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24 Sep 2017 Spa Business Handbook
 

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Spa Business Handbook - Chain Reaction

Spa Franchises

From Spa Business Handbook 2016 issue 1
Chain Reaction


Spa franchises are taking the industry by storm. We take a closer look at the global market and ask which brands are selling the most, how and where they’re growing and who the newcomers are to watch out for

Jane Kitchen, Spa Business and Spa Opportunities

Now in their second decade, spa franchises have made their presence felt in a big way. Their accessibility and affordability have brought spa and wellness to a new audience – one that used to think of massage as a special treat rather than something that could be incorporated into day to day life.

By far the biggest market for franchising globally is the US, where momentum shows no sign of slowing and many brands are set for international expansion. In fact, entrepreneurs and investors are snapping them up faster than you can say ‘deep tissue’. But they are also gaining traction worldwide with niche opportunities opening up across the globe.

So who are the bigger players? And which are ramping up their franchise for roll outs and are worth keeping an eye on?

Massage Envy

With the largest network of massage and facial spas in the US, Massage Envy is the behemoth of global franchises, having led the trend when it first emerged on the scene 13 years ago.

Owned by Atlanta-based equity firm Roark Capital Group, the brand has more than 1,100 locations in 49 states and US$1bn (€876m, £692m) in earned sales.

In big news, the group has just revealed that its taking the first steps in international expansion, with the opening of a site in Sydney, Australia in mid May. A second site will follow a year later and Massage Envy has signed a 100-unit, 15-year deal with Australia-based Collective Wellness Group which already manages 450 Anytime Fitness clubs in the country.

In the US, typical Massage Envy monthly memberships are priced at US$59.99 (€53, £42) and include one massage, or a Murad facial for US$10 (€9, £7) more. Customers can roll over unused services and add family members at a discounted rate.

When setting up a franchise investments range from US$413,700- US$960,850 (€362,550-€842,050, £286,230-£664,780), depending on the real estate. This includes the initial franchise fee of US$45,000 (€39,440, £31,130). Additional locations taken by a single franchisee are US$35,000 (€30,670, £24,220).

Its plan on home turf is to continue its focus on growing strategically in small and large markets, as well as opening in Wyoming (its 50th state).

 



Massage Envy partners with Murad for facials
One to watch

Marilyn Monroe Spas

Marilyn Monroe Spas has 10 locations across four US states – including several in Hyatt hotels – but received a US$20m (€17m, £14m) investment from JCR Holdings last August, which will be used to fund domestic and global expansion.

The company named James M Lewis, a former Disney and Walmart executive, as CEO last year and as well as heading the expansion, Lewis is set to launch a national beauty school business for the company. Founded by spa industry veteran Niki T Kearn (née Bryan) and former Disney executive Allen R Weiss, Marilyn Monroe Spas was granted an exclusive licensing agreement in 2012 to operate the spa, salon, nail and health concept using Monroe’s name.

 



There are 10 franchises and a national beauty school will launch to support the expansion
 


There are 10 franchises and a national beauty school will launch to support the expansion
 
 


There are 10 franchises and a national beauty school will launch to support the expansion
 
ELEMENTS MASSAGE

Based in Colorado, Elements Massage is part of WellBiz Brands. Earlier this year, private equity firm KSL Capital Partners – the company that owns Miraval and ESPA – bought WellBiz for an undisclosed sum.

Elements Massage began franchising in 2006 and today has more than 200 studios in 36 states. In December, it opened its first international location in Vancouver, Canada.

The company offers just one service – massage – and offers The Elements Wellness Program, a month-to-month membership that has 75,000 members. Prices vary by location, but typically cost US$69 (€60, £48) for a 1-hour massage for members.

HAND & STONE

Offering 1-hour massages and 1-hour facials for US$49.99 (€44, £35), plus hair removal, Hand & Stone has over 250 locations across the US and Canada and was projected to hit US$188m (€165m, £130m) in sales in 2015 – 50.4 per cent up on 2014. The company plans to open another 60 locations in 2016.

Launched in 2004 by physical therapist John Marco, Hand & Stone is now owned by LA-based equity firm Levine Leichtman, along with franchising veteran Todd Leff, who headed up the US’s two largest auto transmission franchisors before moving into the spa world.

Hand & Stone has built its brand to serve the middle market, opening in locations like malls where consumers normally do their shopping.

