REVENUE RECOGNITION

12 Months Ended

Jun. 30, 2025

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

REVENUE RECOGNITION:

Revenue Recognition and Deferred Revenue:

Revenue recognized over time

Royalty and advertising fund revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising fund revenues are billed and collected monthly in arrears. Advertising fund revenues and expenditures, which must be spent on marketing and related activities per the franchise agreements, are recorded on a gross basis within the Consolidated Statements of Operations. The treatment increases both the gross amount of reported revenue and expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Recognition of these fees is deferred until the salon opens and typically recognized over 10 years. Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees. The Company recognizes franchise rental income and expense when it is due to the landlord.

Revenue recognized at point of sale

Company-owned salon revenues are recognized at the time when the services are provided, or the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the guest. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized based on gift card balances with no activity over a 36-month basis. In the fourth quarter of fiscal year 2024, the Company revised its estimate related to the gift card breakage and recognized $1.3 million of non-cash gift card revenue. Product sales to franchisees are recorded at the time product is delivered to the franchisee.

Information about receivables, broker fees, and deferred revenue subject to the revenue recognition guidance is as follows:

	June 30, 2025		June 30, 2024		Balance Sheet Classification
	(Dollars in thousands)
Receivables from contracts with customers, net	$	7,378	$	6,887	Receivable, net
Broker fees	5,997		9,369		Other assets
Deferred revenue:
Current
Gift card liability	$	476	$	366	Accrued expenses
Deferred franchise fees open salons	3,832		4,738		Accrued expenses
Total current deferred revenue	$	4,308	$	5,104
Non-current
Deferred franchise fees unopened salons	$	1,475	$	1,783	Other non-current liabilities
Deferred franchise fees open salons	9,394		14,972		Other non-current liabilities
Total non-current deferred revenue	$	10,869	$	16,755

Receivables relate primarily to payments due for royalties, advertising fees, rent, franchise product sales, and sales of salon services and product paid by credit card. The receivables balance is presented net of an allowance for expected credit losses (i.e., doubtful accounts), related to receivables from franchisees. Management estimates the allowance based on the age of the receivable and creditworthiness of the franchisee. The following table is a rollforward of the allowance for credit losses for the periods indicated:

	Fiscal Years
	2025		2024
	(Dollars in thousands)
Balance at beginning of period	$	6,227	$	7,297
Provision for doubtful accounts (1)	3,040		538
Provision for franchisee rent (2)	790		1,538
Recoveries	(2,266)		47
Other	78		(75)
Write-offs	(2,854)		(3,118)
Balance at end of period	$	5,015	$	6,227

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(1)The provision for credit losses is recognized as general and administrative expense in the Consolidated Statements of Operations.

(2)The provision for franchisee rent is recognized as rent in the Consolidated Statements of Operations.

Broker fees are the costs associated with using external brokers to identify new franchisees. These fees are paid upon the signing of the franchise agreement and recognized as general and administrative expense over the term of the franchise agreement in the Consolidated Statements of Operations. The following table is a rollforward of the broker fee balance for the periods indicated:

	Fiscal Years
	2025		2024
	(Dollars in thousands)
Balance at beginning of period	$	9,369	$	12,471
Amortization	(2,313)		(2,749)
Write-offs	(1,059)		(353)
Balance at end of period	$	5,997	$	9,369

Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for fiscal years 2025, 2024, and 2023 was $6.8 million, $6.5 million, and $6.7 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of June 30, 2025, is as follows (in thousands):

2026	$	3,769
2027	3,311
2028	2,649
2029	2,190
2030	895
Thereafter	412
Total	$	13,226