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corresp

December 23, 2004

Mr. Robert S. Littlepage, Jr.

Accounting Branch Chief

United States Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549

Re: Regis Corporation

Form 10-K for the year ended June 30, 2004

File No. 0-11230

Dear Mr. Littlepage:

     We have received and reviewed your comment letter dated December 13, 2004 and
plan to address each of the comments in the manner discussed below. The main
heading of each of your comments, as well as the comment itself, is included
below, followed by Regis Corporation’s (Regis or the “Company”) response to
each comment.

Form 10-K for the fiscal year ended June 30, 2004

Income Statement, page 49

    1.

    In accordance with Rule 5-03 of Regulation S-X, revise your consolidated
statement of operations so that product sales related to company-owned
salons and product sales related to franchise revenues are combined into
one line item.

Response

Beginning with our interim period ending December 31, 2004, we will revise our
consolidated statement of operations so that product sales related to
company-owned salons and product sales related to franchise revenues are
combined into one line item.

Note 1 — Business Description and Summary of Significant Accounting Policies
Recent Accounting Pronouncements, page 56

    2.

    You indicate that franchise entities are not within the scope of this
interpretation because they are businesses as defined by FIN 46(R).
However, paragraph 4h of FIN 46(R) states four conditions that may exist
which would disallow an entity from being excluded from the provisions of
FIN 46(R) because the entity is a business. For the cases in which you
had a financing agreement with the franchisee, explain to us in detail how
you determined that none of the four conditions in paragraph 4h existed
and provide us with the evaluation that you

    prepared (as disclosed on page 56). When preparing your response, please
address how you considered within your evaluation the following franchisee
relationships:

    •

    On page 66, you indicate within your Future Minimum Lease Payments
table that you have reimbursable franchisee leases

    •

    On page 66, you disclose that the Company is the guarantor on
certain equipment lease agreements between the franchisee and the
leasing companies.

    •

    On page 68, you indicate that the Company has a franchise stock
purchase plan available to substantially all franchisee employees.

Response

Summary Conclusion

The Company believes that its franchising activities are not within the scope
of FIN 46(R), except in a few limited cases, based on the fact that its
franchising agreements are best described as “plain vanilla” and contain normal
ongoing royalties and “at market” sublease rentals. The Company requires new
franchisees to evidence and guarantee enough net worth that results in the
franchisee having enough subordinated financial support that the Company
clearly would not be the primary beneficiary should the provisions be applied
to its franchise agreements. The rationale for this conclusion, along with the
few exceptions identified by the Company, is outlined below.

Supporting Background

FIN 46(R) defines financial support as variable interests that will absorb some
or all of an entity’s expected losses. The Company has determined that the
following variable interests may exist in its franchising arrangements:

    •

    Ongoing royalty arrangements.

    •

    Sublease rental arrangements (i.e., reimbursable franchise leases).

    •

    Note receivable arrangements.

    •

    Guarantee arrangements.

The Company’s franchising agreement will normally only include ongoing
royalties and sublease rentals (i.e., reimbursable franchise leases). In very
limited cases, Regis will extend a financing offer to a franchisee in the form
of a note receivable. In a few select cases, Regis has guaranteed the
franchise entities’ equipment lease payments. However, the practice of
entering into guarantees of equipment lease payments was ceased by the Company
over two years ago.

Regis’ limited number of guarantees and note receivable arrangements are
generally with large franchisees with significant financial resources who
already own multiple salons. The arrangements are entered into to stimulate
growth, not to sustain current operations.

Paragraph 4h of FIN 46(R) states that an entity that is deemed to be a
business, as defined, is not within the scope of FIN 46(R) unless one or more
of four conditions are met. Conditions 4h(1) and 4h(4) do not merit
consideration in the Company’s analysis due to the nature of the relationships
being considered. Conditions 4h(2) and 4h(3) were considered by the Company,
as they impact whether a franchise entity is subject to the provisions of FIN
46(R). Conditions 4h(2) and 4h(3) are as follows:

    4h(2)

    Substantially all of the activities of the entity involve or
are conducted on behalf of the reporting enterprise and its related
parties.

