Supercuts 2006 Annual Report Download - page 19

Download and view the complete annual report

Please find page 19 of the 2006 Supercuts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 126

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126

Management believes that its information systems provide the Company with operational efficiencies as well as advantages in planning
and analysis which are generally not available to competitors. The Company continually reviews and improves its Information Systems to
ensure systems and processes are kept up to date and that they will meet the growing needs of the Company. The goal of Information Systems
is to maximize the overall value to the business while improving the output per dollar spent by implementing cost-effective solutions and
services.
Salon Competition:
The hair care industry is highly fragmented and competitive. In 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 within malls from companies which operate
salons within department stores and from smaller chains of salons, independently owned salons and, to a lesser extent, salons which, although
independently owned, are operating under franchises from a franchising company that may assist such salons in areas of training, marketing
and advertising.
Significant entry barriers exist for chains to expand nationally due to the need to establish systems and infrastructure, recruitment of
experienced hair care management and adequate store staff, and leasing of quality sites. The principal factors of competition in the affordable
hair care category are quality, consistency and convenience. The Company continually strives to improve its performance in each of these areas
and to create additional points of differentiation versus the competition. In order to obtain locations in shopping malls, the Company must be
competitive as to rentals and other customary tenant obligations.
Beauty School Business Strategy:
Operating beauty schools is complementary to the salon business as it allows the Company to attract, train and retain valuable employees.
The Company expects to open and acquire additional beauty schools in the future in order to take advantage of this opportunity, although we
expect to moderate our acquisition activity in fiscal year 2007. The principle activity of the beauty schools is the teaching of beauticians to
prepare for their licensing. The activities also include clinic and school sales of products to students and customers and other miscellaneous
sales. Subjects available for enrollment include cosmetology, nail art and esthetic programs. Most schools are certified by the U.S. Department
of Education (ED) for participation in Federal Title IV Student Financial Assistance Programs. As of June 30, 2006, the Company operated 49
such facilities. The for-
profit beauty school industry represents approximately 1,000 schools generating an estimated $1 billion annually. Given
the attractive unit economics and the fact that Regis Corporation is the largest employer of beauty school graduates, the Company seeks to be
the largest operator of beauty schools.
Following is a summary of the Company’s beauty school locations:
18
2006
2005
2004
Beauty schools:
Open at beginning of period
24
11
5
Constructed
2
—
—
Acquired
30
13
6
Less relocations
2
—
—
School openings
30
13
6
Total beauty schools
54
24
11