Regis Corp. engages in the ownership, franchise, and operation of beauty salons. It operates through the Company-Owned Salons and Franchise Salons segments. The Company-Owned Salons segment offers hair care and beauty services and retail products to customers in United States, Canada, and Puerto Rico. The Franchise Salons segment runs businesses located in strip center locations and Walmart Supercenters. Its brands include Supercuts, SmartStyle Hair Salon, Cost Cutters, First Choice Haircutters, Roosters, Opensalon, and Best Cuts. The company was founded by Paul Kunin and Florence Kunin in 1922 and is headquartered in Edina, MN.
We are in the process of implementing a new strategy, priorities and initiatives and any inability to execute and evolve our strategy over time could adversely impact our financial condition and results of operations.
It is important for us and our franchisees to attract, train and retain talented stylists and salon leaders.
Our continued success depends in part on the success of our franchisees, who operate independently.
Acceleration of the sale of company-owned salons to franchisees may not improve our operating results and could cause operational difficulties.
If our capital investments in developing new technology-enabled capabilities and improving current technology infrastructure do not achieve appropriate returns, our financial condition and results of operations may be adversely affected.
Cybersecurity incidents could result in the compromise of potentially sensitive information about our guests, employees, vendors or company and expose us to business disruption, negative publicity, costly government enforcement actions or private litigation and our reputation could suffer.
TBG’s inability to operate its salons successfully could adversely affect our business, financial condition and results of operations or cash flows, and could prevent the transaction from delivering the anticipated benefits and enhancing shareholder value.
Our ability to franchise our company-owned SmartStyle salons and successfully operate this business is dependent on our relationship with Walmart.
Our future growth and profitability may depend, in part, on our ability to build awareness and drive traffic with advertising and marketing efforts, and on delivering a quality guest experience to drive repeat visits to our salons.
Changes in regulatory and statutory laws, such as increases in the minimum wage and changes that make collective bargaining easier, and the costs of compliance and non-compliance with such laws, may result in increased costs to our business.
Our success depends substantially on the value of our brands.
Premature termination of franchise agreements can cause losses.
We rely heavily on our information technology systems for our key business processes. If we experience an interruption in their operation, our results of operations may be affected.
We rely on external vendors for products and services critical to our operations.
Consumer shopping trends and changes in manufacturer choice of distribution channels may negatively affect both service and product revenues.
If we are not able to successfully compete in our business markets, our financial results may be affected.
We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities.
Changes to healthcare laws in the U.S. may increase the number of employees who participate in our healthcare plans, which may significantly increase our healthcare costs and negatively impact our operating results.
Changes to interest rates and foreign currency exchange rates may impact our results from operations.
Failure to simplify and standardize our operating processes across our brands could have a negative impact on our financial results.
Empire Education Group is unsuccessful, our financial results may be affected.
Failure to control costs may adversely affect our operating results.
If we fail to comply with any of the covenants in our financing arrangement, we may not be able to access our existing revolving credit facility, and we may face an accelerated obligation to repay our indebtedness.
Changes in the general economic environment may impact our business and results of operations.
Changes in consumer tastes, hair product innovation, fashion trends and consumer spending patterns may impact our revenue.
Operational failure at one of our distribution centers would impact our ability to distribute product.
Our enterprise risk management program may leave us exposed to unidentified or unanticipated risks.
We rely on our management team and other key personnel.
Impact of salons sold to franchisees on operations.
In the three and nine months ended March 31, 2020, the Company sold 375 and 1,363, respectively, company-owned salons to franchisees. The impact of these transactions are as follows:
As we transition to an asset-light franchise platform, our results will be more impacted by our system-wide sales, which include sales by all points of distribution, whether owned by the Company or our franchisees. While we do not record sales by franchisees as revenue, and such sales are not included in our consolidated financial statements, we believe that this operating measure is important in obtaining an understanding of our financial performance. We believe system-wide sales information aids in understanding how we derive royalty revenue and in evaluating performance.