This annual report, as well as information included in, or incorporated by reference from, future filings by the Company with the Securities and Exchange Commission (the SEC) and information contained in written material, press releases and oral statements issued by or on behalf of the Company contains or may contain "forward-looking statements" within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document reflect management's best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, "may," "believe," "project," "forecast," "expect," "estimate," "anticipate," and "plan." In addition, the following factors could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. These factors include a potential material adverse impact on our business and results of operations as a result of the uncertain duration and severity of the COVID-19 pandemic, as well as the health and risk appetite of our stylists, customers and employees to return to the salon environment; the continued ability of the Company to implement its strategy, priorities and initiatives;initiatives including the re-engineering of our corporate and field infrastructure; our new company-owned back office management system may not yield the intended results on timing and amounts due to COVID-19, efforts by our current third-party back office management system vendor to make it difficult for our franchisees to convert to our new company-owned system, and the pending litigation with that third-party vendor; the impact of COVID-19 on our key suppliers; the ability to address rent obligations incurred during the government-mandated hibernation of our salons related to the COVID-19 pandemic and the ability to obtain long-term rent concessions; the ability to operate or sell the salons transferred back from TBG; the outcome of the review by the administrator in TBG's insolvency proceedings in the United Kingdom; compliance with credit facility covenants and access to the existing revolving credit facility; our and our franchisees' ability to attract, train and retain talented stylists; financial performance of our franchisees; accelerationsuccess of the sale of certain salons to franchisees; if our capital investments in technology do not achieve appropriate returns; our ability to manage cyber threats and protect the security of potentially sensitive information about our guests, employees, vendors or Company information; the ability of the Company to maintain a satisfactory relationship with Walmart; the impact of recent actions by Walmart; marketing efforts to drive traffic;traffic to our franchisees' salons; changes in regulatory and statutory laws including increases in minimum wages; our ability to manage cyber threatsmaintain and protectenhance the securityvalue of sensitive information about our guests, employees, vendors or Company information;brands; premature termination of agreements with our franchisees; reliance on information technology systems; reliance on external vendors; consumer shopping trends and changes in manufacturer distribution channels; competition within the personal hair care industry; continued ability to compete in our business markets; the continued ability to maintain an effective system of internal controls over financial reporting; changes in tax exposure; changes in healthcare; changes in interest rates and foreign currency exchange rates; failure to standardize operating processes across brands; financial performance of Empire Education Group; the continued ability of the Company to implement cost reduction initiatives; compliance with debt covenants; changes in economic conditions; changes in consumer tastes and fashion trends; failure at our distribution centers; exposure to uninsured or unidentified risks; reliance on our management team and other key personnel or other factors not listed above. Additional information concerning potential factors that could affect future financial results is set forth under Item 1A of this Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC on Forms 10-Q and 8-K and Proxy Statements on Schedule 14A.

Regis Corporation franchises, owns franchises and operates beautytechnology-enabled hairstyling and hair care salons. The Company is listed on the NYSE under the ticker symbol "RGS." Unless the context otherwise provides, when we refer to the "Company," "we," "our," or "us," we are referring to Regis Corporation, the Registrant, together with its subsidiaries.

As of June 30, 2017,2020, the Company-owned,Company franchised, owned or held ownership interests in 9,0086,923 locations worldwide. The Company's locations consist of 8,919 company-owned and5,209 franchised salons, 1,632 company-owned salons, and 8982 locations in which we maintain a non-controlling ownership interest of less than 100%.100 percent. Each of the Company's salon concepts generally offer similar salon products and services and serve the mass marketplace.services.

Financial information about our segments and geographic areas for fiscal years 2017, 2016,2020, 2019, and 20152018 are included in Note 1315 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

The hair salon market is highly fragmented, with the vast majority of locations independently ownedindependently-owned and operated. However, the influence of salon chains, both franchised and company-owned, continues to grow within this market. Management believes salon chains will continue to have significant influence on this market and will continue to increase their presence.

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 from smaller chains, of salons such as Great Clips, Fantastic Sams, Sport Clips and Ulta Beauty, independently ownedindependently-owned salons, department store salons located within malls, in-home hair services, booth rentals and blow dry bars.

At the individual salon level, barriers to entry are low; however, barriers exist for chains to expand nationally due to the need to establish systems and infrastructure, to recruit franchisees, experienced field and salon management and stylists, and to lease quality sites. The principal factors of competition in the hair care category are quality and consistency of the guest experience, convenience, location and price. The Company continually strives to improve its performance in each of these areas and to create additional points of brand differentiation versus the competition.

The majority of existing SmartStyle and Cost Cutters franchise agreements for salons located in Walmart Supercenters have a five-year term with a five-year option to renew. The franchise agreements are site specific.

The majority of existing Cost Cutters franchise agreements have a 15-year term with Walmart. We will continue this evaluation as we make decisions ina 15-year option to renew (at the business.

Our organizationCompany depends on its stylists to help deliver great guest experiences.

The Company's salon concepts focus on providing high quality hair care services and professional products, primarily to the mass market.hair care products. A description of the Company's salon concepts areis listed below:

The tables on the following pages set forth the number of system-wide locations (company-owned(franchised and franchised)company-owned) and activity within the various salon concepts.

The Company utilizes various marketing vehicles for its salons, including traditional advertising, guest relationship management, digital marketing programs and promotional/pricing based programs. A predetermined allocation of revenue is used for such programs. Most marketing vehicles including radio, print, online, digital and television advertising are developed and supervised at the Company's Salon Support headquarters. The Company reviews its brand strategy with the intent to create more clear communication platforms, identities and differentiation points for our brands to drive consumer preference.

