In this exclusive Franchise Chatter FDD Talk post, you’ll learn the following:
Section I – Estimated initial investment (franchise costs) for a Facialworks franchise, based on Item 7 of the company’s 2024 FDD
Section II – Initial franchise fee, royalty fee, and marketing fee for a Facialworks franchise, based on Items 5 and 6 of the company’s 2024 FDD
Section III – Number of franchised and company-owned Facialworks outlets at the start of the year and the end of the year for 2021, 2022, and 2023, based on Item 20 of the company’s 2024 FDD
Section IV – News updates on the Facialworks franchise opportunity
Section V – Presentation and analysis of Facialworks’ financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2024 FDD, including information on the:
- 2023 gross sales, direct cost of goods sold, direct labor cost, direct gross profit, disclosed expenses, adjustments for franchise related expenses, and direct gross profit less disclosed expenses and adjustments for franchise related expenses for each of the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year
- 2023 facial bar service visits vs. treatment room service visits as a percentage of overall service visits for each of the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year
- 2023 total number of service visits and average number of service visits per month for each of the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year
- 2023 average gross sales per treatment room service visit, average gross sales per facial bar service visit, and total members as of December 31, 2023 for each of the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year
Section VI – Key ratios, comparables, computations, and analyses for the Facialworks franchise opportunity (exclusive content for Platinum subscribers)
Section I – Facialworks Franchise Costs
- Facialworks franchise costs, based on Item 7 of the company’s 2024 FDD:
- Initial Franchise Fee: $60,000
- Initial Training Fee: $10,000
- Travel Expenses to Corporate Training: $3,000 to $6,000
- Lease and Utility Deposits: $5,000 to $20,000
- Rent for 3 Months: $5,000 to $20,000
- Design, Architecture, and Engineering: $10,000 to $20,000
- Leasehold Improvements: $150,000 to $315,000
- Project Management: $0 to $20,000
- Furniture, Fixtures, and Equipment: $75,000 to $200,000
- Permits and Permit Management: $4,000 to $6,000
- Signage: $10,000 to $17,500
- Pre-Opening Sales Kit: $7,500 to $10,000
- Initial Inventory: $20,000 to $30,000
- Computer, Software, and Point of Sale System: $3,500 to $7,000
- Insurance Deposits for 3 Months: $600 to $1,200
- Initial Marketing Spend: $25,000 to $30,000
- Professional Fees and Business Permits: $4,000 to $6,000
- Additional Funds for 3 Months: $43,000 to $75,000
- Total Estimated Facialworks Franchise Costs: $435,600 to $853,700
Section II – Facialworks’ Initial Franchise Fee, Royalty Fee, and Marketing Fee
- Facialworks’ initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2024 FDD:
- Initial Franchise Fee: $60,000
- Royalty: 6% of Gross Sales, subject to Minimum Monthly Royalty Fee Requirement
- Brand Development Fund: up to 2% of Gross Sales, currently 1% of Gross Sales
- Franchisee Directed Local Marketing: not less than $1,000 per month
Section III – Number of Franchised and Company-Owned Facialworks Outlets
Franchised
2021
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- Outlets at the Start of the Year: 0
- Outlets at the End of the Year: 0
- Net Change: 0
2022
- Outlets at the Start of the Year: 0
- Outlets at the End of the Year: 0
- Net Change: 0
2023
- Outlets at the Start of the Year: 0
- Outlets at the End of the Year: 0
- Net Change: 0
Company-Owned
2021
- Outlets at the Start of the Year: 4
- Outlets at the End of the Year: 4
- Net Change: 0
2022
- Outlets at the Start of the Year: 4
- Outlets at the End of the Year: 4
- Net Change: 0
2023
- Outlets at the Start of the Year: 4
- Outlets at the End of the Year: 4
- Net Change: 0
Section IV – News Updates on the Facialworks Franchise
Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Facialworks Franchise (Item 19, 2024 FDD)
- During the 2022 and 2023 Calendar Years, Facialworks had a total of four Company Owned Outlets, and all four constitute Operational Company Owned Outlets.
- The table below provides a summary of Facialworks’ Operational Company Owned Outlets.
