What changed in this filing

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Item 1A. Risk Factors

2026-09-01 compared with 2025-09-03 · 43 added, 34 removed, 282 unchanged (21% of the section changed)

7 unchanged sentences

We may be unable to successfully realize the anticipated benefits of the Alline Acquisition.

On December 19, 2024, we acquired Alline, a former franchisee of Regis, which immediately prior to the acquisition owned and operated 314 stores under our Cost Cutters, Holiday Hair, and Supercuts brand names (the Alline Stores).

On December 19, 2024, we acquired 314 stores, of which 261 remain in operation as of June 30, 2026, under our Cost Cutters, Holiday Hair, and Supercuts brand names (Alline, or the Alline Stores) from a former franchisee (the Alline Acquisition).

The success of the Alline Acquisition depends on our ability to successfully integrate the Alline Stores with our existing limited network of company-owned stores and operate the Alline Stores as company-owned stores.

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• unforeseen expenses and delays related to the integration of Alline Stores into our system.

Many of these factors will be outside of our control and any one of them could result in increased costs or decreased revenue, which may have a materially adverse effect on our business, financial condition, and results of operation.

We are subject to laws and regulations that could require us to modify our current business practices and incur increased costs, which could have an adverse effect on our business, financial condition, and revenues.

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In addition, a growing number of states, provinces, and municipalities have passed, or are considering passing, requirements for paid sick leave, family leave, predictive scheduling (which imposes penalties for changing an employee's shift as it nears), and other requirements that increase the administrative complexity and cost of managing a workforce.

Increases in costs for our franchisees could lead to reduced profitability of salons, which may lead to salon closures.

Increases in costs could lead to reduced profitability of salons, which may lead to salon closures.

Finally, changes in labor laws designed to facilitate union organizing could increase the likelihood of stylists being subjected to greater organized labor influence.

If a significant portion of stylists were to become unionized, it would have an adverse effect on salon operations which adversely impacts our business and financial results.

If a significant portion of stylists were to become unionized, it would have an adverse effect on salon operations, which could adversely impact our business and financial results.

If the National Labor Relations Board (NLRB) were to decide to treat our franchisees as "joint employers" with us or if our franchisees are classified as large employers under minimum wage statutes because of their affiliations with us, this could have an adverse impact on our business.

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Various state and federal laws govern our relationships with our franchisees and our potential sale of a franchise.

If we fail to comply with these laws, we may subject the Company and our personnel to claims lodged by our franchisees, as well as federal and state government agencies, and those claims may include, among others, fraud, misrepresentation, unfair business practices and wrongful terminations.

If we fail to comply with these laws, we may subject the Company and our personnel to claims lodged by our franchisees or applicants, as well as federal and state government agencies, and those claims may include, among others, fraud, misrepresentation, unfair business practices, and wrongful terminations.

As a result of those claims, we could be liable for fines, damages, stop orders, or other penalties.

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Our success is substantially dependent on franchise royalties and the overall success of our franchisees' salons.

Many franchisees have seen a decline in revenues in recent years which reduces their profitability.

Some franchisees have seen a decline in revenues in recent years which reduces their profitability.

As a result, franchise salon closures have increased, which reduces our royalty income.

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To support and enhance our franchisees' businesses, we may need to invest in certain unanticipated new capabilities and/or services, and we will need to determine the appropriate amount of investment to optimize the success of our franchisees, while ensuring that the level of investment supports our expected return on those investments.

If we are not able to identify the right level of support and effectively deliver those resources to our franchisees, our results of operations and business may be adversely affected.

If we are not able to identify the right level of support and effectively deliver those resources to our franchisees, our results of operations and business may be

adversely affected.

Furthermore, as a franchised business, we may be exposed to additional legal, compliance and operational risks specific to this business model, including the business failure of unproven new salon owners.

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We could also be subject to additional liability such as property, environmental and other liability as a result of being a direct operator and lessee of additional salons and liability arising from regulatory compliance.

Furthermore, it may create additional costs, expose us to additional legal and compliance risks, cause disruption to our business and impact our financial condition and results of operation.