    4h(3)

    The reporting enterprise and its related parties provide
more than half of the equity, subordinated debt or other forms of
subordinated financial support to the entity based on an analysis of
the fair values of the interests in the entity.

These conditions attempt to address (i) those entities that have narrow
business purposes because they were designed to complement the reporting
enterprise’s operating or financing activities or (ii) those situations where a
party has significant financial support with an entity that would imply the
party has effective control, rather than voting control, over an entity and
holds the residual risks and rewards of ownership. When assessing these
criteria, the Company first considered whether any related parties exist that
need to be considered. The Company then (i) qualitatively considered the
nature of a franchise entity’s activities and its decision making abilities and
(ii) assessed the nature of the Company’s variable interests with a franchise
entity in comparison to a franchisee’s variable interests to assess the
significance of the financial support provided by the Company and therefore the
risks and rewards of ownership held by Regis.

Related Parties and De Facto Agents

Paragraph 16 of FIN 46(R) addresses the concept of related parties and de facto
agents. The Company concluded that its franchisees do not meet the definition
of related parties as defined in SFAS 57, “Related Party Disclosures.” This
assessment was straightforward, as the Company does not franchise locations to
members of management or their immediate family members. Further, “de facto
agent” relationships do not exist based on the following assessments.

    •

    Franchisees are able to, and nearly always, obtain third party “build
out” financing from lending institutions. If Regis extends a
financing offer, which is rare, it is done not because the franchisee
is unable to finance the operations of the franchise entity without
the financial support of Regis, but because of the ease of a
franchisee entering into such a financial arrangement with its
franchisor. The Company understands, based on its general knowledge
of the franchisees’ net worth and the historical sales volumes
generated by the franchisee at his or her existing salons, that a
franchise entity has other avenues for obtaining financing and is not
dependant on offers extended by Regis.

    •

    Regis requires all franchisees to evidence a minimum net worth at
inception of a new franchise arrangement adequate to sustain the
upfront costs associated with establishing a salon, which history
demonstrates begins to positively cash flow within twelve months after
opening. The Company does not loan amounts to a franchisee to acquire
its interest in the franchised entity except for very rare cases.

    •

    Regis’ franchisees are not officers, employees or members of governing
boards of the Company nor are company personnel managers, officers or
members of the governing boards of the franchise entities.

    •

    The franchising of a location does not involve any arrangement where
the Company’s variable interest(s) are transferred to a service
provider or the like.

In conclusion, Regis’ franchisees and franchising activities do not involve
related parties or “de facto agents” of Regis, as defined by FIN 46 (R). The
“rare cases” noted above are further considered under the discussion below of
the variable interests associated with note receivable arrangements.

Franchise Entity Activities and Decision Making Abilities

The Company believes that its franchise entities are independent businesses
whose principle purpose is to provide a return to the franchisees. In return,
Regis earns an initial franchisee fee, ongoing product sales revenue and an
ongoing royalty. Regis also receives sublease income, but the amounts received
generally do not generate a profit for the Company, as the sublease rentals
normally equal the primary lease rentals (a few acquired subleases contain a 10
percent markup). Further, the franchise agreement clearly states that Regis
provides no guarantee, express or implied, as to the revenues, profits or
success of the franchise salon and that the business risks are largely
dependent upon the business abilities and participation of the franchisee.

Further, the Company considered whether it has the direct or indirect ability
to make decisions about a franchise entity’s activities through voting or
similar rights. The Company’s consideration took into account the guidance
provided by FSP FIN 46(R)-3, “Evaluating Whether as a Group the Holders of the
Equity Investment at Risk Lack the Direct or Indirect Ability to Make Decisions
about an Entity’s Activities through Voting Rights or Similar Rights under FASB
Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities,” in order to determine whether the decision-making,
permitted by the Company in its franchise arrangements, could result in one
concluding that the activities of the franchise entity involve or are conducted
on behalf of Regis. Because Regis’ standard franchising arrangement only
provides it the typical rights to protect its brands and not the right to “run”
the franchisee’s business, it is reasonable to conclude that the activities of
the franchisees are not conducted on behalf of the Company.

