What changed in this filing

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Item 1. Business

2021-08-26 compared with 2020-08-31 · 155 added, 193 removed, 185 unchanged (65% of the section changed)

Regis Corporation franchises, owns and operates technology-enabled hairstyling and hair care salons.

Regis Corporation franchises technology-enabled hairstyling and hair care salons.

The Company is listed on the NYSE under the ticker symbol "RGS." Unless the context otherwise provides, when we refer to the "Company," "we," "our," or "us," we are referring to Regis Corporation, the Registrant, together with its subsidiaries.

As of June 30, 2021, the Company franchised, owned or held ownership interests in 5,917 locations worldwide.

The Company's locations consist of 5,209 franchised salons, 1,632 company-owned salons, and 82 locations in which we maintain a non-controlling ownership interest of less than 100 percent.

The Company's locations consist of 5,563 franchised salons, 276 company-owned salons, and 78 locations in which we maintain a non-controlling ownership interest.

Each of the Company's salon concepts generally offer similar salon products and services.

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Salons also sell a variety of hair care and other beauty products.

We earn revenue for services and products sold at our company-owned salons, product sold to franchisees, and earn royalty revenue based on service and product sales at our franchise locations.

The Company's franchise salon operations are comprised of 5,209 franchised salons operating in the United States (U.S.), Canada, the United Kingdom and Puerto Rico.

The Company's company-owned salon operations are comprised of 1,632 salons operating in the U.S., Canada, and Puerto Rico.

We earn royalty revenue based on service and product sales at our franchise locations, earn revenue on product sold to franchisees, and earn revenue for services and products sold at our company-owned salons.

Salons operate primarily under the trade names of SmartStyle, Supercuts, Cost Cutters, First Choice Haircutters and Roosters and they generally serve the value category within the industry.

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Financial information about our segments and geographic areas for fiscal years 2021, 2020, and 2019 are included in Note 15 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

In fiscal year 2017, we announced plans to expand the franchise side of our business, through organic growth and by selling certain company-owned salons to franchisees over time, where it made financial sense for the Company and shareholders.

The transformation began in fiscal year 2017 and in fiscal year 2018, the Company expanded its franchise business by selling 449 non-mall salons to franchisees, primarily SmartStyle.

In fiscal years 2019 and 2020, the Company accelerated its sale of salons to franchisees by selling 767 and 1,475 salons, respectively, across all brands.

Management is committed to its strategy to become a fully-franchised asset-light company by the end of fiscal year 2021.

We plan to sell approximately 800 - 1,000 salons to franchisees in the next twelve months and we will close the remaining salons at their lease expiration or terminate the lease early when it is in the best interest of shareholders.

Additionally, in October 2017, the Company sold substantially all of its mall-based salon business in North America, representing 858 salons, and substantially all of its previous International segment, representing 250 salons in the U.K., to The Beautiful Group (TBG), an affiliate of Regent L.P., a private equity firm based in Los Angeles, California.

On June 27, 2019, the Company entered into a settlement agreement with TBG regarding the North American salons, which, among other things, exchanged the franchise agreement for a license agreement.

In the second quarter of fiscal year 2020, TBG transferred 207 of its North American mall-based salons to the Company.

The 207 North American mall-based salons transferred were the salons that the Company was the guarantor of the lease obligation.

See Note 3 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K for further discussion on the sale of our mall-based salon business and the previous International segment, which are now reported as discontinued operations.

The overall goal of the TBG transaction was to reduce the Company's exposure to the mall-based lease obligations.

As of June 30, 2020, we have 166 TBG salons and remaining lease liability of $23 million.

In fiscal year 2018, the Company closed 605 non-performing company-owned SmartStyle salons and 124 other underperforming salons.

In fiscal year 2021, we nearly completed our multi-year transformation to a technology-enabled, asset-light fully-franchised business.

Since the transformation began, we have sold 4,671 salons to franchisees.

As of June 30, 2021, 95.3% of our salons are owned by franchisees.

Of the remaining 276 company-owned salons, approximately 130-150 will be sold in fiscal year 2022 with the remaining salons closed when the leases expire.

Additionally, in fiscal year 2021, the Company closed 252 non-performing company-owned SmartStyle salons and 361 other underperforming company-owned salons.

In fiscal years 2020 and 2019, the Company closed 250 and 133, respectively, underperforming salons at or near their lease end.

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Management believes salon chains will continue to have significant influence on this market and will continue to increase their presence.

In every area in which the Company has a salon, there are competitors offering similar hair care services and products at similar prices.

In practically every area in which the Company has a salon, there are competitors offering similar hair care services and products at similar prices.

The Company faces competition from chains, such as Great Clips, Fantastic Sams, Sport Clips and Ulta Beauty, independently-owned salons, department store salons located within malls, in-home hair services, booth rentals and blow dry bars.

The Company also faces competition from other franchise organizations outside of the hair salon industry in attracting new franchisees.

At the individual salon level, barriers to entry are low;

however, barriers exist for chains to expand nationally due to the need to establish systems and infrastructure, to recruit franchisees, experienced field and salon management and stylists, and to lease quality sites.

however, barriers exist for chains to expand nationally due to the need to establish systems and infrastructure, the ability to recruit franchisees, experienced field and salon management and stylists, and to lease quality sites.

