Regis Take-Back Shows Road to Asset Light Can Be Rocky
A Regis-branded hair salon. Regis Corp. had to take back 200 salons from The Beautiful Group, the L.A.-based franchisee that will close another 300 salons.
A deal has come undone between Regis Corp. and The Beautiful Group, the Los Angeles-based franchisee that acquired some 500 Regis and Mastercuts mall-based hair salons in 2017. Regis is taking back about 200 stores, for which the franchisor still had lease obligations, and The Beautiful Group is closing the other 300.
Right before the new year, local reports around the country said employees received notice of the closings via email from Maria Fesler, head of salon operations at The Beautiful Group.
"Unfortunately, a variety of factors impacted our business at The Beautiful Group," said the letter, dated December 30, 2019. "TBG has also made the difficult decision to close all remaining salons not transferring to Regis Corporation."
A Facebook post from Sooner Fashion Mall in Norman, Oklahoma, said employees were emailed the letter “on December 30th with only 24hr notice we would be closing. We have enjoyed making you look good and feel great at Sooner Mall and we are deeply saddened by the decision from The Beautiful Group,” it continued.
“Please find your individual stylist on Facebook or Instagram. We would still love to see the wonderful clients that made our job great.”
Other salon chains, including JCPenney Salon and Ulta Beauty, immediately began posting job opportunities on a Facebook group for ex-employees.
Hugh Sawyer, president and CEO of Regis Corp., said in a statement the company “remains committed to our strategy of converting to a fully franchised model,” which is also known as “asset-light” and favored by many investors. "In light of TBG’s performance, we determined that resuming operational management of this relatively small number of salons was the best path for us to mitigate our risk and preserve long-term value for our shareholders.”
He expects to identify new owner/operators to purchase the salons. Regis Corp. shares hit a 2020 low of $16.10 each on January 14, down from nearly $17 January 10. Regis owned franchised or held ownership interests in 7,092 worldwide locations as September 2019.
The statement said Regis “is pleased to welcome back the many talented stylists serving customers in these salons,” referring to the 200 salons it took back.