The company recently partnered with soccer star Carli Lloyd, who will be featured in its marketing up until 2018.

 



US soccer star Carli Lloyd is the new face of Hand & Stone
 


The chain was projected to pass US$188m in sales in 2015
 

One to watch
YELO SPA


 

Nicolas Ronco
 

With licensed locations in New York, San Juan and São Paulo, YeloSpa is not a traditional franchisor, but Nicolas Ronco, CEO and founder, says he’s spent the past 12 months working on a model that’s fully franchisable.

Founded eight years ago in New York, Yelo is a model of high-end, city-centre spas offering innovative services such as the Yelocab nap treatment.

With membership starting at US$99 (€87, £69) for a 50-minute treatment (US$133 or €117/£92 without membership), its costs are almost double that of competitors – but Yelo isn’t competing on price. “We went where no other spas wanted to go,” says Ronco. “We have our own niche.”

Ronco is working with iFranchise to begin franchising this year and hopes to have five locations up and running by 2017. His overall goal is to have as many as 250 locations across the US in the next five to seven years.


"YeloSpa will begin franchising this year"

 



YeloSpa franchises will be high-end with services nearly twice as expensive as rivals
MASSAGE HEIGHTS

Launched in San Antonio, Texas in 2004 by husband and wife Wayne and Shane Evans, Massage Heights has more than 100 locations, with a goal of 35 new retreats – as they call them – in 2016. Long-term, the aim is to have 300 retreats in 20 states by the end of 2018.

“We have been growing rapidly and we are just in the beginning stages,” says Bret Franson, director of franchise development. “And I don’t see this slowing down.”

Monthly memberships start at US$49.99 (€46, £34), which includes a 1-hour massage and aromatherapy each month. Facial memberships start at US$59.99 (€55, £40) and the company has recently introduced 30-minute targeted massages as well.

Initial investment for franchisees is typically US$425,000 (€372,450, £294,040) including the fee, operating capital and opening costs.

Massage Heights is currently searching for a master franchisor in the UK, a country which it wants to target this year.

"We have been growing rapidly and we are just in the beginning stages" - Bret Franson

 



There are 100 Massage Heights in the US, with plans to add 35 more this year
 


Massage Heights is looking to grow internationally and the UK will be the first country it targets for growth
 
 


Massage Heights is looking to grow internationally and the UK will be the first country it targets for growth
 
WOODHOUSE DAY SPAS

Established by avid spa lover Jeni Garrett in Texas in 2001, the Woodhouse Day Spa differs from other franchises in the scope of its treatments – more than 70 – including facials; Vichy showers; Swedish, deep tissue or volcanic hot stone massages; manicures and pedicures.

With 46 locations in 18 states, Woodhouse also distinguishes itself by using organic, wild-crafted products; making a commitment to sustainability and using American-made products.

Woodhouse currently has 350 locations in the pipeline over the next decade and has ambitions to open 20-30 new locations annually.

 



Woodhouse’s franchise USP is its wide range of services –it offers over 70 treatments

MASSAGE GREEN SPA

 

Allie T Mallad
 

Launched in 2008, Massage Green Spa currently has 100 day spas in the US, almost 1,000 more in development and plans to launch in Canada, Europe and Australia.

“The spa industry will continue to climb, because making massage therapy affordable allows people to embrace the concept of incorporating it into their lifestyle,” says Allie T Mallad, chair and CEO.

Massage Green offers massages – in 1-hour, 1.5-hour and 2-hour increments – for stress management, pain management and functional mobility, with enhancements of aromatherapy or hot stones. Prices vary per location but start at US$39.95 (€37, £27) for a 1-hour full-body massage.

The company has a month-to-month membership and has differentiated itself by allowing up to four people in the same house to use it, and by using sustainable materials in its build-out, says Mallad.

Franchisees pay an initial US$232,000 (€203,310, £160,510) investment and then pay 6 per cent commission on services.


"Making massage therapy affordable allows people to embrace the concept of incorporating it into their lifestyle" - Allie T Mallad

 



Over 1,000 spas are in development

Dragonfly
China


 

Randal Eastman
 

Founded 12 years ago in Shanghai by Hong Kong-born celebrity hairstylist Georgie Yam and local Chinese business partner Eve Zhou, Dragonfly has 15 retreats, three of which are franchises.