Furthermore, it may create additional costs, expose us to additional legal and compliance risks, cause disruption to our business and impact our financial condition and results of operations.

Our salons are dependent on a third-party preferred supplier agreement for merchandise.

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If our supplier is unable to source the products at the prices expected by our franchisees, our franchisees' profitability and our profitability may be adversely impacted.

Further, events or circumstances beyond our control, including economic instability and other impactful events and circumstances in the regions in which our supplier and its manufacturers are located, the financial instability of our supplier, our supplier's failure to meet our terms and conditions or our supplier standards, product safety and quality issues, disruption or delay in the transportation of products from our supplier and its manufacturers to our salons, transport availability and cost, transport

security, inflation and other factors relating to the supplier and the areas in which it operates, may adversely impact our and our franchisees' profitability.

It is important for us and our franchisees to attract, train and retain talented stylists and salon leaders.

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If franchisees do not successfully operate their salons in compliance with our standards, our brand reputation and image could be harmed, and our financial results could be affected.

Additionally, if franchisees do not price their goods and services competitively, the franchisee may fail to maximize the financial performance of their salon.

Additionally, if franchisees do not price their goods and

services competitively, the franchisee may fail to maximize the financial performance of their salon.

We could experience greater risks as the scale of our franchised salons increases.

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More broadly, our incident response preparedness and disaster recovery planning efforts may be inadequate or ill-suited for a security incident, and we could suffer disruption of operations or adverse effects to our operating results.

Our use of artificial intelligence presents risks that could adversely affect our business, operations, and reputation.

We have begun incorporating artificial intelligence (AI) technologies into certain aspects of our business operations.

Currently, our AI Taskforce is leading an initiative that leverages AI tools to analyze operational and guest traffic data to guide decisions regarding optimal salon operating hours across our salon portfolio, and we anticipate expanding our use of AI in additional operational and business contexts in fiscal year 2027 and beyond.

Although we believe these initiatives have the potential to improve operational efficiency and support profitability, the use of AI also introduces a number of risks.

AI systems rely on data inputs and algorithms that may produce inaccurate, incomplete, or biased results, and decisions made in reliance on flawed AI outputs could result in suboptimal operating hours, lost revenue, stylist scheduling inefficiencies, or guest dissatisfaction.

AI systems may also process sensitive operational, employee, or guest data, increasing exposure to cybersecurity threats and potential liability in the event of a breach or misuse.

If our AI investments fail to deliver expected benefits, or if our competitors deploy AI more effectively or at lower cost — for example, to optimize personalized guest experiences, dynamic pricing, marketing, or stylist matching — we may be unable to compete effectively, which could result in a loss of guests or market share.

Furthermore, the legal and regulatory landscape governing the use of AI is evolving rapidly, and compliance with new or amended laws may require us to modify or discontinue certain AI-enabled processes, potentially resulting in fines or penalties if we fail to comply.

We are in the early stages of developing internal AI governance capabilities, including an AI Acceptable Use Policy to guide employees on appropriate use of AI tools, and will continue to evolve our policies and practices in response to further developments in AI.

Even with these policies, there remains a risk of unauthorized or inappropriate use of AI that could expose the Company to legal, reputational, or operational harm.

We also may utilize third-party vendors to develop or operate AI capabilities, and there may be third parties with whom we do business using AI, and any failure or discontinuation of their services or businesses could disrupt our operations.

We cannot guarantee that the benefits of our current or future AI initiatives will outweigh the associated risks, and any of the foregoing, if they materialize, could adversely affect our business, financial condition, and results of operations.

SmartStyle and Cost Cutters (located in Walmart) salon operations are dependent on our relationship with Walmart.

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In addition, delivering a quality guest experience is crucial to drive repeat visits to our salons.

We are focusing on improving guest experiences to provide brand differentiation and preference as well as ensure our guests' needs are met.

We are focusing on improving guest experiences to provide brand differentiation and preference as well as ensuring our guests' needs are met.

If our marketing, advertising, and improved guest experience efforts do not generate sufficient customer traffic and repeat visits to our salons, our business, financial condition, and results of operations may be adversely affected.