The Company maintains ownership interests in beauty schools. The primary ownership interest is a 54.6%non-controlling 55.1% ownership interest in Empire Education Group, Inc. (EEG), which is accounted for as an equity method investment. See Note 1 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. EEG operates accredited cosmetology schools. ContributingWe entered into an agreement to sell our stake in EEG to the Company's beauty schoolscontrolling owner in fiscal 2008 to EEG leveraged EEG's management expertise,year 2020 while enabling the Company to maintain a vested interestenhancing our relationship in the beauty school industry. Additionally, we utilize our EEG relationshiporder to recruit stylists straightdirectly from beauty school. The transaction is expected to close in fiscal year 2021, at which time the Company expects to record an immaterial non-operating gain.

The Company holds numerous trademarks, both in the United States and in many foreign countries. The most recognized trademarks are "SmartStyle,"SmartStyle®," "Supercuts," "MasterCuts,"Supercuts®," "Regis Salons,Salons®," "Cost Cutters," "Hair Masters,Cutters®," "First Choice Haircutters,Haircutters®," and "Magicuts."Magicuts®."

As of June 30, 2017,2020, the Company had approximately 41,0009,000 full and part-time employees worldwide, of which approximately 36,0008,000 employees were located in the United States. The Company believes its employee relations are amicable.

Information relating to the Executive Officers of the Company follows:

Hugh Sawyer has served as President and Chief Executive Officer, as well as a member of the Board of Directors, since April 2017. He was elected Chairman of the Company's Board of Directors in January 2020. Before joining Regis Corporation, he served as a Managing Director of Huron Consulting Group Inc. ("Huron")(Huron) from January 2010 to April 2017. While at Huron, he served as Interim President and CEO of JHT Holdings, Inc. from January 2010 to March 2012, as the Chief Administrative Officer of Fisker Automotive Inc. from January 2013 to March 2013 and as Chief Restructuring Officer of Fisker Automotive from March 2013 to October 2013, and as Interim President of Euramax International, Inc. from February 2014 to August 2015. Mr. Sawyer has served as President or CEO of nine companies (including Regis) and on numerous Boards of Directors.

Eric Bakken has served as President of Franchise and Executive Vice President since April 2017 and2017. He also served as Executive Vice President, Chief Administrative Officer, Corporate Secretary and General Counsel sincefrom April 2013.2013 to January 2018. He also served as Interim Chief Financial Officer from September 2016 to January 2017. He served as Executive Vice President, General Counsel and Business Development and Interim Corporate Chief Operating Officer from 2012 to April 2013 and performed the function of interim principal executive officer between July 2012 and August 2012. Mr. Bakken joined the Company in 1994 as a lawyer and became General Counsel in 2004.

Jim Lain has served asChad Kapadia was appointed to Executive Vice President and Chief OperatingTechnology Officer since November 2013.in June 2018. Before joining Regis Corporation, he served as Head of Engineering at Target Corporation's New Ventures and Accelerators. Prior to Target Corporation, Mr. Kapadia served in technology positions of increasing responsibility including Chief Technology Officer and Product Head at Swissclear Global, Inc. and as an Engineering Leader and founding member of Netflix, Inc.'s Content Platform Engineering and Media Pipeline.

Annette Miller has servedJames Townsend was appointed as SeniorExecutive Vice President and Chief MerchandisingMarketing Officer since December 2014.in April 2019. Before joining Regis Corporation, sheJames was a Partner and Chief Development Officer for 72andSunny. Prior to 72andSunny, James served as Senior Vice President of Merchandising, GroceryClient Services at Target from 2010 to 2014.Huge, Inc.; led the global Yahoo business for advertising agency, Goodby, Silverstein & Partners; led the San Francisco office of digital agency, Code and Theory; was the Executive Producer of the award-winning music company, The Rumor Mill; and started his career at Ogilvy in New York City.

Shawn Moren was appointed to Executive Vice President and Chief Talent Officer in August 2019. She also served as the Senior Vice President and Chief Human Resources Officer infrom August 2017.2017 to August 2019. Before joining Regis Corporation, she served as Senior Vice President, Human Resources, for Bluestem Group, Inc. from July 2013 to August 2017. Prior to that, she served as Vice President, Human Resources, Retail, Supply Chain & Corporate for SUPERVALU during 2013 and as Group Vice President, Human Resources for SUPERVALU from March 2012 to March 2013.

Rachel Endrizzi has servedAmanda Rusin was appointed as Senior Vice President and Chief Marketing Officer since May 2017. She joinedGeneral Counsel and Secretary in January 2018. Before joining Regis Corporation, in 2004 and most recentlyshe served as Vice President, BrandingAssistant General Counsel at Polaris Industries, Inc. from September 2015 to December 2017 and Marketing Communications.Senior Attorney at Polaris Industries, Inc. from June 2014 to September 2015. Before joining Polaris Industries, Inc. She served as Commercial Director at Cargill, Incorporated from August 2013 to May 2014 and Attorney at Cargill, Incorporated from June 2008 to August 2013.

The Company is subject to various federal, state, local and provincial laws affecting its business as well as a variety of regulatory provisions relating to the conduct of its beauty related business, including health and safety.

In the United States, the Company's franchise operations are subject to the Federal Trade Commission's Trade Regulation Rule on Franchising (the FTC Rule) and by state laws and administrative regulations that regulate various aspects of franchise operations and sales. The Company's franchises are offered to franchisees by means of an offering circular/disclosure document containing specified disclosures in accordance with the FTC Rule and the laws and regulations of certain states. The Company has registered its offering of franchises with the regulatory authorities of those states in which it offers franchises and in which such registration is required. State laws that regulate the franchisor-franchiseefranchisee/franchisor relationship presently exist in a substantial number of states and, in certain cases, apply substantive standards to this relationship. Such laws may, for example, require that the franchisor deal with the franchisee in good faith, may prohibit interference with the right of free association among franchisees and may limit termination of franchisees without payment of reasonable compensation. The Company believes that the current trend is for government regulation of franchising to increase over time. However, such laws have not had, and the Company does not expect such laws to have, a significant effect on the Company's operations.