The principal factors of competition in the hair care category are quality and consistency of the guest experience, convenience, location and price.

The Company continually strives to improve its performance in each of these areas and to create additional points of brand differentiation versus the competition.

2020 Strategy:

The Company is focused on maximizing shareholder value.

In order to successfully maximize shareholder value, we place a balanced approach on our guests, franchisees, employees and shareholders.

After carefully considering potential options to enhance shareholder value and based on the success of our vendition strategy in 2019, we reached a decision to fully transition our company-owned salons to a franchise platform and continued these efforts in fiscal year 2020.

This strategic initiative is intended to facilitate an ongoing multi-year transformation to a capital-light business that we believe will be better positioned for sustainable growth.

We believe the transformation of our salon platform coupled with the investments we are making in technology, marketing and advertising, merchandise and franchisor capabilities will be in the best long-term interests of our shareholders.

The COVID-19 global pandemic and the resulting government-mandated temporary hibernation of our salons greatly impacted our business in the second half of fiscal year 2020.

However, we believe the safety strategies we implemented to respond to the global pandemic will allow us to thrive once this pandemic has passed.

While we address the immediate crisis, we are still focused on our long-term strategy.

Key Elements of Our Strategy

In fiscal year 2020, the Company executed on various management initiatives to accelerate the growth of its franchise business and to significantly reduce costs to better align costs with the Company’s transition to a fully-franchised business model.

The core components of the various management initiatives are focused on improving our performance by establishing core competencies to support franchise growth, eliminating non-essential costs, sourcing trend-driven professional beauty care products, optimizing our supply chain and distributor capabilities, creating industry-leading stylist recruiting and education, offering differentiated brands and consumer-focused marketing and advertising and launching transformational technology to reduce friction and enhance the customer experience.

In order to modernize and continue providing an exceptional guest experience, we opened a technology office in Fremont, California during fiscal year 2019 where we invested in a dedicated Product Engineering team.

We have developed a proprietary cloud-based store management and point of commerce solution, OpenSalon Pro™, which launched in fiscal year 2021.

Beginning in fiscal year 2021, we also launched an all-new Cost Cutters mobile app for iOS and Android which includes a new loyalty program.

The app features same day or advanced bookings, booking history and a digital loyalty program.

Additionally, we overhauled the Supercuts mobile app with improved same-day check-in and the ability to book services for the following day, the update represents an alternative to the traditional walk-in model that consumers (and even some states) are demanding, especially in the face of COVID-19 restrictions and wider consumer preference.

We have also partnered with Google to improve and streamline the salon discovery and customer booking experience.

In 2019, we launched OpenSalon™, Regis' proprietary platform that allows customers to book salon services directly and enables customers to reserve and check-in for various salon services via mobile devices or desktops, for those salons that have chosen to adopt the utilization of such technology.

These technology investments are meant to drive traffic to our franchise and company-owned salons.

We continue to evaluate our investments and dis-invest in non-value generating programs while investing in other value generating initiatives.

In addition to closing non-performing company-owned salons, we repurposed certain corporate programs, reduced long-term marketing contracts to allow for more agile spending and have invested in our creative digital capabilities to re-position Regis as the leading operator of value brands and technical education.

Salon Franchising Program:

We have various franchising programs supporting our 5,563 franchised salons as of June 30, 2021, consisting mainly of Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters and Roosters salons.

We provide our franchisees with a comprehensive system of business training, stylist education, site approval and lease negotiation, construction management services, professional marketing, promotion, and advertising programs, and other forms of on-going support designed to help franchisees build successful businesses.

Historically, we have signed the salon lease and subleased the space to our franchisees.

We provide our franchisees with a comprehensive system of business training, stylist education, site approval, professional marketing, promotion, and advertising programs, and other forms of on-going support designed to help franchisees build successful businesses.

Historically, we have signed the salon lease and then subleased the space to our franchisees.

However, moving forward, for all new locations and most lease renewals, franchisees will sign the salon leases directly with the landlords.

We have the right to approve salon leases.

Standards of Operations.

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The Company's field personnel make periodic visits to franchised salons to ensure they are operating in conformity with the standards for each franchising program.

All of the rights afforded to the Company with regard to franchised operations allow the Company to protect its brands, but do not allow the Company to control the franchise operations or make decisions that have a significant impact on the success of the franchised salons.

The Company’s franchise agreements do not give the Company any right, ability or potential to determine or otherwise influence any terms and/or conditions of employment of franchisees’ employees (except for those, if any, that are specifically related to quality of service, training, salon design, decor and trademark usage), including, but not limited to, franchisees’ employees’ wages and benefits, hours of work, scheduling, leave programs, seniority rights, promotional or transfer opportunities, layoff/recall arrangements, grievance and dispute resolution procedures, dress code, and/or discipline and discharge.

All of the rights afforded to the Company with regard to franchised operations allow the Company to protect its brands, but do not allow the Company to control day-to-day franchise operations or make decisions that have a significant impact on the success of the franchised salons.