Specifically, Regis does not control the day-to-day operations of its
franchisees, including hiring and firing, establishing prices to charge for
products and services, business hours and capital expenditure decisions.
Regis’ standard franchise agreement does provide Regis the right to approve
location, suppliers and the sale of a franchise. However, the FSP permits
these and other rights in a franchising arrangement without it being considered
to provide the franchisor a controlling financial interest.

The Company also considered whether it maintains the obligation to absorb the
expected losses of the franchise entity or holds the right to receive the
expected residual returns. Through the franchise agreement, Regis is not
required to provide any additional capital contributions that may be necessary
to cover operating short falls. Further, Regis is only entitled to future
sublease income and royalty income from a standard franchisee arrangement.
Regis may also receive revenue from selling hair care products to the
franchisees although the franchisees can purchase approved products from other
sources. The franchisee holds the residual rights to the increase in the fair
value of the franchise entity through his or her residual interest in the
entity. No put or call arrangements exist. However, upon default by the
franchisee, Regis can commence operating a salon on that site, but is not
obligated to assume the franchise entity’s existing financial obligations.

In summary, the Company believes that substantially all of the inputs,
processes and output activities of a franchise entity are not conducted on its
behalf. As such, the Company concluded that it does not have arrangements with
its franchisees that would imply that the franchise entities’ activities are
performed substantially on Regis’ behalf.

Financial Support and Variable Interests

As indicated above, the nature of Regis’ financial support provided to a
franchise entity may consist of (i) ongoing royalty payments, (ii) at market
sublease rentals, associated with plentiful lease space availability, (iii)
note receivable arrangements (limited) and (iii) equipment lease guarantees
(limited). Each of these variable interests was considered in determining
whether a franchise entity was subject to the provisions of FIN 46(R).

Notes Receivable

Any variable interest entity’s liabilities may be variable interests because a
decrease in the fair value of an entity’s assets could be so great that all of
the liabilities would absorb that decrease. However, senior beneficial
interests and senior debt instruments with fixed interest rates or other fixed
returns normally would absorb little of the entity’s expected variability, and
therefore, a holder of only the most senior interests of a variable interest
entity likely would not be the primary beneficiary of that entity, unless the
subordinated interests of the variable interest entity are not large enough to
absorb the entity’s expected losses.

Regis’ very limited number of note receivable arrangements with its franchisees
are generally with large franchisees who already own multiple salons. The
arrangements are entered into to stimulate growth, not to sustain current
operations. Regis rarely, if ever, funds current operating losses and the
notes carry normal terms such that they do not provide Regis additional rights
to “run” the franchisee’s business. The notes carry only a fixed rate of
return and are collateralized by the franchisee’s business. The Company also
obtains a personal guarantee from the franchisee on the outstanding note
balance. As such, the Company does not believe its notes could result in it
being deemed the primarily beneficiary.

During the course of the FIN 46(R) implementation and associated analysis, the
Company identified certain arrangements with franchisees whereby the
outstanding note receivable balance warranted further consideration given the
significance of the note receivable balance. These limited cases are further
discussed below under the “Nonstandard Arrangements” caption.

Royalties and Sublease Rentals

The royalty arrangement with the Company’s franchise entities is variable based
on the actual sales of the franchisees. Further, Regis subleases the salons to
the majority of its franchisees to discourage franchisees from simply leaving
the system once they have established their walk-in customer base to their
businesses. That is, the sublease arrangement exists only to create an
economic disincentive to the franchisee from leaving the system by forcing them
to “walk-away” from their existing leasehold improvements and walk-in customer
base, if they were to leave the system. The sublease should be treated in a
manner similar to how a debt instrument is treated

since these are, in essence, financing arrangements. Because the actual
activities and the resulting fair value of an entity may affect the
collectability of both the royalty and sublease income, these arrangements were
considered by the Company when determining whether the franchise entities were
within the scope of FIN 46(R).

The Company believes its royalty and sublease arrangements are significantly
senior to interests that contain residual return rights. The residual rights
of return are held by the franchisees, as put and call arrangements do not
exist. Furthermore, Regis requires its franchisees to have a certain amount of
net worth to qualify to be a franchisee and that the franchisee must sign a
guarantee committing his or her net worth t