In Canada, the Company's franchise operations are subject to franchise laws and regulations in the provinces of Ontario, Alberta, Manitoba, New Brunswick and Prince Edward Island. The offering of franchises in Canada occurs by way of a disclosure document, which contains certain disclosures required by the applicable provincial laws. The provincial franchise laws and regulations primarily focus on disclosure requirements, although each requires certain relationship requirements such as a duty of fair dealing and the right of franchisees to associate and organize with other franchisees.

The Company believes it is operating in substantial compliance with applicable laws and regulations governing all of its operations.

The Company maintains an ownership interest in EEG. Beauty schools derive a significant portion of their revenue from student financial assistance originating from the U.S. Department of Education's Title IV Higher Education Act of 1965. For the students to receive financial assistance at the school, the beauty schools must maintain eligibility requirements established by the U.S. Department of Education. In 2020, we signed an agreement to sell our ownership interest in EEG to the other owner. The transaction is expected to close in fiscal year 2021.

Financial information about foreign and North American markets is incorporated herein by reference to Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 and segment information in Note 1315 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

Our operations expose us to risks associated with public health crises and epidemics/pandemics, such as the novel strain of coronavirus (COVID-19) that has spread globally. COVID-19 has had, and will continue to have, an adverse impact on our operations, including the temporary closure of all of our company-owned salons and almost all of our franchise locations for most of the fourth quarter of fiscal year 2020; implementation of a furlough program in the processfourth quarter for a substantial majority of implementing,our workforce across our corporate office, field support and distribution centers; and temporary reductions in the pay for executives and other working employees at different levels for approximately two months during the fourth quarter of fiscal year 2020. The pandemic may affect the health and welfare of our stylist community, customers, franchise partners or headquarters personnel. As of the date of this filing, a majority of our company-owned and franchise salons have re-opened after having been temporarily closed for several weeks and/or months during the fourth quarter of fiscal year 2020. While most of our salons have been able to re-open, we expect that states may decide to again require the closure of salons as the level of COVID-19 positive cases continue to fluctuate, as we have already seen in California. Each time we are required to close and re-open salons, we will continue to experience the risks and business impacts described here, and further requirements to again close salons or limit and/or modify services or operations may exacerbate these impacts.

In addition, as our stores are able to resume operations, some of our franchisees, many of whom were in the early stages of developing their businesses prior to the onset of the pandemic, have chosen or may choose not to due to a variety of factors, resume operation of their salons and/or they are facing challenges rehiring employees, reestablishing operations with their landlords and other vendors, and attracting customers back to their salons. As a result, in addition to our prior decision to suspend collection of franchise ad fund fees from our franchisees from April 1, 2020 through June 30, 2020, many of our franchisees have requested reductions or other modifications to their royalty payments or other amounts due to us, which may be critical to their ability to reestablishing operations, and they may simply be unable or unwilling to make lease, royalty or other payments to us and may further implement,be unable to continue to operate or need to close the salon. The removal or reduction of these payments, including the added expense associated with closed locations where the Company may have residual lease liability, has and is expected to continue to adversely impact our revenues and cash flows. Customers and employees may be cautious about returning to personal service providers, and we and our franchisees are incurring substantial additional costs to ensure the safety of our employees and customers. While we may experience an initial increased customer demand for our services and products when businesses’ resume operation, there is no assurance that such immediate increase will be sustained. Furthermore, many of our customers have themselves experienced adverse financial impacts from the pandemic, including loss of disposable income, which may limit their spending on personal care, including purchasing of beauty products, or have identified other means for hair care during the pandemic. The trend of increased remote work and utilization of advanced video-conferencing technology has led to a new strategy, priorities and initiatives under our recently appointed President and Chief Executive Officer,less-formal work environment which could impact the frequency of our hair care services. In addition, efforts to lift restrictions on individuals’ daily activities and businesses’ normal operations may result in a resurgence of COVID-19 and potentially prolong and intensify the impact of the crisis, including additional workers compensation claims and customer claims associated with the pandemic. Further, the pandemic could impact workers at our headquarters or compromise the performance of our Fremont, CA technology center.

As a result, COVID-19 has and will continue to negatively affect our performancerevenue, increase the cost of salon operations, increase our investment in safety equipment and could result in an alterationpotentially expose us to additional liability, the combination of which will reduce our profitability, including the profitability of our strategy moving forward,franchisees. In addition, we retain residual real estate lease liability of $817.7 million for company-owned and any inabilitynearly all franchise stores. The combination of the revenue reduction, obligations we ultimately owe to evolvelandlords, and execute these strategiesother costs both related and unrelated to COVID-19 could significantly reduce or exhaust our available liquidity over time and limit our ability to access liquidity sources. While the economic impact of COVID-19 to our franchisees may be reduced by financial assistance under the Coronavirus Aid, Relief, and Economic Security (CARES) Act or other similar COVID-19 related federal and state programs, such programs may not have a positive impact on our corporate financial results and we believe we are currently ineligible for these programs.

COVID-19, and the volatile local, regional and global economic conditions stemming from the pandemic, as well as reactions to future pandemics or resurgences of COVID-19, including government mandates, could also precipitate or aggravate the other risk factors identified in this Form 10-K, which in turn could materially adversely impactaffect our business, financial condition, liquidity, results of operations (including revenues and profitability) and/or stock price. Further, COVID-19 may also affect our operating and financial results, certain litigation or regulatory risks or the value of our salon brands in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.

Investments made in company-owned technology, including the Company's new, internally developed back office salon management system, OpenSalon Pro, may not yield the profitable results on the timing or in amounts that we anticipate. Further, the COVID-19 pandemic may impact our ability to successfully launch this new system on the timing and levels of profitability we had originally anticipated. In addition, our existing point of sale system supplier has challenged the development of certain parts of our technology systems in litigation brought in the Northern District of California, case No. 20-cv-02181-MMC. We have vigorously denied the allegations made by this third-party supplier and have asserted certain counterclaims against the third party. However, the dispute regarding our ownership and involvement of certain key personnel may be costly and distracting, and the outcome is currently uncertain. Further, this litigation may delay the migration or ultimate success of our new President and Chief Executive Officer and a membertechnology.

