Supercuts 2010 Annual Report Download - page 27

Table of Contents
Changes in our key relationships may adversely affect our operating results.
We maintain key relationships with certain companies, including Wal-Mart. Termination or modification of any of these relationships,
including Wal-Mart, could significantly reduce our revenues and have a material and adverse impact on our business, our operating results and
our ability to grow.
Changes in fashion trends may impact our revenue.
Changes in consumer tastes and fashion trends can have an impact on our financial performance. For example, trends in wearing longer
hair may reduce the number of visits to, and therefore, sales at our salons.
Changes in regulatory and statutory laws may result in increased costs to our business.
With approximately 12,700 locations and 56,000 employees worldwide, our financial results can be adversely impacted by regulatory or
statutory changes in laws. Due to the number of people we employ, laws that increase minimum wage rates or increase costs to provide
employee benefits may result in additional costs to our company. Compliance with new, complex and changing laws may cause our expenses
to increase. In addition, any non-compliance with these laws could result in fines, product recalls and enforcement actions or otherwise restrict
our ability to market certain products, which could adversely affect our business, financial condition and results of operations. We are also
subject to laws that affect the franchisor-franchisee relationship.
If we are not able to successfully compete in our business segments, our financial results may be affected.
Competition on a market by market basis remains strong. Therefore, our ability to raise prices in certain markets can be adversely
impacted by this competition. If we are not able to raise prices, our ability to grow same-store sales and increase our revenue and earnings may
be impaired.
If our joint ventures are unsuccessful our financial results may be affected.
We have entered into joint venture arrangements with other companies in the hair salon and beauty school businesses in order to maintain
and expand our operations in the United States, Asia and continental Europe. If our joint venture partners are unwilling or unable to devote
their financial resources or marketing and operational capabilities to our joint venture businesses, or if any of our joint ventures are terminated,
we may not be able to realize anticipated revenues and profits in the countries where our joint ventures operate and our business could be
materially adversely affected. If our joint venture arrangements are not successful, we may have a limited ability to terminate or modify these
arrangements. If any of our joint ventures are terminated, there can be no assurance that we will be able to attract new joint venture partners to
continue the activities of the terminated joint venture or to operate independently in the countries in which the terminated joint venture
conducted business.
We are subject to default risk on our accounts and notes receivable.
We have outstanding accounts and notes receivable subject to collectability. For example, as of June 30, 2010, $31.6 million was due to
the Company from the purchaser of Trade Secret. On July 6, 2010, the purchaser of Trade Secret filed for Chapter 11 bankruptcy. The
Company has a security interest in the assets of the purchaser of Trade Secret, that the Company believes fully collateralizes the $31.6 million.
If the counterparties are unable to repay the amounts due or if payment becomes unlikely our results of operations would be adversely affected.
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