The Company's franchise agreements do not give the Company any right, ability or potential to determine or otherwise influence any terms and/or conditions of employment of franchisees' employees (except for those, if any, that are specifically related to quality of service, training, salon design, decor and trademark usage), including, but not limited to, franchisees' employees' wages and benefits, hours of work, scheduling, leave programs, seniority rights, promotional or transfer opportunities, layoff/recall arrangements, grievance and dispute resolution procedures, and/or discipline and discharge.

Franchise Terms.

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Roosters franchise agreements have a ten-year term with a ten-year option to renew (at the option of the franchisee).

New franchisees enter into a franchise agreement concurrent with the opening of their first store, along with a development agreement under which they have the right to open two additional locations.

New franchisees enter into a franchise agreement concurrent with the opening of their first store, along with a development agreement with the right to open two additional locations.

Franchisee Training.

The Company provides new franchisees with training, focusing on the various aspects of salon management, including operations, personnel management training, marketing fundamentals and financial controls.

The Company provides new franchisees with training, focusing on the various aspects of salon management, including:

operations, management training, marketing fundamentals and controls.

Existing franchisees receive training, counseling and information from the Company on a regular basis.

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Our portfolio of salon concepts enables our guests to select different service scheduling options based upon their preference.

We believe the ability to serve walk-in appointments and minimize guest wait times is an essential element in delivering an efficient guest experience.

We believe the ability to serve walk-in appointments and minimize guest wait times are essential elements in delivering an efficient guest experience.

Our mobile applications and online check-in capabilities, including check-ins directly from Facebook Messenger ® and Google ® , allow us to capitalize on our guests' desire for convenience.

We continue to focus on stylist staffing and retention, optimizing schedules, balancing variable labor hours with guest traffic and managing guest wait times.

Our salons are located in high-traffic strip centers and Walmart Supercenters, with guest parking and easy access, and are generally open seven days per week, offering guests a variety of convenient ways to fulfill their beauty needs.

Our salons are located in high-traffic strip centers and Walmart Supercenters, with guest parking and easy access, and are generally open seven days per week to offer guests a variety of convenient ways to fulfill their beauty needs.

Affordability.

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In the value category, our guests expect outstanding service at competitive prices.

These expectations are met with average service transactions ranging from $19 to $23.

Pricing decisions are considered on a salon level basis and established based on local conditions.

In response to the COVID-19 global pandemic we implemented a surcharge at our company-owned salons to cover the costs of additional safety measures we put in place.

These expectations are met with the average service price of transactions ranging from $21 to $27.

Pricing decisions are considered on a salon-level basis and are established based on local conditions.

Our franchisees control all pricing at their locations.

Salon Safety, Appearance and Atmosphere.

Guest and stylist safety is our first priority and made even more important by the COVID-19 global pandemic.

We have invested heavily in safety and personal protective equipment, ensuring social distancing in our salons and training employees on these measures.

As a result of the COVID-19 pandemic, the Company collaborated with infectious disease specialists at the University of Minnesota Medical School.

These specialists reviewed the Company's salon and customer journey, as well as new safety training videos on how services are performed with the view of how to best protect customers and stylists.

They provided recommendations on the proper personal protective equipment and additional safety measures that have been communicated throughout the our entire salon system to help educate the our franchise partners and stylists to operate salons in a safe manner in a COVID-19 environment.

Franchise and company-owned salons have incorporated these recommendations, along with any state specific guidelines, into our operations.

Guest and stylist safety is our first priority and became even more important by the COVID-19 global pandemic.

We have invested heavily in safety and personal protective equipment, ensuring social distancing in our salons and training employees on safety measures.

Our salon repairs and maintenance program is designed to ensure we invest in salon cleanliness and safety, as well as in maintaining the normal operation of our company-owned salons.

The Company's salons range from 500 to 5,000 square feet, with the typical salon approximating 1,200 square feet.

Our salon repairs and maintenance program is designed to ensure we invest in salon cleanliness and safety, as well as in maintaining the normal operation of our salons.

Our annual capital expenditures include investments to refresh the appeal and comfort of our salons.

Retail Assortments.

The Company's salons sell nationally recognized hair care and beauty products, as well as a complete assortment of owned brand products.

The Company's stylists are compensated and regularly trained to sell hair care and beauty products to their guests.

Salons sell nationally recognized hair care and beauty products, as well as a complete assortment of corporate-owned brand products.

Stylists are compensated and regularly trained to sell hair care and beauty products to their guests.

Additionally, guests are encouraged to purchase products after stylists demonstrate their efficacy by using them in the styling of our guests' hair.

The top selling brands within the Company's retail assortment include L'Oreal Professional Brands, Regis Private Label Brands such as DESIGNLINE and Blossom, and Paul Mitchell.

We also continued to expand our e-commerce initiative to distribute our Regis Blossom and DESIGNLINE brands through new distribution channels, including amazon.com and walmart.com to supplement our existing in-salon sales and raise brand awareness.

Our current point of sale system has the ability to collect guest and transactional data and enable the Company to invest in guest relationship management, gaining insights into guest behavior, communicating with guests and incenting return visits.