The Company depends upon the support of Directors effective asa small number of April 17, 2017.critical suppliers, including its merchandise, PPE and technology providers, including its third-party point of sale system supplier. We have experienced limited disruption in operations from these suppliers. The transition has resultedcontinuing impacts of the COVID-19 pandemic may pose additional disruptions in our supply chain or in the in the availability of products and services, or could furtherincrease the prices we pay to our suppliers, which could result in changesa material impact to our own operations.

Our success depends, in part, onThe COVID-19 pandemic has also adversely affected our franchisees ability to grow our franchise model. We announced plansopen organic and venditioned salons. Franchisees have delayed some openings and will likely continue to evaluate the pace and quantity of salon development, including purchasing salons from the Company, until more clarity on the post-COVID-19 operating environment emerges. Delays in fall 2016 to expandorganic development or the franchise sideCompany’s transfer of our business, including by selling certain company-ownedexisting corporate salons to franchisees over time.in this environment may also reduce the purchase price of such venditioned salons, the royalties and other fees received from franchisees, lead to disputes with franchisees, overall have an adverse effect on our revenues, and could result in future impairment charges, especially if the effects of the pandemic extend for a significant amount of time or grow in severity. In Januaryaddition, the commercial real estate industry, including our landlords, are experiencing tenants requesting rent abatements and reductions during COVID-19, which could lead to an increase in tenant evictions and vacant spaces, landlord bankruptcies, mall and/or shopping center foreclosures, and as a result, the properties at which the Company and its franchisees operate may not be as appealing for our customers to visit and therefore cause a decrease in foot traffic and revenue at the impacted salons.

On December 31, 2019, we began franchisingre-acquired certain assets that were used in the SmartStyle brand throughoutoperation of the U.S.mall-based salon business in the United States and Canada at which we had residual real estate lease liability from our original sale of the salons to TBG. The transfer was consummated in connection with an assignment for the first time,benefit of creditors by TBG. The assets acquired in connection with the salon reacquisition are, in the aggregate, unprofitable and during the second halftotal lease liability related to the salons is approximately $23 million as of fiscal 2017,June 30, 2020. We are attempting to renegotiate these lease obligations; however, the outcome of those negotiations is currently uncertain. In addition to the salons, we entered intoassumed limited liabilities for certain employee benefit related payments. In connection with the reacquisition of the salons, we also terminated certain other agreements we had with TBG that we had already recorded a full reserve against the promissory notes evidencing TBG’s obligations to sell 233us. As a result of our company-ownedreacquisition of these salons acrossin connection with TBG assignment for the benefit of creditors, there is a risk that a creditor of TBG could seek to void or otherwise challenge the transfer as a preference transaction. If a TBG creditor was successful in making such a claim, we could remain liable on the leases without the ability to operate the salons to generate revenue to fund the lease obligations.

While we believe the salons transferred back to us have been able to continue operations without any significant disruptions so far, except for the impacts arising out of COVID-19, these salons have experienced significant changes in recent years and, as a result, there is a risk of increased levels of employee attrition, customer losses, and supplier interruption. A loss of key personnel or material erosion of the employee base, particularly our brandsstylists, as well as fruition of other risks could adversely affect our results of operations and could diminish the value of the salons in any future transfer of the ownership of these salons to new and existing franchisees. This initiative is still in an early stage. It will take timeownership as part of our continued commitment to execute, andconverting to a fully-franchised model. If we are not able to successfully operate these salons, we may not be able to generate sufficient revenue to cover the lease liabilities for these salons. As a result, we may be compelled to close certain salons or sell the assets at depressed values. In the meantime, we expect that our operation of these salons may adversely impact our results of operations. Our inability to successfully operate the salons or transfer them to new stable ownership, could adversely affect our business, financial condition, results of operations and cash flows.

As previously announced, we entered into a franchise agreement with the Bushell Investment Group (Bushell), which acquired over 100 salons in the United Kingdom from TBG in December 2019. The transaction occurred in connection with TBG’s insolvency proceedings in the United Kingdom. While we do not have any financial obligations in connection with the salons transferred to Bushell, the administrator in TBG’s insolvency proceeding has a legal obligation to review our original and subsequent transactions with TBG in the United Kingdom. If the administrator were to challenge our original transaction with TBG, the administrator could seek remedies to effectively unwind the economics of the original transaction or impair the ability of Bushell to continue operating these salons as our franchisee. While we do so. Furthermore,not expect the administrator to identify any concerns with our original or any subsequent transaction, any allegations against the validity of these transactions could disrupt the operation of the salons by Bushell and we could face significant adverse financial impacts or management distraction.

Guest loyalty is dependent upon the stylists who serve our guests. Greatguests and the customer experience in our franchised and company-owned salons. Qualified, trained stylists are a key to a greatmemorable guest experience that creates loyal customers. In order to profitably grow our business, it is important for usour franchisees and company-owned salons to attract, train and retain talented stylists and salon leaders and to adequately staff our salons. Because the salon industry is highly fragmented and comprised of many independent operators, the market for stylists is typically highly competitive. In addition, increases in minimum wage requirements may impact the number of stylists considering careers outside the beauty industry. In some markets, we and our franchisees have experienced a shortage of qualified stylists. Offering competitive wages, benefits, education and training programs are important elements to attracting and retaining greatqualified stylists. In addition, due to challenges facing the for-profit education industry, cosmetology schools including our joint venture EEG, have experienced declines in enrollment, revenues and profitability in recent years. If the cosmetology school industry sustains further declines in enrollment or some schools close entirely, or if stylists leave the beauty industry, we expect that we and our franchisees would have increased difficulty staffing our salons in some markets. In addition, we have observed that some stylists are not comfortable coming back to the salon environment during COVID-19 and the enhanced unemployment amounts provided by the federal government during COVID-19 in some cases decreases stylists' incentive to come back to work during COVID-19. If weour company-owned salons or franchisees are not successful in attracting, training and retaining stylists or in staffing our salons, our same-store sales or the performance of our franchise business could experience periods of variability or sales could decline and our results of operations could be adversely affected.

