Supercuts 2011 Annual Report Download - page 29

Table of Contents
Item 2. Properties
The Company's corporate offices are headquartered in a 270,000 square foot, four building complex in Edina, Minnesota owned or leased
by the Company. The Company also operates small offices in Toronto, Canada; Coventry and London, England; Boca Raton, Florida; and
Chattanooga, Tennessee. These offices are occupied under long-term leases.
The Company owns distribution centers located in Chattanooga, Tennessee and Salt Lake City, Utah. The Chattanooga facility currently
utilizes 230,000 square feet while the Salt Lake City facility utilizes 210,000 square feet. The Salt Lake City facility may be expanded to
290,000 square feet to accommodate future growth.
The Company operates all of its salon locations and hair restoration centers under leases or license agreements. Substantially all of its North
American locations in regional malls are operating under leases with an original term of at least ten years. Salons operating within strip centers
and Walmart Supercenters have leases with original terms of at least five years, generally with the ability to renew, at the Company's option, for
one or more additional five year periods. Salons operating within department stores in Canada and Europe operate under license agreements,
while freestanding or shopping center locations in those countries have real property leases comparable to the Company's domestic locations.
The Company also leases the premises in which certain franchisees operate and has entered into corresponding sublease arrangements with
the franchisees. These leases have a five year initial term and one or more five year renewal options. All lease costs are passed through to the
franchisees. Remaining franchisees, who do not enter into sublease arrangements with the Company, negotiate and enter into leases on their own
behalf.
None of the Company's salon leases are individually material to the operations of the Company, and the Company expects that it will be
able to renew its leases on satisfactory terms as they expire. See Note 10 to the Consolidated Financial Statements in Part II, Item 8 of this
Form 10-K.
Item 3. Legal Proceedings
The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail
employers, the Company has been faced with allegations of purported class-
wide wage and hour violations. Litigation is inherently unpredictable
and the outcome of these matters cannot presently be determined. Although the Company's counsel believes that the Company has valid defenses
in these matters, it could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results
of operations in any particular period.
During fiscal year 2011, the Company settled a legal claim with the former owner of Hair Club for $1.7 million.
During fiscal year 2010, the Company settled two legal claims regarding certain customer and employee matters for an aggregate charge of
$5.2 million plus a commitment to provide discount coupons. During the twelve months ended June 30, 2011 and 2010, payments aggregating
$4.3 million and $0.9 million, respectively, were made.
Item 4. Reserved
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