Supercuts 2009 Annual Report Download - page 26

Table of Contents
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.
Changes in manufacturers' choice of distribution channels may negatively affect our revenues.
The retail products that we sell are licensed to be carried exclusively by professional salons. The products we purchase for sale in our salons
are purchased pursuant to purchase orders, as opposed to long-term contracts and generally can be terminated by the producer without much
advance notice. Should the various product manufacturers decide to utilize other distribution channels, such as large discount retailers, it could
negatively impact the revenue earned from product sales.
Changes to interest rates and foreign currency exchange rates may impact our results from operations.
Changes in interest rates will have an impact on our expected results from operations. Currently, we manage the risk related to fluctuations
in interest rates through the use of variable rate debt instruments and other financial instruments. During fiscal year 2008, the National
Association of Insurance Commissioners downgraded our private placement debt from investment-grade private placement to non-investment
grade. The downgrade has not had any effect on the private placement debt outstanding or corresponding interest rate. Any future non-
investment grade private placement debt would result in a substantially higher interest rate. The downgrade has not impacted our revolving credit
facility or our ability to secure bank borrowings. See discussion in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market
Risk," for additional information.
If we fail to protect the security of personal information about our customers, we could be subject to costly government enforcement actions or
private litigation and our reputation could suffer.
The nature of our business involves processing, transmission and storage of personal information about our customers. If we experience a
data security breach, we could be exposed to government enforcement actions and private litigation. In addition, our customers could lose
confidence in our ability to protect their personal information, which could cause them to stop visiting our salons altogether. Such events could
lead to lost future sales and adversely affect our results of operations.
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