Additionally, we plan to continue expanding our digital marketing efforts, and the success of those efforts is dependent upon our franchisees’ proper continued use of the Zenoti salon technology platform, accurate and consistent guest data capture, and customers continuing to opt-in to receive marketing messages from us.

Additionally, we plan to continue expanding our digital marketing efforts, including seeking additional options for loyalty and rewards software to complement our current system.

The success of those efforts is dependent upon our franchisees’ proper continued use of the Zenoti salon technology platform, accurate and consistent guest data capture, and customers continuing to opt-in to receive marketing messages from us.

Our success depends substantially on the value of our brands.

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Any such loss or delay in payment could have a material and adverse effect on a franchisee's ability to satisfy its obligations under its franchise agreement, including its ability to make royalty payments.

We are implementing a new enterprise resource planning system, and challenges with the planning or implementation of the system may impact our internal control over financial reporting, business and operations.

We are undertaking a multi-year process of implementing an enterprise resource planning (“ERP”) system, which is a major undertaking that will replace most of our existing financial systems.

An ERP system is used to maintain financial records, enhance data security and operational functionality and resiliency, and provide timely information to management related to the operation of a business.

The implementation will require the integration of the new ERP system with existing information systems and business processes.

Our ERP planning has required, and the ongoing planning and future implementation of the new ERP will continue to require, investment of significant capital and human resources, requiring the attention of members of our management team.

Any deficiencies in the design, or delays or issues encountered in the implementation, of the new ERP

system could result in significantly greater capital expenditures and employee time and attention than currently contemplated and could adversely affect our ability to operate our business, including effective management of our invoicing and accounts receivable and collections processes, file timely reports with the SEC or otherwise affect the proper and efficient operation of our controls.

We have implemented a new enterprise resource planning system, and challenges arising from the implementation or the ongoing operation of the system may impact our internal control over financial reporting, business, and operations.

We have completed a multi-year process of implementing an enterprise resource planning (ERP) system, which was a major undertaking that replaced most of our existing financial systems.

The new ERP system, which was implemented August 1, 2026, is used to maintain financial records, enhance data security and operational functionality and resiliency, and provide timely information to management related to the operation of the business.

The implementation required the integration of the new ERP system with existing information systems and business processes and will continue to require investment of significant capital and human resources, including the attention of members of our management team.

While the initial implementation is complete, we may continue to encounter deficiencies in the design or operation of the new ERP system that could result in significantly greater capital expenditures and employee time and attention than currently contemplated and could adversely affect our ability to operate our business, including effective management of our invoicing and accounts receivable and collections processes, our ability to file timely reports with the SEC, or otherwise affect the proper and efficient operation of our controls.

If the system as implemented, or after necessary investments, does not result in our ability to maintain accurate books and records, our financial condition, results of operations, and cash flows could be materially adversely impacted.

If we are unable to adequately plan, implement and maintain procedures and controls relating to our ERP, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired and impact the effectiveness of our internal control over financial reporting.

If we are unable to adequately maintain procedures and controls relating to our ERP, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired and impact the effectiveness of our internal control over financial reporting.

All of the above could result in harm to our reputation or our customers and franchisees, as well as expose us to regulatory actions or claims, any of which could materially impact our business, results of operations, financial condition, and stock price.

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If the IRS audits Alline during the applicable statute of limitations period and finds that Alline was not eligible to receive all or part of the ERC, Alline would be required to return some or all of the ERC to the IRS, together with any applicable interest and penalties.

As of June 30, 2026, the statute of limitations remains open on $10 million of the total ERC Alline received.

While the former owners of Alline would be required to indemnify us for any such amounts required to be repaid to the IRS (together with any applicable interest and penalties, and all reasonable costs and expenses incurred by us in defending or addressing any matters related to the ERC), we may not ultimately be able to timely or fully recoup such amounts from the former owners of Alline.

If we are ultimately required to repay the ERC, and we are unable

to sufficiently recover such amounts from the former owners of Alline, our financial condition, results of operations and liquidity may be materially adversely affected.