The system allow us to monitor guest retention and to survey our guests for feedback on improving the guest experience.

The top selling brands within the Company's retail assortment include:

L'Oreal Professional Brands, Regis Private Label Brands such as Designline ® , Prototype ® and Blossom ® , and Paul Mitchell.

We also distribute our Regis Blossom, Prototype and Designline brands through distribution channels, including amazon.com and walmart.com, to supplement our existing in-salon sales and raise brand awareness.

In fiscal year 2021, our proprietary back-office salon management system, Opensalon ® Pro, became available to franchisees.

Opensalon Pro gives us critical business information at the transaction level.

We are building a robust business analytics platform and team that will use the data to transform the Company into a data-driven organization.

This data will enable us to drive traffic into our salon, implement relevant promotions, and enhance our loyalty programs and product sales initiatives.

Our mobile applications allow guests to view wait times and interact in other ways with salons.

In fiscal year 2021, our new proprietary back office salon management system will be available to franchisees.

We continue to invest in marketing to differentiate our priority salon and merchandise brands and drive traffic.

This includes leveraging advertising and media, customer relationship management, digital, mobile and other one-on-one communications and hyper-local tactical efforts.

We are increasingly using our owned channels and paid media to support the launches associated with our customer-facing technology such branded applications and new loyalty program.

As the pandemic continues, we are addressing consumer mindset by messaging about our Safe Salon Commitment, and have put customer safety and experience at the head of our Supercuts comeback campaign.

We have also decided to move away from the previously announced sponsorship between Supercuts and Major League Baseball and select local club partnerships.

This is part of efforts to continually reallocate marketing investments into opportunities we believe represent the highest return to our shareholders in the current environment.

Our marketing is brand specific and funded primarily from contractual contributions, based on sales, to the brand's cooperative advertising funds.

Our Company depends on its stylists to help deliver great guest experiences.

Artistic and Safety Education.

We believe in the importance of the ongoing development of our stylists' craft.

We aim to be an industry leader in stylist training, including the utilization of digital training that we enhanced significantly during fiscal years 2019 and 2020.

Our stylists deliver a superior experience for our guests when they are well trained technically and through experience.

Our stylists deliver a superior experience for our guests when they are well-trained technically and through years of experience.

We employ trainers who provide new hire training for stylists joining the Company.

We supplement internal training with targeted vendor training and external trainers who bring specialized expertise to our stylists.

We utilize training materials to help all levels of field employees navigate the running of a salon and essential elements of guest service training within the context of brand positions.

In response to the global COVID-19 pandemic, we have provided stylist training virtually in maintaining social distancing, sanitization, personal protective equipment and other safety protocols to limit the virus spread.

Ensuring that we attract, train and retain our stylists is critical to our success.

We compete with all service industries for our stylists;

to that end, we continue to enhance our recruiting efforts across all levels within our Company and are focused on showing our stylists a path forward.

We also leverage beauty school relationships and participate in job fairs and industry events.

Our back office salon management systems and salon workstations throughout North America enable communication with salons and stylists, delivery of online and digital training to stylists, salon level analytics on guest retention, wait times, stylist productivity, and salon performance.

We are currently making further investments in our back office salon management hardware and salon technology to improve the speed of our systems allowing for stylists to be more productive and improve overall guest and stylist satisfaction.

We supplement internal training with targeted vendor training and external trainers that bring specialized expertise to our stylists.

We utilize training materials to help all levels of field employees navigate the operation of a salon and essential elements of guest service training within the context of brand positions.

In response to the global COVID-19 pandemic, we have provided stylist training virtually with the benefits of maintaining social distancing, sanitization, personal protective equipment and other safety protocols.

Salon Support

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Organization.

Salon Support and our associated priorities are aligned to our field organization to enhance the effectiveness and efficiency of the service we provide and optimize the guest experience.

Salon Support and our associated priorities are aligned with our brands to enhance the effectiveness and efficiency of the service we provide.

Simplification.

Our ongoing simplification efforts focus on aligning our cost structure with our transition to an asset-light franchise model and improving the way we plan and execute across our portfolio of brands.

In fiscal year 2020, we significantly reduced our field and salon support resources as our portfolio of salons shifts to franchisees.

We remain focused on eliminating non-essential costs and on profit enhancing initiatives that do not harm the guest experience.

We also strive to ensure every program, communication, and report that complicates our operations and takes time away from our franchisees or guests is assessed for simplification or elimination.

New Location.

In March 2019, we announced a relocation of Salon Support to a new location in Minneapolis, which occurred in April 2020.

We believe the new headquarters will facilitate collaboration amongst our internal teams, support our employee recruiting efforts and enhance shareholder value.

However, due to the COVID-19 pandemic, the majority of our salon support employees are working from home to reduce the risk of the virus spreading.

We look forward to everyone returning to the office when it is safer.

In fiscal year 2021, we completed a corporate reorganization based on a zero-based budgeting philosophy to ensure each employee was performing the "right work," each team was the "right size" based on resources and priorities and overall, have the "right structure" to succeed as a company.

This exercise reduced salon support headcount in fiscal year 2021.

