Item 1A. Risk Factors
Item 1A. Risk Factors
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, except as follows.
Sales and staffing at franchise locations may not return to pre-pandemic levels.
Sales and staffing at most of our franchise locations have not returned to their pre-pandemic levels causing our franchisees to earn less profits or incur losses. Franchisees may be unable to pay their royalties which could decrease cash collections. Some franchisees have stopped paying rents as they come due, reduced operating hours or closed before the lease end date, which are violations of the lease agreement and may results in penalties depending on the lease which may increase our cash outflows when the franchisee subleases from us or we guarantee the lease. Franchisees who decide to close their salons when there is not another franchisee willing to take over the business decreases the size of our fleet and our revenues.
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