In the salon business, where talent comes and goes, Dennis Ratner, founder and chief executive of the Vienna, Va.-based Hair Cuttery chain of salons, said his big edge comes from training employees to become part of his company’s “family culture.”
But seven key employees, including one superstar, have left the company in the past several months for rival Regis Corp.
The 72-year-old entrepreneur said that his company is “under frontal attack” from Regis, saying his rival is trying to steal key employees, appropriate trade secrets and put him out of business, according to a lawsuit Ratner filed Monday in Fairfax County Circuit Court.
Regis “recently embarked on a desperate campaign to raid key Ratner management personnel that form Ratner’s essential infrastructure.”
“The objective of Regis’s campaign is to target and persuade key Ratner managers in Ratner’s most lucrative markets, including Maryland, to quit their jobs and work for Regis while making use of confidential information obtained during their employment by Ratner,” the suit said.
Publicly traded Regis, which declined to comment, runs the largest chain of hair salons in the world, with 9,556 locations, both company-owned and franchised. Its brands include SmartStyle, Supercuts, MasterCuts, Regis Salons, Cost Cutters, Sassoon Salon and Jean Louis David.
Ratner’s 38-page complaint is seeking $5 million in damages, a court order to stop Regis from hiring more Hair Cuttery employees and enforcement of a noncompete agreement that would prevent Ratner’s former star employee, Bobby Brown, an 11-year-veteran of Hair Cuttery, from continuing to work for Regis following his departure in August.
Ratner said Brown’s departure and Regis’s poaching of key employees, all managers, out of thousands who work at Hair Cuttery, has thrown his company into a somersault and has put its corporate playbook into a rival’s hands.
Brown could not be reached for comment.
“We have fear in our whole organization based on their activity,” Ratner said. “It’s incredible.” He said his employees are concerned. “They are thinking, ‘We are not solvent.’ They are afraid of their future. It’s created an unstable work environment where people are in fear of the unknown.”
Most noncompete agreements are enforceable only if they are tightly written and limited to a small geographic area and to a time frame of six months to one year.
“The courts generally are reluctant to enforce noncompetes because it can prevent individuals from earning a living,” said lawyer Lawrence Postol, who specializes in employment law at Seyfarth Shaw. “That said, when companies have a legitimate interest to protect, such as customer lists or confidential information, the courts will enforce a reasonably restricted noncompete.”
The tonsorial tempest began in April, when Regis began hiring key managers, known as district leaders, from Hair Cuttery’s Maryland salons. The seven managers, who each run multiple locations, collectively represent 166 years of employment with Ratner.
The complaint accuses Brown of taking “crucial knowledge and expertise in how to employ Ratner’s business strategies for successfully running its chain of hair salons and training its employees; he also took Ratner’s confidential trade secret documents from a Ratner-owned and password-protected laptop once he began his employment with Regis,” according to the complaint.
“We believe they have our entire playbook,” Ratner said.
Like Ratner’s Hair Cuttery, Regis began as a family operation. The Kunin family started Regis in 1922 in Minnesota as a chain of salons located in department stores. Myron Kunin, son of the founders, bought the chain in the 1950s and renamed it Regis Corp.
He bought up regional salon chains and focused on shopping mall locations. Kunin took the company public in 1991 and stepped aside as chief executive a few years later. He stayed on its board of directors until 2008.
Regis has grown into an international firm with a market capitalization of $673 million. The company lost $2.6 million in the quarter ending June 30 on quarterly revenue of $462.9 million.
The company’s share price has ranged from $10.60 to $17.91 in the past year. Shares closed at $12.72 on Monday.
Ratner is chief executive of Ratner Companies, which he co-founded with his ex-wife, Ann. Ratner Cos. has 11,747 employees across several brands built around hair care. In addition to his flagship Hair Cuttery, which has more than $400 million in annual revenue, the Ratners own the upscale Salon Cielo and Spa, and the midrange Bubbles Salons. The company also owns the Cibu hair-products line.
Ratner is widely known around Washington, having mentored several entrepreneurs. His other investments include Zengo Cycle, a small chain of local spin cycle exercise clubs.
The Ratners, who refer to themselves as stylists, launched Hair Cuttery in West Springfield, Va., in 1974 with $5,000. They helped pioneer the concept that allows clients to walk in without an appointment.
“I’m a native Washingtonian,” Ratner said. “I went through the Washington, D.C., public school system. I am self-educated. I’ve learned from the college of hard knocks.”
In a city where many iconic local businesses have fallen by the wayside, including Garfinckel’s, Hecht’s and Woodward & Lothrop, Ratner said he will not stand by without a fight.
“I’m one of the only family-owned operations left,” Ratner said. “I’m the last man standing, and I’m not going to let this happen.”