In April 2020, we relocated Salon Support to a new location in Minneapolis, Minnesota.

The new headquarters facilitates collaboration amongst our internal teams, supports our employee recruiting efforts, and enhances shareholder value.

Due to the COVID-19 pandemic, the majority of our salon support employees worked from home in fiscal year 2021 and have recently returned to the office in a modified schedule.

Salon Concepts:

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The Company has 2,386 franchised and 35 company-owned Supercuts locations throughout North America.

Signature Style.

Signature Style salons are made up of acquired regional salon groups operating under the primary concepts of Hair Masters, Cool Cuts for Kids, Style America, First Choice Haircutters, Famous Hair, Cost Cutters, Magicuts, Holiday Hair, Fiesta Salons, Roosters and TGF, as well as other concept names.

Portfolio Brands.

Portfolio Brands (formerly known as Signature Style) salons are made up of acquired regional salon groups operating under the primary concepts of Cost Cutters, First Choice Haircutters, Roosters, Hair Masters, Cool Cuts for Kids, Style America, Famous Hair, Magicuts, Holiday Hair, Fiesta Salons, and TGF, as well as other concept names.

Most concepts offer a full range of custom hairstyling, cutting and coloring services, as well as professional hair care products.

The Company has 1,217 Signature Style franchised and 505 company-owned locations throughout North America.

The Company has 1,357 franchised and 107 company-owned Portfolio Brands locations throughout North America.

International Salons.

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Supercuts 2,386 2,508 2,340

Signature Style 1,217 766 745

Total franchise locations, excluding TBG mall locations 5,042 3,721 3,045

Total North America TBG mall locations (2) — — 807

Portfolio Brands (1) 1,357 1,217 766

Total North American salons 5,409 5,042 3,721

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Supercuts 35 210 403

Signature Style 505 1,155 1,378

Portfolio Brands (1) 107 505 1,155

Mall-based (2) 43 166 —

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Supercuts 21 39 55

Signature Style 4 6 8

Portfolio Brands (1) 10 4 6

Total North American salons 31 47 64

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Supercuts 4 9 9

Signature Style 6 1 1

Total North American salons 15 10 2

Total International salons (2)(3) — — 1

Portfolio Brands (1) — 6 1

Total Company-owned salons 4 15 10

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Supercuts (273) (102) (72)

Signature Style (43) (33) (40)

Mall locations (2) — (807) (63)

Portfolio Brands (1) (82) (43) (33)

Mall based (2) — — (807)

Total North American salons (411) (174) (930)

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Supercuts (54) (26) (21)

Signature Style (111) (73) (76)

Mall locations (2) (41) — (14)

Total North American salons (250) (133) (715)

Total International salons (2)(3) — — (14)

Portfolio Brands (1) (190) (111) (73)

Mall based (2) (117) (41) —

Total Company-owned salons (613) (250) (133)

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Supercuts 130 231 618

Signature Style 490 48 7

Mall locations (2) — — 870

Total North American salons 1,448 735 1,321

Total International salons (2)(3) — — 262

Portfolio Brands (1) 212 490 48

Total Franchise salons 747 1,448 735

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Supercuts (125) (176) (513)

Signature Style (545) (151) (15)

Mall locations (2) 207 — (884)

Total North American salons (1,241) (735) (1,319)

Total International salons (2)(3) — — (262)

Portfolio Brands (1) (208) (545) (151)

Mall based (2) (6) 207 —

Total Company-owned salons (747) (1,241) (735)

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(1) Franchised SmartStyle salons in Walmart stores include salons originally opened as Magicuts locations in Canadian Walmart stores that were rebranded to SmartStyle.

(2) In October 2017, the Company sold substantially all of its mall-based salon business in North America, representing 858 salons, and substantially all of its previous International segment, representing approximately 250 salons in the UK, to TBG, who operated these locations as franchise locations until June 2019.

TBG has subsequently closed many of those salons and since June 2019, operates the North American salons under a license agreement.

The mall-based business and the previous International segment have been reported as a discontinued operation.

(1) Portfolio Brands was previously referred to as Signature Style.

These salons were included in discontinued operations in fiscal years 2020 and 2019.

On December 31, 2019, 207 mall-based salons were acquired from TBG and are included in continuing operations under the Company-owned segment from January 1, 2020.

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(3) Canadian and Puerto Rican salons are included in the North American salon totals.

(4) In January 2018, the Company closed 597 non-performing company-owned SmartStyle locations.

(5) During fiscal years 2020, 2019, and 2018, the Company acquired 27, 32, and zero salon locations, respectively, from franchisees.

(4) During fiscal years 2021, 2020, and 2019, the Company acquired 1, 27, and 32 salon locations, respectively, from franchisees.

During fiscal years 2021, 2020, and 2019, the Company sold 748, 1,475, and 767 salon locations, respectively, to franchisees.

Salon Markets and Marketing:

Franchised Salons

Most franchise concepts maintain separate advertising funds that provide comprehensive marketing and sales support for each system.

The Supercuts advertising fund is the Company's largest advertising fund and is administered by a council consisting of primarily franchisee representatives.

