Varsity Spirit Corp. Business Information, Profile, and History

History of Varsity Spirit Corp.

Varsity Spirit Corp. sells products and services to the school spirit industry throughout the United States and in Japan. It designs and markets cheerleader, dance team, and booster club uniforms and accessories, including sweatshirts, jumpers, vests, sweaters, pompons, jackets, pins, and other paraphernalia. The company also operates, and markets its products through high school and college cheerleader and dance team camps in the United States and Japan.

Varsity Spirit is a leader in a business niche that it helped to create, the school spirit industry. When the company was launched in 1974, there was only one other significant player in the industry: National Cheerleaders Association (later dubbed National Spirit Group), a privately owned Dallas-based venture. National Cheerleaders had been founded by Lawrence Herkimer in 1948. The company had grown and profited chiefly through the operation of cheerleading camps, where high school and college kids could learn cheerleading routines and hone related athletic and gymnastic skills. Among the company's employees in the early 1970s was Jeffrey Webb, the soon-to-be entrepreneur destined to pose the first serious challenge to Herkimer's enterprise.

Webb, a self-described sports nut, had become absorbed in cheerleading during a one-year stint as a cheerleader for the University of Oklahoma's football team. While he was a student at Oklahoma he began teaching at, and directing, cheerleading training camps for National Cheerleaders Association. It was that experience that prompted him to launch a similar venture. Although Webb enjoyed cheerleading, he believed that the activity had become stagnant and, more specifically, that National Cheerleaders was missing opportunities to advance the sport. He wanted to breathe new life into cheerleading and take it in a new, more dynamic direction that incorporated athleticism and entertainment. "I wanted to modernize cheerleading," Webb recalled in the June 1994 issue of Nation's Business.

Webb left National Cheerleaders in 1974 and, at the age of 23, started a company that he called Universal Cheerleaders Association. With no business experience and a relatively unconventional business plan, Webb was unable to secure institutional financing. Instead, he raised $80,000 by establishing a limited partnership and selling $5,000 shares in his company to his family and friends. He also invested $5,000 from his own savings. At the time, the burgeoning cheerleading business was gravitating toward Texas. Webb bucked the trend by setting up his office in Memphis because it was in the middle of the region where he had developed most of his contacts.

Webb's original goal was to provide high-quality, innovative instructional programs for young people on a national basis. He would attract young people to his camps by promising to shun the staid, monotonous routines taught year after year at National Cheerleaders Association, and instead teach new routines that emphasized more athletic and gymnastic stunts. "From the very beginning, he had a good vision of what cheerleading fashions and the whole school spirit industry would look like ten years down the road with the athletics and national television exposure," said Greg Webb, Jeffrey's younger brother and vice-president, in the February 22, 1993 issue of Memphis Business Journal. "We knew we were working with a changing environment for school spirit efforts, while some of our competitors were still holding to the traditional role and look."

After setting up his base in Memphis, Webb started scouting out and reserving college and university dormitories and athletic facilities that were empty during the summer, in anticipation of enrolling high school students interested in attending his camps. Then he mailed letters announcing the training camps, with registration forms, to every high school within 100 miles of each of the campuses where he had reserved space. The effort sapped all of the company's start-up capital, so Webb was relieved when the return mail brought a sack of registration forms. "If the registration forms didn't come in, we were out of business," he recalled in an article printed in the October 25, 1993 issue of Forbes. "I was yelling and screaming, throwing letters into the air. I knew we were going to survive."

With a rapidly expanding registry, Webb knew that he would be able to find the talent to teach at his camps because several of his associate instructors at National Cheerleaders had promised to join him once he got his venture "up and running." Webb hired 24 instructors during his first summer and operated a total of 20 of his high-energy clinics throughout the Midwest and Southeast. A total of 4,000 students attended. He sometimes slept in his car during that summer as he traveled from clinic to clinic. The venture was an immediate success. Universal Cheerleaders posted a profit in its first year and continued to do so every year thereafter into the mid-1990s.

Once the word spread, Universal's rosters were filled with eager students. By 1979 the company was generating $2 million from its training camps. Encouraged by the success, Webb decided that it was time to branch into a new segment of the market: fashions and supplies. Webb realized that most of the clothing being marketed by the competition at the time did not suit the style of cheerleading taught at his camps. The clothing was restrictive and often tore under the stress of more athletic cheerleading routines. Furthermore, it was outdated. Webb wanted to introduce an updated line of clothing that was durable and stylish.

In 1979 Universal Cheerleaders started a division named Varsity Spirit Fashions and Supplies. Through that unit, Webb began offering updated outfits that were less constrictive and that featured, for example, sleeveless tops, jumpers, and a variety of necklines. The uniforms contrasted with the traditional sweaters and skirts that had been worn for years. The clothing line was an instant hit, and Webb found that it was relatively easy to market through his clinics. During its first year, the Varsity Spirit division chalked up $200,000 in sales. That early gain signaled the success of a venture that soon overcame Universal's core cheerleading clinic business and vaulted the company to multimillion-dollar corporate status.

