The spa industry is a growing and highly lucrative business in the United States. Franchising has become a popular way for entrepreneurs to enter the market and take advantage of the growth and profitability of this industry. In this blog, we will explore the types of spa business franchises available in the U.S. today.
There are several types of spa franchises available in the U.S. today, and each type may differ in terms of the types of services they offer, the size and layout of the spa facility, the kinds of spa amenities offered, whether or not they offer a recurring monthly membership, the average revenue of the franchise spa business, their start-up costs, their royalty fees and eventually the value the business builds over time for resell considerations.
Let's take a closer look at each type of traditional spa franchise and then we will compare them to Glosshouz spa center franchise in service offerings, size, and finances.
Day Spa Franchises
The word “Spa” has origins of the meaning a mineral-rich water or hydrotherapy for wellness. In the traditional sense, a true day spa would have a water feature or service in its offerings. Today, day spas (and day spa franchise businesses) may or not have a water therapy but they typically offer wellness services such as massages, facials, manicures, pedicures, and body treatments. Day spa franchises are also commonly open seven days a week and cater to individuals who are looking for wellness service for relaxation and stress relief.
A day spa may range from 2,000 to 10,000 square feet, with some larger spas occupying even more space (although those extra large format spas are typically not offered as franchise businesses). The size of the spa will depend on the number of treatment rooms, relaxation areas, and other amenities that are included. Smaller day spas may have fewer treatment rooms and offer a more limited range of services, while larger spas may have many treatment rooms and offer a wide variety of services and amenities.
According to a report by Spa Executive, the top 20% of day spas in terms of size and revenue generated an average of $2.4 million in annual revenue in 2020. However, some large day spas can generate much more than this, with some high-end destination spas generating tens of millions of dollars in annual revenue!
Salon and Spa Franchises
Similar to a day spa, a salon and spa franchise might combine the services of a full hair salon with some traditional services of a day spa. They offer services such as haircuts, coloring, and styling, and perhaps facials, brow waxing, or other spa treatments. For the size, although it may vary, a typical salon and spa may be around 1500 to 2000 sqft. The average revenues can range from $400,000 to $1 million per year.
According to a 2021 report by IBISWorld, the median revenue of a day spa in the United States was approximately $600,000 in 2021. However, it is important to note that this figure may vary depending on the location, the size (probably in the 1200 - 2000 sqft range), and services offered by the day spa. Other factors such as competition, marketing strategies, and pricing may also impact the revenue of a day spa. Profitability of day spa franchises may depend on location, competition, operator experience, team expertise and other factors.
From what we’ve seen in the industry, salon and spa franchise offerings may include an initial franchise fee from $40K - $60K. The buildout of the spa may also range from $400K - $2 Million or more depending on the size and brand. The net income potential of the typical day spa or salon and spa may range on average from $90,000 to $300,000. Again, this depends on many factors and could be more or less.
Medical Spa Franchises
Medical spa franchises (medspas) focus on providing medical treatments and services such as Botox, fillers, laser hair removal, skin treatments, and other cosmetic procedures. These franchises are staffed by licensed medical professionals, but they are not necessarily owned by a physician. In fact, according to the AMSPA 2022 Medical Spa State of the Industry Report: 63% of all medspas in the U.S. are non-physician owned.
Medspas offer medical aesthetic services that are typically more expensive than those of a day spa. Medspas are usually not open 7 days a week, typically opne on weekdays but may or may not be open on Saturdays as well. Medical spa franchises can be highly profitable, with revenues ranging from $1 million to $4 million per year and the median revenue at around $1.9 million.
Though it may vary, a typical medspa size may be from 1500 to 2000 sqft. The investment range for a medspa might be from $400K up to $2 Million or more. The range of initial investment is typically due to size of the space as well as the energy devices that you may or may not buy initially (equipment such as lasers and body machines).
Franchise royalties for medspa businesses are typically around 7% plus brand fund around 2%, with the initial franchise fee of around $60,000 typical but could vary. Medspa profits could be from 10 - 25% dependin on how successful the operations among other factors.
Specialty Spa Service Franchises
Next we have a multitude of single-service studio type of “spas” that provide one or two types of treatments only. The single-service franchises in this category were pioneers in offering a loyalty program which entailed getting a specific service per month. This created a nice monthly recurring revenue for those type of franchise businesses.
Studio spa franchise businesses like these may include “Drybar”, “Blo Blow Dry Bar”, “European Wax Center”, “Waxing he City”, “Massage Envy”, “Hand & Stone”, “Elements Massage”, “Massage Heights”, “Amazing Lash”, “Deka Lash”, “Simplicity Laser Hair Removal”, “SuperCuts”, “Great Clips”, “Fantastic Sams”, and so on and so forth.
The benefit of these types of franchises is in their simplicity in service offering, and they have a low barrier to entry because of the fact that they are a lower investment cost to build. As a franchisee, the worry with these types of franchises might be that you are dependent upon the market favor for that one type of single service offering. What happens if that goes out of favor in the market or if your competitor moves next door?
As well, the revenue for a specialty service franchise like these mentioned is typically on the lower side and may range from $250K up to $1.3 Mil or so depending on location, size, and other factors.