The council has overall control of the advertising fund's expenditures and operates in accordance with terms of the franchise operating and other agreements.

All stores, franchised and company-owned, contribute to the advertising funds.

Depending on the brand, the funds are allocated to the brand contributing market for media placement and local marketing activities or to the creation of national advertising and system-wide activities.

Company-Owned Salons

The Company utilizes various marketing vehicles for its salons, including traditional advertising, guest relationship management, digital marketing programs and promotional/pricing based programs.

Most marketing vehicles including radio, print, online, digital and television advertising are developed and supervised at the Company's Salon Support headquarters.

The Company reviews its brand strategy with the intent to create more clear communication platforms, identities and differentiation points for our brands to drive consumer preference.

Affiliated Ownership Interest:

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EEG operates accredited cosmetology schools.

We entered into an agreement to sell our stake in EEG to the controlling owner in fiscal year 2020 while enhancing our relationship in order to recruit stylists directly from beauty school.

The transaction is expected to close in fiscal year 2021, at which time the Company expects to record an immaterial non-operating gain.

We entered into an agreement to sell our stake in EEG to the controlling owner in fiscal year 2020 while enhancing our relationship in order to recruit stylists directly from the beauty school.

The transaction is expected to close in fiscal year 2022 upon receipt of state approvals, at which time the Company expects to record an immaterial non-operating gain.

Corporate Trademarks:

The Company holds numerous trademarks, both in the United States and in many foreign countries.

The most recognized trademarks are "SmartStyle®," "Supercuts®," "Regis Salons®," "Cost Cutters®," "First Choice Haircutters®," and "Magicuts®."

Corporate Employees:

As of June 30, 2020, the Company had approximately 9,000 full and part-time employees worldwide, of which approximately 8,000 employees were located in the United States.

The Company believes its employee relations are amicable.

The Company holds numerous trademarks, both in the United States.

and in many foreign countries.

The most recognized trademarks are "SmartStyle ® ", "Supercuts ® ", "Regis Salons ® ", "Cost Cutters ® ", "First Choice Haircutters ® ", "Roosters ®" and "Magicuts ® ."

Human Capital Management:

The Company believes that being a brand citizen starts with putting your social values in the foreground, defining your purpose in the context of your core business, fostering trust among consumers, and acting with a sense of collective responsibility.

In fiscal year 2021, the Company set out to develop a new vision that would allow it to become a model brand citizen.

It started with stakeholder interviews with members of the Company's Board of Directors, its executive leadership team, corporate employees, franchisees, and stylists.

Next, the Company facilitated a comprehensive review of brand citizen strategies in addition to primary and secondary research.

As an outcome of this work, the Company defined its purpose as:

Unleash the beauty of potential .

To build values reflective of this newly defined purpose, the Company assembled a cross-functional group of key leaders that represented its Board of Directors, departments throughout the Company, its franchisees, and its stylists, and all together, conducted a values workshop.

As a result of this collaborative effort, the Company unveiled its values as:

Foster Trust.

Create powerful relationships by acting with empathy and integrity.

Create Community.

Connect and collaborate with all your partners.

Share the challenges as much as you celebrate the wins.

Dream big and courageously challenge the status quo.

You are empowered.

Take responsibility and own your role and your results.

As of June 30, 2021, the Company employed approximately 2,446 employees;

203 of whom served at its corporate headquarters in Minnesota, 28 of whom served at its product engineering headquarters in California, 183 of whom served at its distribution centers, 55 of whom provided artistic education to its hair care salons, and the remainder of whom served as field employees or at its company-owned salons.

Diversity and Inclusion

The Company believes diversity of thoughts, backgrounds, experiences, and ideas help it deliver a world-class system of technology-enabled hair salons.

As of June 30, 2021, racial minorities consist of over 46% of the Company's U.S.

workforce, which is summarized below.

• 13% Black or African American

• 12% Hispanic or Latinx

• 3% American Indian or Alaska Native

• 3% Native Hawaiian

• 5% Two or more races

Also, 86% of the Company's entire workforce are women and 61% of the Company's leadership positions are held by women.

Families First

Nearly 100 years ago, the Company began as a family business and its support of families continues today.

It offers up to 16 weeks of parental leave so that parents have time to focus on their newest family members.

It also offers flexible work options, ranging from occasional work at home to full-time telecommuting.

Additionally, the Company offers flexible paid time off, which allows employees to control their time away from work based on individual needs, not years of service.

The Company also observes 13 U.S.

holidays, including Martin Luther King Jr.

Day (MLK Day of Service) and Good Friday, which were added in fiscal year 2021.

Other Compensation and Benefits

The Company also takes care of its people by offering competitive compensation and benefits packages that meet the needs of its employees and their families, including short- and long-term incentive packages, an employee stock purchase plan, retirement plans, health, dental, and vision benefits, basic life insurance, long-term disability coverage, and wellness and employee assistance programs.

The Company analyzes market trends and monitors its own compensation practices to attract, retain, and promote employees and reduce turnover and associated costs.

In addition, its short- and long-term incentive plans are aligned with its core values and key business objectives, which are intended to motivate strong performance.

