentages.

Factors that differentiate Sport Clips’s fee structure from competitors include the scope of technology fee requirements, the frequency and cost of mandatory training programs, the specific insurance coverage requirements, and the provisions for fee increases during the franchise term. A franchise that charges a lower royalty but imposes higher technology fees or more expensive training requirements may have a comparable or higher total fee burden.

At Lopes Law LLC, when we review FDDs for clients considering Sport Clips alongside competing franchise opportunities, we build a total-cost comparison that accounts for every Item 6 fee, not just the headline royalty rate. This comparison often reveals that the franchise with the lowest royalty is not always the one with the lowest total cost of franchisor-related obligations.

What Should Prospective Sport Clips Franchisees Focus on in Item 6?

When reviewing Sport Clips’s FDD Item 6, focus on these specific areas:

• Gross sales definition: Understand exactly what “gross sales” includes and excludes. The broader the definition, the larger the fee base. Some definitions include online orders, gift card redemptions, and ancillary revenue that you might not consider part of your core business.
• Advertising fund accountability: Determine how the marketing fund is spent and whether franchisees receive regular reporting on expenditures. Ask current franchisees whether they believe the advertising spend generates measurable results in their local markets.
• Technology fee escalation: Check whether technology fees are fixed for the franchise term or subject to increase as the franchisor rolls out new platforms. Open-ended technology fee provisions give the franchisor the ability to increase your costs unilaterally.
• Insurance minimums: Get actual insurance quotes for the required coverage types and limits before signing. Do not rely on estimates. Insurance costs in the hair salon sector can be significant, and they vary widely by state and by your specific circumstances.
• Transfer and renewal fees: Understand what fees are triggered when you sell or renew the franchise, and factor these into your long-term financial plan. The cost of exiting or continuing the franchise should be part of your initial investment analysis.
• Audit provisions: Review the franchisor’s right to audit your financial records. If an audit reveals underreporting of gross sales, you may be required to pay the cost of the audit in addition to unpaid fees and penalties.
• Late payment consequences: Understand the interest rate and penalties for late royalty or advertising payments, and whether repeated late payments constitute a default that could trigger termination of the franchise agreement.

Why Legal Review of Sport Clips Item 6 Is Not Optional

The fees disclosed in Sport Clips’s Item 6 represent contractual obligations that will continue for the full term of the franchise agreement. Signing without fully understanding these obligations is the financial equivalent of committing to a multi-year expense structure without running the numbers. The franchise term for Sport Clips means you are binding yourself to these fee obligations for years, and the franchise agreement typically does not allow you to renegotiate fees during the term.

A franchise attorney can help you model the total fee burden against realistic revenue projections, identify fees that may increase over the term based on escalation provisions in the agreement, evaluate the fee structure relative to the support and value the franchisor provides, and compare the total cost structure against other franchise opportunities you may be considering.

At Lopes Law LLC, we review Sport Clips FDDs regularly. Our flat-fee FDD validation review is $3,000 and covers all 23 items of the FDD, with particular attention to the fee structure in Item 6 and the financial performance data in Item 19. For a complete overview of what that process involves, see our guide on what to expect from an FDD review. For concerns about franchise agreement terms, read our guide on franchise agreement red flags.

Frequently Asked Questions About Sport Clips FDD Item 6

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Last updated: March 12, 2026