And Cut! But is it a Wrap?

High Street Chain Supercuts, owned by Regis has asked for some help from the landlords of its shops for free rent as part of a rescue plan. According to the Guardian “ The group has asked for rent reductions of 25-100% at 110 of its 220 salons. Regis warned that if the plan is not approved by creditors then it was likely it would enter administration.”

Grant Thornton are assisting the company with a procedure known as a Company Voluntary Arrangement. 

Jackie Lang, the managing director of Regis UK, said: “This action has been taken to restructure our costs to ultimately enable reinvestment into the business to improve our digital platforms and our expertise in-salon. If successful, over 90% of our creditors will be unaffected.”

But why are the company in so much trouble. Everybody needs a haircut and you can’t get this on the Internet, so the company can hardly be a victim of the so called “Amazon Effect” Is it because their expenses are too high in the first place? Your local independent barber doesn’t seem to be having the same problems. Is it because most of these shops operate from shopping precincts where the surrounding units are now empty so the passing trade has dropped?

The Guardian says “The CVA is the latest of a string of similar cost-cutting plans in the struggling retail sector that have led to hundreds of store closures across UK high streets and shopping centres this year. Carpetright, Mothercare and New Look have used CVAs to get rid of unwanted stores, while Toys R Us and House of Fraser tried CVAs before going into administration.”

The rescue operation should work if the company and those advising them have their sums right. Although the Landlords will not find the request particularly palatable they won’t have much of an option in what is very much a Tenants market. But this is simply a short term plan. 

All tenants no matter if they are a small independent or a large enterprise should carefully consider their business plan when entering into new leases in the first place and ensure they get good legal advice when considering the term of the lease, the rent and rent reviews and any break clauses as an exit strategy to ensure the business can deal with a trade downturn.

It seems supercuts may soon be trimming salons as well as trimming hair!