Corporate Responsibility

The Company will not do business with organizations that employ or condone unfair labor practices.

Instead, it partners with companies who share its commitment to ethical business conduct and fair labor practices.

The Company also specifically condemns human trafficking and abuse of child labor.

Information About Our Executive Officers:

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Name Age Position

Hugh Sawyer 66 Chairman, President and Chief Executive Officer

Eric Bakken 53 Executive Vice President and President of Franchise

Felipe Athayde 42 President and Chief Executive Officer

Matthew Doctor 34 Executive Vice President and Chief Strategy Officer

Chad Kapadia 52 Executive Vice President and Chief Technology Officer

James Townsend 44 Executive Vice President and Chief Marketing Officer

Jim Lain 57 President, SmartStyle and Portfolio Brands

Amanda Rusin 39 Executive Vice President, General Counsel

Shawn Thompson 38 President, Supercuts

Kersten Zupfer 46 Executive Vice President and Chief Financial Officer

Shawn Moren 53 Executive Vice President and Chief Talent Officer

Amanda Rusin 38 Senior Vice President and General Counsel and Secretary

Hugh Sawyer has served as President and Chief Executive Officer, as well as a member of the Board of Directors, since April 2017.

He was elected Chairman of the Company's Board of Directors in January 2020.

Before joining Regis Corporation, he served as a Managing Director of Huron Consulting Group Inc.

(Huron) from January 2010 to April 2017.

While at Huron, he served as Interim President and CEO of JHT Holdings, Inc.

from January 2010 to March 2012, as the Chief Administrative Officer of Fisker Automotive Inc.

from January 2013 to March 2013 and as Chief Restructuring Officer of Fisker Automotive from March 2013 to October 2013, and as Interim President of Euramax International, Inc.

from February 2014 to August 2015.

Sawyer has served as President or CEO of nine companies (including Regis) and on numerous Boards of Directors.

In February 2018, Mr.

Sawyer was appointed to the Board of Directors of Huron.

Eric Bakken has served as President of Franchise and Executive Vice President since April 2017.

He also served as Executive Vice President, Chief Administrative Officer, Corporate Secretary and General Counsel from April 2013 to January 2018.

He also served as Interim Chief Financial Officer from September 2016 to January 2017.

He served as Executive Vice President, General Counsel and Business Development and Interim Corporate Chief Operating Officer from 2012 to April 2013 and performed the function of interim principal executive officer between July 2012 and August 2012.

Bakken joined the Company in 1994 as a lawyer and became General Counsel in 2004.

Felipe Athayde was appointed President and Chief Executive Officer in October 2020.

Prior to joining the Company, he served as President, Americas of Popeyes Louisiana Kitchen, owned by Restaurant Brands International, a multinational quick-service restaurant holding company, between March 2019 and September 2020.

Athayde has held various positions with Restaurant Brands International between 2011 and 2020, including President, Latin America and Caribbean for Burger King, and President, U.S.

for Tim Hortons.

Matthew Doctor was appointed Executive Vice President and Chief Strategy Officer in February 2021.

Prior to joining the Company, he was Chief Financial Officer of Kava Restaurants LLC, a Tim Horton's franchisee.

Earlier in his career, Mr.

Doctor worked in business development at Restaurant Brands International and was in investment banking with J.P.

Chad Kapadia was appointed to Executive Vice President and Chief Technology Officer in June 2018.

Before joining Regis Corporation, he served as Head of Engineering at Target Corporation's New Ventures and Accelerators.

Before joining the Company, he served as Head of Engineering at Target Corporation's New Ventures and Accelerators.

Prior to Target Corporation, Mr.

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and as an Engineering Leader and founding member of Netflix, Inc.'s Content Platform Engineering and Media Pipeline.

Kersten Zupfer was appointed to Executive Vice President and Chief Financial Officer in November 2019.

Before her promotion to Chief Financial Officer she served in accounting and finance roles of increasing leadership at Regis for more than 13 years.

Most recently, she served as Senior Vice President and Chief Accounting Officer since November 2017, prior to which she served as Vice President, Corporate Controller, Chief Accounting Officer since December 2014.

James Townsend was appointed as Executive Vice President and Chief Marketing Officer in April 2019.

Before joining Regis Corporation, James was a Partner and Chief Development Officer for 72andSunny.

Prior to 72andSunny, James served as Vice President of Client Services at Huge, Inc.;

led the global Yahoo business for advertising agency, Goodby, Silverstein & Partners;

led the San Francisco office of digital agency, Code and Theory;

was the Executive Producer of the award-winning music company, The Rumor Mill;

and started his career at Ogilvy in New York City.

Shawn Moren was appointed to Executive Vice President and Chief Talent Officer in August 2019.

She also served as the Senior Vice President and Chief Human Resources Officer from August 2017 to August 2019.

Before joining Regis Corporation, she served as Senior Vice President, Human Resources, for Bluestem Group, Inc.

from July 2013 to August 2017.

Prior to that, she served as Vice President, Human Resources, Retail, Supply Chain & Corporate for SUPERVALU during 2013 and as Group Vice President, Human Resources for SUPERVALU from March 2012 to March 2013.