As of June 30, 2017,2020, approximately 29%76.1% of our salons were franchised locations, and we intendcontinue to expand our number of franchised locations.pursue conversion to a fully-franchised model. We derive revenues associated with our franchised locations from royalties, service fees and product sales to franchised locations. Our financial results are therefore substantially dependent in part upon the operational and financial success of our franchisees. As we increase our focus on our franchise business, our dependence on our franchisees grows.

We have limited control over how our franchisees’ businesses are run. Though we have established operational standards and guidelines, they own, operate and oversee the daily operations of their salon locations.locations including employee-related matters and pricing. If franchisees do not successfully operate their salons in compliance with our standards, our brand reputation and image could be harmed, and our financial results could be affected. We could experience greater risks as the scale of our franchise owners increases. Further, some franchise owners may not successfully execute the rebranding and/or turnaround of under-performing salons which we have transferred to them.them particularly in the post-COVID environment.

In addition, our franchisees are subject to the same general economic risks as our Company, and their results are influenced by competition for both guests and stylists, market trends, price competition and disruptions in their markets and business operations due to public health issues, including pandemics, severe weather and other external events. Like us, they rely on external vendors for some critical functions and to protect their company data. They may also be limited in their ability to open new locations by an inability to secure adequate financing, especially since many of them are small businesses with much more limited access to financing than our Company, or by the limited supply of favorable real estate for new salon locations.locations, or by government-mandated restrictions on salon operations due to COVID-19 or other pandemics. They may also experience financial distress as a result of over-leveraging, which could negatively affect our operating results as a result of delayed paymentsor non-payments to us. The bankruptcy, default, abandonment, or other default or breach by or of a franchisee could also expose us to liability under leases, which are generally sub-leased by us to our franchisees.

A deterioration in the financial results of our franchisees, or a failure of our franchisees to renew their franchise agreements, could adversely affect our operating results through decreased royalty payments, fees and product revenues.

In addition, challenges in supporting our expanding franchise system could cause our operating results to suffer. If we are unable to effectively select and train new franchisees and support and manage our growing franchisee base, it could affect our brand standards, cause disputes between us and our franchisees, and potentially lead to material liabilities.

At June 30, 2017,2020, we had 2,8282,068 SmartStyle or Cost Cutters salons within Walmart locations, including 374 salons opened during fiscal year 20172020 (net of relocations). Walmart is by far our largest landlord, and we believe we are Walmart’s largest tenant. Our business within each of those 2,8282,068 salons relies primarily on the traffic of visitors to the Walmart in which it is located, so our success is tied to Walmart’s success in bringing shoppers into their stores. We have limited control over the locations and markets in which we open new SmartStyles,SmartStyle locations, as we only have potential opportunities in locations offered to us by Walmart. Furthermore, Walmart has the right to close up to 100 of our salons per year for any reason, upon payment of certain penalties; to terminate lease agreements for breach, such as if we failed to conform with required operating hours, subject to a notice and cure period; and to terminate the lease if the Walmart store in which it sits is closed. DuringFurthermore, in an effort to manage traffic flow and direction during COVID-19, Walmart has elected at some stores to close one or more of its primary entryways. We have found that when the entry way nearest to our salon is closed, foot traffic in the salon is materially reduced. We are currently discussing this issue and other issues related to COVID-19 with Walmart, but there is no assurance they will be resolved. In fiscal year 2017, we began franchising select SmartStyle branded locations. Future franchising activity will require and be limited by the SmartStyle brand, with Walmart’s approval.approval of Walmart on a location by location basis. Walmart may not give their approval to franchise some or all of our company-owned salons. Further, Walmart may attempt to impose changes to the terms and conditions of our agreements which are contrary to our economic interests. Operating both company-owned and franchised SmartStylesSmartStyle salons adds complexity in overseeing franchise compliance and coordination with Walmart.

Our future growth and profitability may depend on the effectiveness, efficiency and spending levels of our marketing and advertising efforts to drive awareness and traffic to our salons. In addition, delivering a quality guest experience is crucial in order to drive repeat visits to our salons. We are developing our marketing and advertising strategies, including national and local campaigns, to build awareness, drive interest, consideration and traffic to our salons. We are also focusing on improving guest experiences to provide brand differentiation and preference, and to ensure we meet our guests’ needs. If our marketing, advertising and improved guest experience efforts do not generate sufficient customer traffic and repeat visits to our salons, our business, financial condition and results of operations may be adversely affected.

With 9,0086,923 locations and approximately 41,0009,000 employees worldwide, our financial results can be adversely impacted by regulatory or statutory changes in laws. Due to the number of people we or our franchisees employ, laws that increase minimum wage rates, employment taxes, overtime requirements or costs to provide employee benefits or administration may result in additional costs to our Company.

A number of U.S. states, Canadian provinces and municipalities in which we do business have recently increased or are considering increasing the minimum wage, with increases generally phased over several years depending upon the size of the employer. Increases in minimum wages and overtime pay increase our costs, and our ability to offset these increases through price increases may be limited. In fact, increases in minimum wages increased our costs over the last fourfive years. In addition, a growing number of states, provinces, and municipalities have passed or are considering requirements for paid sick leave, family leave, predictive scheduling (which imposes penalties for changing an employee’s shift as it nears), and other requirements that increase the administrative complexity of managing our workforce. Finally, changes in labor laws, such as recent legislation in Ontario and Alberta designed to facilitate union organizing, could increase the likelihood of some of our employees being

Increases in minimum wages, administrative requirements and unionization could also have an adverse effect on the performance of our franchisees, especially if our franchisees are treated as a "joint employer" with us by the National Labor Relations Board (NLRB) or as a large employer under minimum wage statutes because of their affiliation with us. In addition, we must comply with state employment laws, including the California Labor Code, which has stringent requirements and penalties for non-compliance.