- Material financial and operational characteristics that are reasonably anticipated to differ from future operational franchise outlets include: (a) managerial skill and efficiency experienced by Facialworks’ Company Owned Outlets as a result of its extensively experienced management team; (b) brand recognition within the local markets in which Facialworks’ Company Owned Outlets operate; and (c) no obligation to pay ongoing monthly fees that a franchisee will pay to Facialworks, such as Royalty Fees and Brand Development Fund Fees.
Part 1 – Company Owned Outlet: Newport Beach Studio
Gross Sales by Category
- Memberships: $626,885 (37.6%)
- Products: $274,891 (16.5%)
- General: $766,115 (45.9%)
- Total Gross Sales: $1,667,891 (100.0%)
Less: Direct Cost of Goods Sold
- Retail and Service Product Sales: $218,724 (13.1%)
- Merchant Service Fees: $51,119 (3.1%)
- Total Direct Cost of Goods Sold: $269,843 (16.2%)
Less: Direct Labor Cost: $546,809 (32.8%)
Direct Gross Profit: $851,240 (51.0%)
Less Disclosed Expenses
- Rent: $169,876 (10.2%)
- Utilities: $4,727 (0.3%)
- Insurance: $4,800 (0.3%)
- Repairs and Maintenance: $8,685 (0.5%)
- Software and Technology: $7,586 (0.5%)
- Marketing: $5,186 (0.3%)
- Supplies: $9,673 (0.6%)
- Laundry Expenses: $3,558 (0.2%)
- Miscellaneous: $5,913 (0.4%)
Less: Adjustments for Franchise Related Expenses
- Royalty Fee: $100,073 (6.0%)
- Brand Development Fund Fee: $16,679 (1.0%)
- Technology Fee: $3,000 (0.2%)
- Local Marketing: $6,814 (0.4%)
Direct Gross Profit Less Disclosed Expenses and Adjustments for Franchise Related Expenses: $504,669 (30.3%)
Part 2 – Company Owned Outlet: Huntington Beach Studio
Gross Sales by Category
- Memberships: $284,110 (38.9%)
- Products: $115,551 (15.8%)
- General: $330,822 (45.3%)
- Total Gross Sales: $730,483 (100.0%)
Less: Direct Cost of Goods Sold
- Retail and Service Product Sales: $96,892 (13.3%)
- Merchant Service Fees: $21,248 (2.9%)
- Total Direct Cost of Goods Sold: $118,140 (16.2%)
Less: Direct Labor Cost: $263,980 (36.1%)
Direct Gross Profit: $348,363 (47.7%)
Less Disclosed Expenses:
- Rent: $146,890 (20.1%)
- Utilities: $7,114 (1.0%)
- Insurance: $4,800 (0.7%)
- Repairs and Maintenance: $5,348 (0.7%)
- Software and Technology: $7,408 (1.0%)
- Marketing: $1,249 (0.2%)
- Supplies: $5,616 (0.8%)
- Laundry Expenses: $11,408 (1.6%)
- Miscellaneous: $636 (0.1%)
Less: Adjustments for Franchise Related Expenses
- Royalty Fee: $43,829 (6.0%)
- Brand Development Fund Fee: $7,305 (1.0%)
- Technology Fee: $3,000 (0.4%)
- Local Marketing: $10,751 (1.5%)
Direct Gross Profit Less Disclosed Expenses and Adjustments for Franchise Related Expenses: $93,009 (12.7%)
Part 3 – Company Owned Outlet: Dana Point Studio
Gross Sales by Category
- Memberships: $209,745 (38.2%)
- Products: $73,087 (13.3%)
- General: $266,932 (48.6%)
- Total Gross Sales: $549,764 (100.0%)
Less: Direct Cost of Goods Sold
- Retail and Service Product Sales: $72,501 (13.2%)
- Merchant Service Fees: $16,677 (3.0%)
- Total Direct Cost of Goods Sold: $89,178 (16.2%)
Less: Direct Labor Cost: $224,231 (40.8%)
Direct Gross Profit: $236,356 (43.0%)
Less Disclosed Expenses:
- Rent: $86,312 (15.7%)
- Utilities: $8,375 (1.5%)
- Insurance: $4,800 (0.9%)
- Repairs and Maintenance: $5,709 (1.0%)
- Software and Technology: $7,622 (1.4%)
- Marketing: $38 (0.0%)
- Supplies: $3,838 (0.7%)