Amanda Rusin was appointed as Senior Vice President and General Counsel and Secretary in January 2018.

Before joining Regis Corporation, she served as Assistant General Counsel at Polaris Industries, Inc.

Jim Lain was appointed as President of Portfolio Brands in December 2020 and President of SmartStyle in June 2021.

Previously, he served as Executive Vice President and Chief Operating Officer since November 2013.

Before joining the Company, Mr.

Lain served as Vice President at Gap, Inc.

from August 2006 to November 2013.

Amanda Rusin was appointed as Executive Vice President, General Counsel and Corporate Secretary in November 2020 and previously served as Senior Vice President, General Counsel and Corporate Secretary since January 2018.

Before joining the Company, Ms.

Rusin served as Assistant General Counsel at Polaris Industries, Inc.

from September 2015 to December 2017 and Senior Attorney at Polaris Industries, Inc.

from June 2014 to September 2015.

Before joining Polaris Industries, Inc.

She served as Commercial Director at Cargill, Incorporated from August 2013 to May 2014 and Attorney at Cargill, Incorporated from June 2008 to August 2013.

Before joining Polaris Industries, Inc she served as Commercial Director at Cargill, Incorporated from August 2013 to May 2014 and Attorney at Cargill, Incorporated from June 2008 to August 2013.

Shawn Thompson was appointed as President of Supercuts in December 2020.

Before joining the Company, Mr.

Thompson served as President, U.S.

for Tim Hortons and Head of Global operations for Restaurant Brands International.

Kersten Zupfer was appointed to Executive Vice President and Chief Financial Officer in November 2019.

For more than 13 years before her promotion to Chief Financial Officer, Ms.

Zupfer served in accounting and finance roles of increasing leadership at the Company.

Zupfer served as Senior Vice President and Chief Accounting Officer since November 2017, prior to which she served as Vice President, Corporate Controller and Chief Accounting Officer since December 2014.

Governmental Regulations:

The Company is subject to various federal, state, local and provincial laws affecting its business as well as a variety of regulatory provisions relating to the conduct of its beauty-related business, including health and safety.

During the third and fourth fiscal quarters of 2020, state and local governments temporarily mandated the closure of our franchise and company-owned salons in the response to the COVID-19 global pandemic.

During the third and fourth fiscal quarters of fiscal years 2020 and 2021, state and local governments temporarily mandated the closure of some of our franchise and company-owned salons in the response to the COVID-19 global pandemic.

These government-mandated closures have and may continue throughout the pandemic.

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In the United States, the Company's franchise operations are subject to the Federal Trade Commission's Trade Regulation Rule on Franchising (the FTC Rule) and by state laws and administrative regulations that regulate various aspects of franchise operations and sales.

The Company's franchises are offered to franchisees by means of an offering circular/disclosure document containing specified disclosures in accordance with the FTC Rule and the laws and regulations of certain states.

The Company has registered its offering of franchises with the regulatory authorities of those states in which it offers franchises and in which such registration is required.

The Company's franchises are offered to franchisees by means of a disclosure document containing specified disclosures in accordance with the FTC Rule and the laws and regulations of certain states.

The Company has registered its offering of franchises with the regulatory authorities of those states in which it offers franchises and in where registration is required.

State laws that regulate the franchisee/franchisor relationship presently exist in a substantial number of states and, in certain cases, apply substantive standards to this relationship.

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However, such laws have not had, and the Company does not expect such laws to have, a significant effect on the Company's operations.

In Canada, the Company's franchise operations are subject to franchise laws and regulations in the provinces of Ontario, Alberta, Manitoba, New Brunswick and Prince Edward Island.

In Canada, the Company's franchise operations are subject to franchise laws and regulations in the provinces of Ontario, Alberta, Manitoba, New Brunswick, Prince Edward Island and British Columbia.

The offering of franchises in Canada occurs by way of a disclosure document, which contains certain disclosures required by the applicable provincial laws.

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The Company believes it is operating in substantial compliance with applicable laws and regulations governing all of its operations.

The Company maintains an ownership interest in EEG.

The Company maintains an ownership interest in Empire Education Group.

Beauty schools derive a significant portion of their revenue from student financial assistance originating from the U.S.

Department of Education's Title IV Higher Education Act of 1965.

For the students to receive financial assistance at the school, the beauty schools must maintain eligibility requirements established by the U.S.

For the students to receive financial assistance at the schools, the beauty schools must maintain eligibility requirements established by the U.S.

Department of Education.

In 2020, we signed an agreement to sell our ownership interest in EEG to the other owner.

The transaction is expected to close in fiscal year 2021.

In 2020, the Company signed an agreement to sell our ownership interest in EEG to the other owner.

The transaction is expected to close in fiscal year 2022 after receipt of state ownership transfer approvals.

Financial Information about Foreign and North American Operations

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All of our reports, proxy and information statements and other information are available on the SEC's internet site ( www.sec.gov ).

Financial and other information can be accessed in the Investor Information section of the Company's website at www.regiscorp.com .

Financial and other information can be accessed in the Investor Relations section of the Company's website at www.regiscorp.com .

The Company makes available, free of charge, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business