FRANCHISE OF THE WEEK

Hand & Stone Massage

Fast Facts

Background

• HQ: Trevose, PA
• Founded in 2004, franchising since 2006
• Massage, facial, and waxing services

Location Trends

Franchise Fees

• Royalty: 6%
• Brand Fund: 1% 
• Franchise Fee: $49,500

Financial Overview

• The below table discloses information on 452 Hand & Stone franchise outlets that have been operating for 12 months or more as of the end of 2022

The Wolf’s Take 🍟

Massage franchises are nothing new. 

A few decades ago, a massage was largely considered a luxury service – something only the wealthy could afford regularly, while the majority of us would maybe be able to enjoy a massage on a vacation, a special occasion, etc.

Thanks to Massage Envy, the “middle market” of massage therapy was pioneered by them starting in 2003.

With over 1,000 units of Massage Envy operating today, massage therapy is now far more affordable for the average individual, and the business model has proved sustainable enough to survive through the GFC and covid-19.

And because of Massage Envy’s success, other franchises have carved out market share:

• Elements: 250+ locations
• MassageLuXe: 79 locations
• LaVida Massage: 49 locations
• Hand & Stone: 501+ locations

Hand & Stone is the clear #2 in this market, as unit counts have increased ~15% over the last year.

An Insider’s Perspective

I recently spoke to Eric Danver, who has an ~$80M Hand & Stone Portfolio across 58 units, and is looking to DOUBLE that in the next year.

Eric previously owned upwards of 50 Papa John’s before selling them, and had this to say when I asked him, “what attracted you to Hand & Stone?”

First is, the traffic that was still coming into the stores – the number of people coming into the spas that have never been in before. I’m talking about 70, 80, up to 120 people a week coming into spas for the first time that are 4 or 5 years old.

The other thing is the comparable sales growth because of the membership model – and what you can do as you continue to grow those memberships.

 A good year in the food business meant you increased sales 3% – 5%, but these guys were posting double digit growth in these units year after year after year. 

He then went on to say that managers are easier to get (relative to food), as it’s an industry both men and women are interested in getting into, and he sees margins in the 18-20% EBITDA range. 

“Much Better than my grocery store margins at Papa John’s towards the end” 😂

This tells you all you need to know about the economics of membership based model, and that while massage therapy isn’t hot and trendy – it’s been around long enough – but it is still a great business.

I remember speaking almost 18 months ago to a Massage Envy franchisee on my podcast, and they shared jaw-dropping information:

• Bought first location in 2008
• Reached profitability in 9 months
• EBITDA of roughly ~$500k/year on that first location since (they own 6 total stores)

That was likely a mix of a great market combined with the perfect timing of massage therapy reaching the masses, but as Eric has told us, he is still seeing tons of new faces every week at his locations.

Not All Sunshine And Rainbows ❌ 🌈

No business is perfect, and massage therapy has the same “problem” as every single small business in the country: LABOR!

In particular though, if you listen to Eric’s conversation with me and the Massage Envy group, they both discuss how getting quality massage therapists is a constraint to their businesses.

So much so, that both have started their own versions of massage schools, so that they can build and own a pipeline of the best talent – a natural funnel to one of their locations.

If you can crack that code, you have an edge, plain and simple.

Beyond that, the biggest hurdle is breaking into these systems, as the green field development is largely taken up.

Eric was able to transition from one franchise to another – it’s often a case of hustling and being scrappy to get you face in front of the key decision maker at these franchises. 

But once you’re in….you are IN!