Various state and federal laws govern our relationship with our franchisees and our potential sale of a franchise. If we fail to comply with these laws, we could be liable for damages to franchisees and fines or other penalties. A franchisee or government agency may bring legal action against us based on the franchisee/franchisor relationship. Also, under the franchise business model, we may face claims and liabilities based on vicarious liability, joint-employer liability, or other theories or liabilities. All such legal actions not only could result in changes to laws and interpretations, making it more difficult to appropriately support our franchisees and, consequently, impacting our performance, but, also, such legal actions could result in expensive litigation with our franchisees, third parties or government agencies that could adversely affect both our profits and our important relations with our franchisees. In addition, other regulatory or legal developments may result in changes to laws or the franchisor/franchiseefranchisee/franchisor relationship that could negatively impact the franchise business model and, accordingly, our profits.

In addition to employment and franchise laws, we are also subject to a wide range of federal, state, provincial and local laws and regulations, including those affecting public companies, product manufacture and sale, and governing the franchisor-franchiseefranchisee/franchisor relationship, in the jurisdictions in which we operate. Compliance with new, complex and changing laws may cause our expenses to increase. In addition, any non-compliance with laws or regulations could result in penalties, fines, product recalls and enforcement actions or otherwise restrict our ability to market certain products or attract or retain employees, which could adversely affect our business, financial condition and results of operations.

Our success depends, in large part, on our ability to maintain and enhance the value of our brands, our customers’ connection to our brands, and a positive relationship with our franchisees. Brand value can be severely damaged even by isolated incidents, particularly if the incidents receive considerable negative publicity, including via social media, or result in litigation. Some of these incidents may relate to the way we manage our relationship with our franchisees, our growth strategies, our development efforts, or the ordinary course of our, or our franchisees’, business. Other incidents may arise from events that may be beyond our control and may damage our brands, such as actions taken (or not taken) by one or more franchisees or their employees relating to health, safety, welfare, or otherwise; litigation and claims; security breaches or other fraudulent activities associated with our back office management or payment systems; and illegal activity targeted at us or others. Consumer demand for our products and services and our brands’ value could diminish significantly if any such incidents or other matters erode consumer confidence in us or our products or services, which could result in the compromise of sensitive information about our guests, employees, vendors or companylower sales and, expose us to business disruption, negative publicity, costly government enforcement actions or private litigationultimately, lower royalty income, and our reputationin turn could suffer.

Our franchise agreements may be subject to premature termination in certain circumstances, such as failure of a franchisee to cure a default, monetary or otherwise, a franchisee bankruptcy, or abandonment of the franchise. If terminations occur for these or other reasons, we may need to enforce our right to damages for breach of contract and related claims, which could cause us to incur significant legal fees and expenses and/or to take back and operate such salons as company-owned. Any damages we ultimately collect could be less than the projected future value of the fees and other amounts we would have otherwise collected under the franchise agreement. In addition, as the regulatory environment relating to retailers and other companies' obligations to protect sensitive data becomes stricter, a material failure on our part to comply with applicable regulations could subject us to fines or other regulatory sanctions and potentially to lawsuits. These laws are changing rapidly and vary among jurisdictions. Furthermore, while our franchisees are independently responsible for data security at franchised locations, a breach of guest or vendor data at a franchised location could also negatively affect public perceptionmany of our brands. More broadly, our incident response preparednessbrands, we remain liable under the lease and, disaster recovery planning efforts maytherefore, will be inadequateobligated to pay rent or ill-suited forenter into a security incidentsettlement with the landlord, and we may not be made whole by the franchisee. A significant loss of franchisee agreements due to premature terminations could suffer disruptionhurt our financial performance or our ability to grow our business.

The efficient operation of our business is dependent on our management information systems. We rely heavily on our management information systems to collect daily sales information and guest demographics, generate payroll information, monitor salon performance, manage salon staffing and payroll costs, manage our two distribution centers and other inventory and other functions. Such systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, hackers, security breaches, and natural disasters. In addition, certain of our management information systems are currently developed and maintained by external vendors, including our POSback office salon management system, and some are outdated or of limited functionality.functionality, not owned by the Company or not exclusively provided by the Company. The failure of our management information systems to perform as we anticipate, or to meet the continuously evolving needs of our business, or provide an affordable long-term solution, could disrupt our business operations and result in other negative consequences, including remediation costs, loss of revenue, and reputational damage.

We rely on external vendors for the manufacture of our owned brand products, other retail products we sell, and products we use during salon services such as color and chemical treatments. We also rely on external vendors for various services critical to our operations and the security of certain Company data. Our dependence on vendors exposes us to operational, reputational, financial, and compliance risk.

If our product offerings do not meet our guests’ expectations regarding safety and quality, we could experience lost sales, increased costs, and exposure to legal and reputational risk. All of our vendors must comply with applicable product safety laws, and we are dependent on them to ensure that the products and packages we buy, for either use on a guest during a service or resale to the public, comply with all safety and quality standards. Events that give rise to actual, potential, or perceived product safety concerns or mislabeling could expose us to government enforcement action and/or private litigation and result in costly product recalls and other liabilities. In addition, we do not own the formulas for certain of our owned brand products, and could be unable to sell those products if the vendor decided to discontinue working with us.

Our vendors are also responsible for the security of certain Company data, as discussed above. In the event that one of our key vendors becomes unable to continue to provide products and services, or their systems fail, are compromised or the quality of their systems deteriorate, we may suffer operational difficulties and financial loss.

