Supercuts 2008 Annual Report Download - page 5

2008, the Company owned, franchised or held ownership interests in over 13,550 worldwide locations. The Company's locations consisted of
10,745 company-owned and franchise salons, 92 hair restoration centers, and 2,714 locations in which the Company maintains an ownership
interest of less than 100 percent. Each of the Company's salon concepts offer similar salon products and services and serve the mass market
consumer marketplace. The Company's hair restoration centers offer three hair restoration solutions; hair systems, hair transplants and hair
therapy, which are targeted at the mass market consumer.
The Company is organized to manage its operations based on significant lines of business—salons and hair restoration centers. Salon
operations are managed based on geographical location—
North America and international. The Company's North American salon operations are
comprised of 8,110 company-owned salons and 2,163 franchise salons operating in the United States, Canada and Puerto Rico. The Company's
international operations are comprised of 472 company-owned salons. The Company's worldwide salon locations operate primarily under the
trade names of Regis Salons, MasterCuts, Trade Secret, SmartStyle, Supercuts, Cost Cutters, and Sassoon. The Company's hair restoration
centers are located in the United States and Canada. During fiscal year 2008, the number of customer visits at the Company's company-owned
salons approximated 111 million. The Company had approximately 65,000 corporate employees worldwide during fiscal year 2008.
On August 1, 2007, the Company contributed 51 of its wholly-owned accredited cosmetology schools to EEG in exchange for a
49.0 percent equity interest in EEG. The investment is accounted for under the equity method. The Company recorded an impairment charge
related to this transaction of $23.0 million ($19.6 million net of tax) during the three months ended March 31, 2007.
The Company realized that in order to maximize the potential of the beauty school division, it would be necessary to invest heavily in
information technology platforms and management. The Company believes that contributing the beauty schools to EEG is the most efficient and
accretive way to achieve its goals. This transaction leverages EEG's management expertise, while enabling the Company to maintain a vested
interest in the beauty school industry. EEG is the largest beauty school operator in North America with 86 accredited cosmetology schools with
revenues of approximately $130 million annually and is overseen by the Empire Beauty School management team.
Once the integration of the Regis schools is complete, the Company expects to share in significant synergies and operating improvements.
Long-term, the Company expects this transaction to be very accretive and to add significantly more shareholder value than the $23.0 million
($19.6 million net of tax) impairment charge. In January 2008, the Company's effective ownership interest increased to 55.1 percent related to
the buyout of EEG's equity interest shareholder. The Company will continue to account for the investment in EEG under the equity method of
accounting as Empire Beauty School retains majority voting interest and has full responsibility for managing EEG. Refer to Note 3 to the
Consolidated Financial Statements for additional information.
On January 31, 2008, the Company merged its continental European franchise salon operations with the operations of the Franck Provost
Salon Group in exchange for a 30.0 percent equity interest in the newly formed Provalliance entity (Provalliance). The merger with the
operations of the Franck Provost Salon Group which are also located in continental Europe, created Europe's largest salon operator with
approximately 2,300 company-owned and franchise salons as of June 30, 2008.
The Company contributed to Provalliance the shares of each of its European operating subsidiaries, other than the Company's operating
subsidiaries in the United Kingdom and Germany. The contributed subsidiaries operate retail hair salons in France, Spain, Switzerland and
several other European countries primarily under the Jean Louis David™ and Saint Algue™ brands. This transaction is expected to create
significant growth opportunities for Europe's salon brands. The Franck Provost Salon Group management structure has a proven platform to
build and acquire company-owned stores as well as a strong franchise operating group that is positioned for expansion.
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