Item 2. Properties
Item 2. Properties
The Company leases its corporate headquarters in Minneapolis, Minnesota, and the lease expires in 2030. We lease four floors at our corporate headquarters. We currently sublease three of the four floors through sublease arrangements which expire in 2030.
The Company leases the premises in which approximately 83% of its franchisees operate and has entered into corresponding sublease arrangements with these franchisees. Generally, these leases have a one to 11-year initial term and one or more five to 10-year renewal options. All lease costs are passed through to the franchisees. Remaining franchisees who do not enter into sublease arrangements with the Company negotiate and enter into leases on their own behalf. As leases renew, the Company intends for franchisees to sign the non-Walmart leases directly so it will no longer be the primary tenant.
In fiscal year 2022, the Company exited its distribution centers located in Chattanooga, Tennessee and Salt Lake City, Utah and signed agreements to sublease the facilities in the short-term before a full lease novation in fiscal years 2023 and 2024. The Company also exited its Fremont, California office in fiscal year 2023 and the lease obligation expired on September 30, 2024.
The Company operates all its company-owned salons under lease agreements with original terms of one to five years, generally with the ability to renew at the Company's option, for one or more additional three to five-year periods.
None of the Company's salon leases are individually material to the operations of the Company, and the Company expects that it will be able to renew its leases on satisfactory terms as they expire or identify and secure other suitable locations. See Note 6 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
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