Our North American Value business is located mainly in strip center locationsBoth our franchised and Walmart Supercenters and the North American Premium business is primarily in mall-based locations. Ourcompany-owned salons are partly dependent on the volume of traffic around thesetheir locations in order to generate both service and product revenues. Supercuts salons and most of our other brands are located mainly in strip center locations, which have been significantly impacted by landlord closures due to COVID-19, and SmartStyle salons are located within Walmart Supercenters, so they are especially sensitive to Walmart traffic. Customer traffic to these shopping areas may be adversely affected by changing consumer shopping trends that favor alternative shopping locations, such as the internet. In particular,recent years, we have experienced substantial declines in traffic in some shopping malls due to changes in consumer preferences favoring retail locations other than malls or online shopping.particular and traffic patterns at those salons affect our potential product sales revenues and impact the health of our brands.

In addition, we are experiencing a proliferation of alternative channels of distribution, like blow dry bars, booth rental facilities, discount brick-and-mortar and online professional products retailers, and manufacturers selling direct to consumers online, which may negatively affect our product and service revenue. Also, product manufacturers may decide to utilize these other distribution channels to a larger extent than in the past and they generally have the right to terminate relationships with us without muchwith little advance notice. These trends could reduce the volume of traffic around our salons, and in turn, our revenues may be adversely affected.

Competition on a market by market basis remains challenging as many smaller chain competitors are franchise systems with local operating strength in certain markets and the hair salon industry as a whole is fragmented and highly competitive for customers, stylists and prime locations. Therefore, our ability to attract guests, raise prices and secure suitable locations in certain markets can be adversely impacted by this competition. Our strategies for competing are complicated by the fact that we have multiple brands in multiple segments, which compete on different factors.

We also face significant competition for prime real estate, particularly in strip malls. We compete tofor lease locations not only with other hair salons, but with a wide variety of businesses looking for similar square footage and high-quality locations.

Furthermore, our reputation is critical to our ability to compete and succeed. Our reputation may be damaged by negative publicity on social media or other channels regarding the quality of products or services we provide. There has been a substantial increase in the use of social media platforms, which allow individuals to be heard by a broad audience of consumers and other interested persons. Negative or false commentary regarding us or the products or services we offer may be posted on social media platforms at any time. Customers value readily available information and may act on information without further investigation or regard to its accuracy. The harm to our reputation may be immediate, without affording us an opportunity for redress or correction. Our reputation may also be damaged by factors that are mostly or entirely out of our control, including actions by a franchisee or a franchisee’s employee. If we are not able to successfully compete, our ability to grow same-store sales and increase our revenue and earnings may be impaired.

We are subject to income taxes in the U.S. and other foreign jurisdictions. Significant judgment is required in determining our tax provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are subject to the examination of our income tax returns, payroll taxes and other tax matters by the Internal Revenue Service and other tax authorities and governmental bodies. The Company regularly assesses the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for income taxes and payroll tax accruals. There can be no assurances as to the outcome of these examinations. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical tax provisions and employment taxes. The results of an audit or litigation could have a material effect on our consolidated financial statementsConsolidated Financial Statements in the period or periods for which that determination is made.

Our effective income tax rate in the future could be adversely affected by a number of factors, including changes in the mix of earnings in countries with different statutory tax rates, changes in tax laws, or the outcome of income tax audits, and any repatriation of non-U.S. earnings on which we have not previously provided U.S. taxes.

StandardizationWe expect standardization of operating processes across our brands, marketing and products willto enable us to simplify our operating model and decrease our costs. Failurecosts and believe failure to do so could adversely impact our ability to grow revenue and realize further efficiencies within our results of operations.

We have a joint venture arrangement withIn 2020, we entered into an agreement to sell our 55% ownership stake in Empire Education Group (EEG), an operator of accredited cosmetology schools.schools to the other owner. The transaction is subject to regulatory approval before it can close, and there is no guarantee that the regulatory approval will occur, which has been delayed in part due to COVID-19. Due to significantly lowerpoor financial projections resulting from continued declinesperformance, we fully impaired the investment in EEG’s enrollment, revenueprior years. If the transaction does not close as anticipated and profitability, we recorded a $13.0 million non-cash impairment charge in fiscal year 2016, resulting in a full-impairment of our investment. If EEG is unsuccessful in executing its business plan, or if economic, regulatory and other factors, including declines in enrollment, revenue and profitability continue for the for-profit secondary education market, our financial results may be affected by certain potential liabilities related to this joint venture.

We must continue to control our expense structure. Failure to manage our cost of product, labor and benefit rates, advertising and marketing expenses, operating lease costs, other store expenses or indirect spending could delay or prevent us from achieving increased profitability or otherwise adversely affect our operating results.

Changes to the U.S., Canadian and United Kingdom economies have an impact on our business. General economic factors that are beyond our control, such as recession, inflation, deflation, tax rates and policy, energy costs, unemployment trends, extreme weather patterns, viruses, pandemics, stay-at-home orders and other casualty events and other matters that influence consumer confidence and spending, may impact our business. In particular, visitation patterns to our salons can be adversely impacted by increases in unemployment rates and decreases in discretionary income levels.

Our success depends in part on our ability to anticipate, gauge and react in a timely manner to changes in consumer tastes, hair product innovation, fashion trends and consumer spending patterns. If we do not timely identify and properly respond to evolving trends and changing consumer demands for hair care, our sales may decline significantly.decline. Furthermore, we may accumulate additional inventory and be required to mark down unsold inventory to prices that are significantly lower than normal prices, which could adversely impact our margins and could further adversely impact our business, financial condition and results of operations.

We operate two distribution centers, one near Chattanooga, Tennessee, and one near Salt Lake City, Utah. These supply our North America company-owned salons and many of our franchisees with retail products to sell and products used during salon services. AThey also provide 3PL services for other third-party manufacturers for a profit. If there were a technology failure, or natural disaster or other catastrophic event that caused one of the distribution centers to be inoperable, it would cause a disruption in our business and could negatively impact our revenues.