Though it may vary, the single-service studio type of spa franchise business is typically about 1000 – 1200 sq ft. Some of these franchise businesses may be larger in high demand areas.
Initial franchise fees can range from $39,000 to $45,000 and franchise royalty might be around 5 - 6% with a 1 - 2% brand fund as well. Different brands may offer different fee structures, however this is what our research has shown.
Glosshouz Spa Center Franchise
Next, we’ll compare the above information to a Glosshouz Spa Center franchise which, as it turns out, draws features from the best of all three of those models.
Glosshouz was designed to take great care of guests and team and to create a “spa for the people”. We are the friendliest spa around, and we aim to make our guest feel the most welcome and invited so that they want to stay and be pampered all day with us! To do this we offer a variety of aesthetic and wellness services all in one place with convenient amenities and special brand features. Our trained service providers consist of a combination of Cosmetologists, Estheticians, Massage Therapists and Registered Nurses all working in harmony to take great care of our guest clients as a Glosshouz team.
We operate in a about a 3800 square foot space and as a data point, our volume of revenue at the Centennial, CO location (suburb of Denver) was $3.3 Million in 2022. Your revenue may be higher or lower than this depending on many factors such as location, market conditions, and other.
Glosshouz offers the BFF Savings Program™ recurring monthly membership which allows our guests to save their monthly BFF credit and use on anything they want to purchase at Glosshouz. In fact, 62% of our revenue is from our loyal BFF members. Our guest clients and members love the Glosshouz brand and the upscale modern comfort of the facility. They continually rave about the design and the BFF Savings Program™ that we provide. With the discounts, perks and benefits, the BFF Savings Program™ membership model allows a great value-proposition for the guest client while also allowing a stable business for the franchise business owner.
Glosshouz diverse revenue streams are generated by a number of activities at the spa including taking care of non-member clients that find us for the variety of services (more than 20 service categories) of full hair salon, specialty facials and skin treatments, nail services, massage therapy, body wraps, lasers, BOTOX, fillers, lashes, blowouts, brows, waxing, makeup application, body sculpting. We like to say we are a one-stop-shop for all things aesthetics and wellness. A benefit of this approach is that we are not 100% dependent on a single service type of business, and it is convenient for our guest clients which keeps them coming back for more.
Another of our favorite services to provide are spa parties and spa day packages (from 2.5 – 8 hrs long) for out-of-towners or for treating someone for a special occasion. We also have business groups in to enjoy services and parties together. Since our franchise includes obtaining a food service license and alcohol license this allows us to better extend hospitality to our guest clients and be able to attend to them and make sure they enjoy a memorable visit with us.
Per the Glosshouz 2023 FDD, the initial investment costs for starting a Glosshouz spa center can range from $885,000 - $1,359,000. One of the reasons for the difference of the initial start-up costs listed here includes the decision of whether to buy the energy devices initially or later when the business is more mature.
An entrepreneur wanting to get started with us will also require access to $300K in liquid capital and $1 Million of personal net worth to become a financially qualified candidate.
For comparison, the Glosshouz initial franchise fee is $45,000 and the Glosshouz spa center franchise royalty is 6% with 2% brand fund. Note that Item 19 of the Glosshouz 2023 FDD also gives a breakdown of the revenues, operating expenses, and the net operating income for the Centennial, CO location for your information.
How to Choose a Spa Franchise Brand
When considering which type of spa franchise brand to own, an entrepreneur should also consider two questions regarding their expected return on investment which is primarily dependent upon profitability:
How long will it take to recoup spa franchise initial investment costs? This comes down to how much profit will you make each year and how many years will it take before you have earned back the initial investment amount that it takes to start the franchise. This question is worth analyzing from brand to brand to forecast the best outcome.
What is your future exit strategy? If you do sell the business, then how much will it be worth when you sell it? Of course, this is dependent on a number of factors you cannot predict now such as market conditions, profitability of the business, brand value and more, but it is worth analyzing potentially how much you could sell the business for in the future.
As well, when you are deciding about a spa franchise business that is right for you, you should consider:
Do you identify with the spa franchise brand and would you enjoy owning a business of this type?
Do you qualify financially for the spa brand that you want to own – do you meet initial investment and net worth criteria?
Are there territories available close to you for the spa franchise brand that you want to own?
Will the spa franchise brand generate enough revenue for you to have the lifestyle that you desire?
Will you be able to get the cash flow you need by operating one franchise location, or is the franchise business format a lower generating business model? This might mean that you will need to think about how to get a future 3 - 5 locations to get the cash flow you desire.
Summary of Spa Franchise Comparisons
Overall, the financial performance of any spa franchise, including a Glosshouz spa center, may depend on various factors such as location, competition, services offered, amenities provided, brand affinity, membership offerings, pricing strategy and operational efficiency.
It is important to research each franchise, read and understand the company’s Franchise Disclosure Document. You will wna to analyze the financial information provided in the Item 19 (if it is published there) so that you will be better informed to be able to forecast and plan your business model for your franchise location.
Most importantly, you should get to know the franchisor and determine if they will be a great partner to work with as you build your franchise business.
Are you ready to take the first step to spa franchise business ownership? If so, get in touch. We are looking forward to meeting you!