If we are ultimately required to repay the ERC, and we are unable to sufficiently recover such amounts from the former owners of Alline, our financial condition, results of operations and liquidity may be materially adversely affected.

If we are not able to successfully compete in our business markets, our financial results may be affected.

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We depend on the skills, working relationships and continued services of key personnel, including our management team and others throughout our Company.

We are also dependent on our ability to attract and retain qualified personnel, for whom we compete with other companies both inside and outside our industry.

We are also dependent on our ability to attract and retain qualified personnel, for whom we

compete with other companies both inside and outside our industry.

We may be required to increase wages and/or benefits to attract and retain qualified personnel or risk considerable turnover.

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In addition, our business may be harmed if we lose too many individuals with institutional knowledge.

Failure to attract and retain key personnel, including the Chief Executive Officer, could adversely affect the business and prospects.

On June 20, 2025, our former President, Chief Executive Officer, and Director, Matthew Doctor, resigned from his positions and as a member of our Board of Directors.

Our Board of Directors appointed our EVP Brand Operations - Supercuts and Cost Cutters, Jim Lain, to serve as interim President and CEO while the Board conducts a comprehensive search for a permanent successor.

Doctor was available in a support role until August 31, 2025.

Although we intend to hire a qualified candidate for CEO, no assurance can be given that we will be able to attract and retain a suitable CEO.

An extended period of time without a permanent CEO could potentially have an adverse effect on our operations or financial condition.

Furthermore, in the event we are unable to effect a seamless transition from our Interim CEO to a new CEO, or if a new CEO should unexpectedly prove to be unsuitable for our Company, the resulting disruption could have an adverse effect on our operations or financial condition or impede our ability to execute our strategic plan.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results and prevent or detect material misstatements due to fraud, which could reduce investor confidence and adversely affect the value of our common stock.

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There can be no assurances that we will be able to prevent control deficiencies from occurring, which could cause us to incur unforeseen costs, reduce investor confidence, cause the market price of our common stock to decline, or have other potential adverse consequences.

Commencing with our fiscal 2023 audit, and as a result of our smaller reporting company status, we are not required to obtain, nor did we obtain, an audit of our system of internal controls over financial reporting.

Commencing with our fiscal 2023 audit, and as a result of our non-accelerated filer status, we are not required to obtain, nor did we obtain, an audit of our system of internal controls over financial reporting.

However, if our public float exceeds $75 million as of the last business day of our second fiscal quarter, we would no longer qualify as a non-accelerated filer and would be required to include an attestation report from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting in future annual reports.

Obtaining such an attestation could require significant management time and resources, and there can be no assurance that our independent auditors would not identify one or more material weaknesses in our internal controls at that time, which could adversely affect investor confidence and the market price of our common stock.

We could be subject to changes in tax rates, the adoption of new U.S.

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On January 28, 2024, our Board of Directors authorized and declared a dividend of one preferred stock purchase right for each outstanding share of Common Stock.

See Note 1 to the Consolidated Financial Statements for additional information on the terms and operation of the Tax Benefits Preservation Plan (the "Plan”), dated as of January 29, 2024, as the same may be amended from time to time, between the Company and Equiniti Trust Company, LLC, as Rights Agent.

See Note 14 to the Consolidated Financial Statements for additional information on the

terms and operation of the Tax Benefits Preservation Plan (the "Plan”), dated as of January 29, 2024, as the same may be amended from time to time, between the Company and Equiniti Trust Company, LLC, as Rights Agent.

On January 27, 2025, the Company entered into Amendment No.

1 to the Plan, extending the expiration date of the Plan from January 29, 2025, to January 29, 2028 (the Extension).

Pursuant to the terms of the Plan, the Company will submit the Extension to its shareholders for ratification at the next annual or special meeting of its shareholders.

Pursuant to the terms of the Plan, the Company submitted the Extension to its shareholders for ratification and the shareholders subsequently approved the ratification on October 28, 2025.

By extending the Plan, the Board of Directors is seeking to protect the Company’s ability to use its NOLs and other tax attributes to offset potential future income tax liabilities.

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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 1A. Risk Factors