- Laundry Expenses: $0 (0.0%)
- Miscellaneous: $1,083 (0.2%)
Less: Adjustments for Franchise Related Expenses
- Royalty Fee: $32,986 (6.0%)
- Brand Development Fund Fee: $5,498 (1.0%)
- Technology Fee: $3,000 (0.5%)
- Local Marketing: $11,962 (2.2%)
Direct Gross Profit Less Disclosed Expenses and Adjustments for Franchise Related Expenses: $65,133 (11.8%)
Part 4 – Company Owned Outlet: Irvine Spectrum Studio
Gross Sales by Category
- Memberships: $284,901 (29.4%)
- Products: $144,974 (15.0%)
- General: $539,433 (55.7%)
- Total Gross Sales: $969,308 (100.0%)
Less: Direct Cost of Goods Sold
- Retail and Service Product Sales: $130,259 (13.4%)
- Merchant Service Fees: $28,420 (2.9%)
- Total Direct Cost of Goods Sold: $158,679 (16.4%)
Less: Direct Labor Cost: $370,575 (38.2%)
Direct Gross Profit: $440,054 (45.4%)
Less Disclosed Expenses:
- Rent: $177,829 (18.3%)
- Utilities: $8,460 (0.9%)
- Insurance: $4,800 (0.6%)
- Repairs and Maintenance: $4,186 (0.4%)
- Software and Technology: $7,278 (0.8%)
- Marketing: $1,164 (0.1%)
- Supplies: $11,313 (1.2%)
- Laundry Expenses: $0 (0.0%)
- Miscellaneous: $1,771 (0.2%)
Less: Adjustments for Franchise Related Expenses
- Royalty Fee: $58,158 (6.0%)
- Brand Development Fund Fee: $9,693 (1.0%)
- Technology Fee: $3,000 (0.3%)
- Local Marketing: $10,836 (1.1%)
Direct Gross Profit Less Disclosed Expenses and Adjustments for Franchise Related Expenses: $141,565 (14.6%)
Part 5 – Facial Bar vs. Treatment Room: Percentage of Overall Service Visits for 2023 Calendar Year
Newport Studio
- Facial Bar: 39.73%
- Treatment Room: 60.27%
Huntington Beach Studio
- Facial Bar: 31.79%
- Treatment Room: 68.21%
Dana Point Studio
- Facial Bar: 35.60%
- Treatment Room: 64.40%
Irvine Spectrum Studio
- Facial Bar: 26.37%
- Treatment Room: 73.63%
Average
- Facial Bar: 33.37%
- Treatment Room: 66.63%
Part 6 – Company Owned Outlet Summary: Service Visit Data for 2023 Calendar Year
Newport Studio
- Total Number of Service Visits: 9,311
- Average Number of Service Visits Per Month: 776
Huntington Beach Studio
- Total Number of Service Visits: 4,158
- Average Number of Service Visits Per Month: 347
Dana Point Studio
- Total Number of Service Visits: 3,358
- Average Number of Service Visits Per Month: 280
Irvine Spectrum Studio
- Total Number of Service Visits: 5,879
- Average Number of Service Visits Per Month: 490
Average
- Total Number of Service Visits: 5,676
- Average Number of Service Visits Per Month: 473
Part 7 – Company Owned Outlet Summary: Average Gross Sales Per Treatment Room Service Visit for 2023 Calendar Year
Average Gross Sales Per Treatment Room Service Visit
- Newport Beach: $226.87
- Huntington Beach: $227.51
- Dana Point: $220.56
- Irvine Spectrum: $214.84
- Average: $222.44
Part 8 – Company Owned Outlet Summary: Average Gross Sales Per Facial Bar Service Visit for 2023 Calendar Year
Average Gross Sales Per Facial Bar Service Visit
- Newport Beach: $81.65
- Huntington Beach: $82.95
- Dana Point: $80.16
- Irvine Spectrum: $86.86
- Average: $82.90
Part 9 – Company Owned Outlet Summary: Total Members as of December 31, 2023
Total Members as of December 31, 2023
- Newport Beach: 327
- Huntington Beach: 151
- Dana Point: 110
- Irvine Spectrum: 152
- Average: 185
- Some Outlets have earned this amount. Your individual results may differ. There is no assurance that you’ll earn as much.