Webb realized the potential of the clothing and equipment business and quickly moved to emphasize its growth. Throughout the 1980s and early 1990s he was able to boost sales rapidly through a large sales force, promotional videotapes, and full-color catalogs. At the same time, he was able to increase profits steadily from the cheerleading clinics. Despite steady sales and profit growth, however, Webb was still unable to find a financial institution that was willing to back his company during the first seven years. So, he was forced to rely on savvy, cost-effective marketing funded directly from the company's profits.

Among his most successful efforts was the creation of several special events, many of which were televised, sponsored by Universal Cheerleaders Association. Universal's nationally televised events included the National High School Cheerleading Championship, the National Dance Team Championship, the National College Cheerleading and Dance Team Championship, as well as various parade exhibitions and college football bowl half-time shows. The events became a profitable advertising channel for Universal because they established goodwill toward the company and often gave national exposure to its Varsity Spirit products.

Buoyed by external financing, Universal Cheerleaders Association was able to increase its annual revenue base from barely more than $2 million in 1980 to about $10 million going into the late 1980s. Of import was the 1985 purchase of a Winona, Minnesota-based concern called Varsity Spirit Fashions. Strengthened by that addition, Universal's Varsity Spirit division and cheerleading camp unit were each capturing sales of about $5 million per year by 1987. The company was employing about 40 full-time workers as well as 350 cheerleading camp instructors who trained 60,000 cheerleaders annually.

Furthermore, Webb was beginning to expand overseas. In 1987 Universal signed an agreement to consult with the Japan Drill & Cheer Association. The agreement led to the creation of a separate licensed venture called UCA-Japan. Universal developed the firm's teaching staff and began supplying it with uniforms and equipment. The partnership was a perfect fit with Universal's U.S. operations because Japan's cheerleading camp season occurred between November and March, whereas U.S. clinics were offered between April and October. By the early 1990s, the joint venture was sponsoring more than 20 clinics in Japan annually.

By 1989 Universal was bringing in more than $20 million in annual sales. It was late in that year that the original limited partners, who had each fronted $5,000, chose to cash out. They effectively sold two-thirds of the company to a group of investors by way of a leveraged buyout. The deal loaded Universal with debt until the investment group took the company public in 1992. It sold shares in the company and used the cash to pay off all of the company's debt. Webb pocketed about $7.7 million in the deal and also managed to hold on to about 13 percent of the company. The company went public with a name change to Varsity Spirit Corp.

The name change reflected the increasing influence of the organization's clothing and supplies division. Indeed, by the early 1990s the company's uniforms and equipment were contributing more than 60 percent of total sales and more than 70 percent of profits. In fact, the cheerleading and dance clinics had become a marketing tool for the organization's products. In 1993 Varsity Spirit trained 116,000 cheerleaders at 600 camps held on campuses throughout the United States. For a four-day session, students paid only $155, which barely covered Varsity Spirit's costs. Varsity was able to profit, though, by having its instructors pass out product catalogs to the students. Because the average cheerleader spent $200 on clothes, pompons, duffel bags, megaphones, and other various items, Varsity was able to generate hefty product sales from clinic patrons.

As a result of its savvy marketing strategy and innovative clinics and products, Varsity Spirit was able to sustain steady sales and profit growth throughout the early and mid-1990s. Sales increased to $28.1 million in 1991, $33.8 million in 1992, and then to $41.6 million in 1993. Likewise, net income rose from about $623,000 in 1991 to about $2.4 million in 1993. In 1993, Varsity Spirit hosted its first international cheerleading championship in Tokyo. A total of 31 U.S. and Japanese teams participated in the event, which was televised nationally in Japan. That effort helped Webb to win the Memphis Business Journal's Small Business Executive of the Year award, among other honors.

During the 1994 summer camp season, Varsity Spirit trained 137,000 coaches and students at more than 700 camps in 50 states. It employed a staff of about 250 full-time workers, although its work force could grow to as many as 1,000 or more during the summers. In addition to marketing goods at those camps, Varsity employed a 100-member sales force that called on 15,000 schools and colleges to sell Varsity Spirit's products and services. For the late 1990s, Webb considered expanding in foreign nations other than Japan and hoped to continue pushing the growing dance-team market segment (the dance teams performed at half-time shows and contests). Having surpassed Webb's former employer (National Cheerleaders Association) in sales during the early 1990s, the company planned to sustain its position as the leading school spirit company in the nation.

Principal Subsidiaries: Varsity Spirit Fashions & Supplies, Inc.; Varsity/Intropa Tours, Inc.

Principal Divisions: Universal Cheerleaders Association.