Regis Corp. has sold nearly 1,100 of its mall-based salons to Regent, a Los Angeles-based private equity group.
Regent’s affiliate, the Beautiful Group, will operate the salons as Regis’ largest franchises. About 9,800 stylists and managers of the salons will become employees of the Beautiful Group.
The move is a big step in the Edina-based company’s plans to move more toward a franchise model and to concentrate corporate ownership on value salons, including Supercuts.
The transaction includes 858 Regis Salons and MasterCuts locations. Regis is also selling 250 Regis and Supercuts salons in the United Kingdom. The U.S. portion of the sale has been finalized and the international portion of the sale is expected to close by the end of the month. Terms of the transaction were not disclosed.
“This transaction further clarifies our strategy by focusing our company-owned salon portfolio in North America on the value segment. At the same time, this outcome is consistent with our strategic imperative to accelerate the growth of our franchise portfolio,” President and CEO Hugh Sawyer said in the company’s release.
Regis in April hired Sawyer — a managing director of the Chicago-based Huron Consulting Group and a president or CEO of eight previous companies — to replace fired CEO Dan Hanrahan. In October 2016, Regis had engaged Huron Consulting to study an expanded franchise business model and expanded that relationship with a Huron subsidiary after hiring Sawyer as CEO.
“I am delighted that after a thoughtful diagnostic process we have reached a strategic conclusion that we believe will best serve our shareholders, employees and guests,” Sawyer said in the release.
Regis ended its fiscal year in June with 6,273 company-owned and 2,646 franchise-owned stores. After the deals are complete they will own approximately 5,100 salons and franchise 3,700.
Stephanie Wissink, an equity analyst for Jefferies, wrote in a research report that the sale of the mall-based salons, many of them underperforming, will allow Regis to concentrate more on the value category and accelerate the move to more franchisees.
Shares of Regis closed Tuesday at $15.25, down 4 cents.