We maintain an enterprise risk management program that is designed to identify, assess, mitigate, and monitor the risks that we face. There can be no assurance that our frameworks or models for assessing and managing known risks, compliance with applicable law, and related controls will effectively mitigate risk and limit losses in all market environments or against all types of risk in our business. If conditions or circumstances arise that expose flaws or gaps in our risk management or compliance programs, the performance and value of our business could be adversely affected.

Insurance and other traditional risk-shifting tools may be held by or available to Registhe Company in order to manage certain types of risks, but they are subject to terms such as deductibles, retentions, limits and policy exclusions, as well as risk of denial of coverage, default or insolvency. If we suffer unexpected or uncovered losses, or if any of our insurance policies or programs are terminated for any reason or are not effective in mitigating our risks, we may incur losses that are not covered or that exceed our coverage limits and could adversely impact our results of operations, cash flows and financial position.

We depend on the skills, working relationships, and continued services of key personnel, including our management team and others throughout our organization. We are also dependent on our ability to attract and retain qualified personnel, for whom we compete with other companies both inside and outside our industry. Our business, financial condition or results of operations may be adversely impacted by the unexpected loss of any of our management team or other key personnel, or more generally if we fail to identify, recruit, train andand/or retain talented personnel. Additionally, the Chief Executive Officer's employment agreement may end before the Company's multi-year strategic transformation is complete, or before the impact of the pandemic has been stabilized. Further, any successor candidate, no matter how well-qualified, may not be successful in a post-COVID environment.

The Company'sIn December 2019, the Company sold the corporate offices are headquartered inoffice consisting of a 170,000139,000 square foot, threetwo building complex in Edina, Minnesota that iswas owned by the Company. In March 2019, the Company signed a ten-year lease for a new corporate headquarters in Minneapolis, Minnesota, with the move to the new headquarters completed in April 2020.

The Company also operates offices in Edina, Minnesota; Toronto, Canada;Canada and Coventry and London, England. These offices are occupiedFremont, CA under long-term leases.

TheIn fiscal year 2019, the Company ownssold its distribution centers located in Chattanooga, Tennessee and Salt Lake City, Utah.Utah and signed long-term leases to continue to operate in the locations. 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 can be expandedCompany also leases the premises in which approximately 92% of our franchisees operate and has entered into corresponding sublease arrangements with the franchisees. Generally, these leases have a five year initial term and one or more five-year renewal options. All lease costs are passed through to 290,000 square feet to accommodate future growth.the franchisees. Remaining franchisees who do not enter into sublease arrangements with the Company negotiate and enter into leases on their own behalf.

The Company operates all of its salon company-owned locations 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, malls 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 North Americancompany-owned locations.

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 or identify and secure other suitable locations. See Note 76 to the Consolidated Financial Statements.Statements in Part II, Item 8, of this Form 10-K.

Regis common stock is listed and traded on the New York Stock Exchange under the symbol "RGS."

In accordance with its capital allocation policy, the Company no longer paysdoes not pay dividends.

The following graph compares the cumulative total shareholder return on the Company's stock for the last five years with the cumulative total return of the Standard and Poor's 500 Stock Index and the cumulative total return of a peer group index (the Peer Group) constructed by the Company. In addition, the Company has included the Standard and Poor's 400 Midcap Index and the Dow Jones Consumer Services Index in this analysis because the Company believes these two indices provide a comparative correlation to the cumulative total return of an investment in shares of Regis Corporation.

The Peer Group consists of the following companies: Boyd Gaming Corp., Brinker International, Inc., Buffalo Wild Wings, Inc., Cracker Barrel Old Country Store, DineEquity, Inc., Fossil Group, Inc., Fred's, Inc., Jack in the Box, Inc., Panera Bread Co., Penn National Gaming, Inc., Revlon, Inc., Ruby Tuesday, Inc., Sally Beauty Holdings, Inc., Service Corporation International, The Cheesecake Factory, Inc. and Ulta Salon, Cosmetics & Fragrance Inc. The Peer Group is a self-constructed peer group of companies that have comparable annual revenues and market capitalization and are in the beauty industry or other industries where guest service, multi-unit expansion or franchise play a part. The Company reviewed and adjusted its Peer Group used for executive compensation purposes in early fiscal 2017, resulting in this Peer Group. Information regarding executive compensation will be set forth in the 20172020 Proxy Statement.

The comparison assumes the initial investment of $100 in the Company's common stock, the S&P 500 Index, the Peer Group, the S&P 400 Midcap Index and the Dow Jones Consumer Services Index on June 30, 20122015 and that dividends, if any, were reinvested.

The following table sets forth selected financial data derived from the Company's Consolidated Financial Statements in Part II, Item 8.8 of this Form 10-K. The table should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and Item 8, "Financial Statements and Supplementary Data", of this Report on Form 10-K.

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

Regis Corporation (RGS) franchises, owns franchises and operates beauty salons. As of June 30, 2017,2020, the Company-owned,Company franchised, owned or held ownership interests in 9,0086,923 worldwide locations. Our locations worldwide. The Company's locations consistconsisted of 8,919 company-owned6,841 system-wide North American and franchisedInternational salons, and 89in 82 locations in which we maintain a non-controlling ownership interest of less than 100%.100 percent. Each of the Company'sCompany’s salon concepts generally offer similar salon products and services and serve the mass market.services. As of June 30, 2020, we had approximately 9,000 corporate employees worldwide. See discussion within Part I, Item 1.

Beginning with the period ended September 30, 2017, the Company redefined its operating segments to reflect how the chief operating decision maker evaluates themall-based business and International segment were accounted for as a result of the increased focus on the franchise business.discontinued operations for all periods presented. Discontinued operations are discussed at the end of this section. See Note 3 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K for further discussion on this transaction.