The team later brought in Canadian business partner Randal Eastman and a fourth business partner, Grace Zhou. Yam has since passed the reins of operations to the other partners.

Eastman says the Dragonfly model is built around relaxation services that are appealing to both men and women. “It’s a lifestyle concept that is more accessible to a wider audience than a typical beauty-oriented day spa,” he explains.

Projected initial investment for a new shop in China – including construction, fit-out, decoration, supplies, print materials, staff training and franchise fees – is around CNY2m, (US$306,990, €269,030, £212,390).

“China is a different market,” says Eastman. “It’s full of spa offerings and very fragmented, but many franchise or chain operations have died or are struggling in recent times. I predict more chains growing in China as there is increasing consolidation in this sector.”

Eastman says Dragonfly is focused on expanding its business in China. It’s added traditional therapies such as Chinese massage, moxibustion and scraping to appeal to locals rather than catering just to its core customer base of expatriates.


"I predict more chains growing in China as there is increasing consolidation in this sector" - Randal Eastman

 



Dragonfly has 15 retreats, three of which are franchises
Siam Wellness Group

Thailand

Thailand’s well known spa chain operators, the Siam Wellness Group, is to expand internationally using franchises.

Established in 1998, Siam owns 23 spas in the country under the RarinJinda Wellness Spa, Let’s Relax Spa and Baan Suan Massage brands. It claims to have treated over 3 million clients, the majority of whom are global tourists, and last year the group had a total revenue of THB34m (US$962,860, €843,810, £666,170).

The group now plans to use a franchise model to grow the businesses outside Thailand with one site already open in China. “Each brand has its own character,” says Narun Wiwattanakrai, executive director. “People are becoming more brand users, thus the right brand will capture the right target market.”

Franchisees pay a fixed-sum for staff training, design consultation, SOP and installation of the operating system, and then a percentage of gross operating revenue for quality control and marketing.

Wiwattanakrai says Siam wants to target the Association of South-east Asian Network countries (ASEAN) comprising Thailand, Singapore, Indonesia, the Philippines, Brunei, Cambodia, Laos, Myanmar and Vietnam with its future franchises. The ASEAN has a pan-Asian economy and Siam aims to set up its first franchise store in the region this year and to penetrate all of the countries by 2018.

 



Wiwattanakrai says having strong brands will help Siam with franchising
 


The group has treated over 3 million clients since it was established in 1998
 
 


The group has treated over 3 million clients since it was established in 1998
 
One to watch - Sense of Touch

HONG KONG

With six locations, two of which are franchises, Hong Kong-based Sense of Touch has not focused on franchises so far, but CEO Neil Orvay says that’s likely to change – he has plans to open at least 20 more spas and is talking with a master franchisee in Vietnam.

The initial franchise fee is around US$50,000 (€43,820, £34,590), with ongoing payments of 5 per cent of turnover plus a 2 per cent marketing contribution. Franchisees receive support in marketing, training, menu development, sourcing staff, inventory and ordering and spa management system updates.

Sense of Touch’s main product partner is British brand Elemis and the franchises offer this along with Dermalogica.

 



CEO Neil Orvay
 


There are six day spas already and plans for at least 20 more
 
 


So far all spas are in Hong Kong, but Orvay is talking to a master franchisor in Vietnam
 
 


So far all spas are in Hong Kong, but Orvay is talking to a master franchisor in Vietnam
 
 


So far all spas are in Hong Kong, but Orvay is talking to a master franchisor in Vietnam
 

Endota
Australia


 

Melanie Gleeson
 

Based in Melbourne, and started by high school friends Melanie Gleeson and Belinda Fraser in 2000, Endota has 90 day spas across Australia. Fraser left the company in mid 2015 and new partners have since come on board.

With a predominantly female audience, the spa franchise recognises that women often put the needs of others before their own and encourages them to ‘be your best me’. The spas feature a signature, calming scent, as well as originally-composed music and its own-branded skincare line. Other suppliers include Dermalogica and HydroPeptide.

Costs of fitting out a spa are between AU$350,000 (US$256,940, €225,170, £177,770) and AU$450,000 (US$330,350, €289,500, £228,560). Franchisees attend Endota Spa introduction and education courses and the company also provides four days of in-spa training before opening. In addition, Endota Spa training schools offer refresher courses for product education and retail sales.


"Endota has 90 day spas across Australia"

 



Today it employs more than 1,000 people

Four Fountains
India


 

Anurag Kedia
 

Launched in 2007 in the tech-hub city of Pune, India, Four Fountains now has 30 franchisees in three cities across the country.

With backing from equity firm Fulcrum Ventures, the chain was set up by Anurag Kedia, Saurabh Garg and Sunil Rao, three business school graduates working as sales and consulting managers who were frustrated by their inability to afford luxury spas.

The team created Four Fountains in an effort to put the health benefits of spa therapies within reach of more people and their ambitious target is to have 300 spas in 10 major Indian cities over the next few years, says company director Kedia.

“Spa franchises continue to grow,” he explains. “In India, the market is just opening up – the penetration of spas and massages is in the low-single-digits, and hence there’s a long way to go from here.”

Currently every Four Fountains spa has a turnover of close to INR10m (US$150,000, €131,450, £103,780) annually.

Total cost of setting up a spa with Four Fountains is around INR6m (US$90,000, €78,870, £62,270), which includes cost for interiors, furniture, fixtures, security deposit and working capital.

Unlike many other franchise models, Four Fountains doesn’t have an up-front fee, but instead, charges a royalty on the total revenue franchisees generate.


"In India, the market is just opening up – the penetration of spas and massages is in the low-single-digits" - Anurag Kedia


One to watch - The Massage Company
UK


 

charlie thompson
 

The Massage Company debuted in the UK in April a 14-treatment room flagship location in Surrey, England.

This is a new venture from Charlie Thompson – former head of health and beauty for UK’s Virgin Active, and Elliot Walker – former MD of Murad UK. It will offer a membership package with monthly massages at £44.95 (US$65, €57).

“We’re building massage as a routine part of lifestyle,” says Thompson. “We’re changing the way that people view it in the UK and bringing it to the mainstream.”


"We’re building massage as a routine part of lifestyle" - charlie thompson

 



The first UK franchise opened in April and the plan is to create a national chain

Body’minute
France


Based in Paris, Body’minute got its start back in 1998 and has grown to include 400 beauty centres across Europe – the majority of which are in France. The company also has one location in Miami, USA and wants to launch in the UK, Italy, Spain, Belgium and Luxembourg.

These membership-based, female-only beauty salons offer waxing, facials, body treatments, relaxation and manicures – all without an appointment.

Body’minute has positioned itself as a low-price player, but had a turnover of around €100m (US$114m, £79m) in 2012. Membership is €9.90 (US$11, £8) per month with facial and body treatments ranging in price from €9.90 to €48 (US$55, £38).

Cost of a Body’minute franchise starts at €130,000 (US$148,340, £102,630) and there’s a fixed monthly fee per treatment room. Average day spa turnover is reported at €250,000 (US$285,270, £197,370) after two years.

It makes its own products and has a training school in Paris. IT, managerial and marketing training is provided as well.


"Body’minute got its start back in 1998 and has grown to include 400 beauty centres across Europe"


One to watch - LivNordic
Sweden


 

Anna-Cari Gund
 

Not a franchise per se, LivNordic is a spa concept available for licensing from Swedish-based spa consultancy Raison d’Etre, which launched in April 2015 as part of a deal with Scandinavia’s Viking Star Cruises. The concept has been inspired by nature and focuses on Nordic wellness, with an emphasis on hydrothermal areas and bathing rituals, as well as Swedish massage.

The first land-based LivNordic Spa & Wellness opened in January in the Cayan Tower in Dubai, and this April, a second LivNordic set sail on-board Viking Sea.

The licensing opportunity is mainly geared towards hotels, where the spa is a standalone brand, yet integrated into overall operations. The business model is a management and joint venture partnership between Raison d’Etre and the hotel/cruise ship owner.

The plan over the next five years is to have at least 15 LivNordic spas up and running, says Anna-Cari Gund, managing director of Raison d’Etre.

“We see a great demand for our Nordic lifestyle concept,” says Gund. “People all over the world are longing for a closer connection to nature.”


"We see a great demand for our Nordic lifestyle concept" - Anna-Cari Gund

 



The Nordic spa concept launched on the Viking Star cruise ship last year and has a focus on bathing rituals with a modern Scandinavian design

Originally published in Spa Business Handbook magazine 2016 issue 1

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