Section VI – Facialworks Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️
- The total estimated initial investment necessary to begin operation of a Facialworks studio ranges from $435,600 to $853,700. Much of this gap is due to significant differences in the costs of Leasehold Improvements ($150,000 to $315,000); Furniture, Fixtures, and Equipment ($75,000 to $200,000); and Additional Funds for 3 Months ($43,000 to $75,000).
- Using the midpoint of the initial investment range ($644,650) and the 2023 average gross sales for the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year ($979,362), we arrive at an average sales-to-investment ratio of 1.5:1. Keep in mind that this ratio is based on the results of just 4 company-owned outlets (all located in California) and might not be representative of future system-wide performance once franchised outlets start reporting their results.
- For purposes of comparison, the average sales-to-investment ratio for Hand & Stone Massage and Facial Spa is 2:1, based on the midpoint of its initial investment range ($680,974.50) and the 2023 average gross sales for the 483 Hand & Stone Massage and Facial Spa franchised outlets that were open 12 months or more as of December 31, 2023 ($1,365,793).
- The average sales-to-investment ratio for Massage Envy is 1.3:1, based on the midpoint of its initial investment range ($810,275) and the 2023 average gross sales for the 188 smaller format Massage Envy businesses that were open and operational for at least 1 year as of December 31, 2023 ($1,081,957).
- The average gross sales for the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the applicable calendar year, increased by 18.4% year-over-year (from $827,488 in 2022 to $979,362 in 2023).
- 35.9% of the 2023 average gross sales for the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year, came from memberships; 15.5% came from products; and 48.6% came from general (i.e., approved services and products that relate to non-membership individual services, pre-paid service package sales, and gift card sales).
- 33.4% of the overall service visits for the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year were for services provided in the facial bar (i.e, open service area with individualized treatment chairs where approved services and products are provided to customers in a shared space setting), while 66.6% of the overall visits were for services provided in the treatment room (i.e., private room where approved services and products are provided to customers on an individual basis and in a private setting).
- The 2023 average number of service visits per month for the the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year, was 473; while their average total members as of December 31, 2023 was 185.
- The 2023 average gross sales per facial bar visit for the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year, was $82.90; while their 2023 average gross sales per treatment room visit was $222.44.
- By far the largest disclosed operating expense for the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year, was direct labor cost (35.9% of gross sales), with direct cost of goods sold (consisting of retail and service product sales, and merchant service fees) (16.2% of gross sales) and rent (14.8% of gross sales) coming in a distant second and third, respectively.
- The only other operating expenses that exceeded 2% of gross sales was the Royalty Fee (6% of gross sales).
- After deducting all disclosed operating expenses, including the Royalty Fee (6% of gross sales), Brand Development Fee (1% of gross sales), and local marketing (1% of gross sales), from gross sales, we arrive at a 2023 average direct gross profit less disclosed expenses and adjustments for franchise related expenses of 20.5% of gross sales, or $201,094 in dollar terms (vs. 20.7% of gross sales, or $171,146 in dollar terms, in 2022) for the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year. Again, keep in mind that this is based on the results of just 4 company-owned outlets (all located in California) and might not be representative of future system-wide performance once franchised outlets start reporting their results.
- Based on the total estimated initial investment range for a Facialworks studio ($435,600 to $853,700) and the 2023 average direct gross profit less disclosed expenses and adjustments for franchise related expenses for the 4 company-owned Facialworks outlets that were open and in operation prior to the commencement of the 2023 calendar year ($201,094), it can take the average franchisee from 2.2 to 4.2 years to recoup their initial investment. We’ll have a better estimate of the average investment payback period for franchisees once franchised outlets start reporting their results.
“Your website and you have been instrumental in finding this franchise opportunity and I am overwhelmingly grateful.” (David F., subscriber)
November 19, 2024 (Tuesday), 4:00 p.m. EST
GOOD NEWS: Franchise ownership is more attainable than you think, thanks to various funding options. Knowing what you can afford is crucial.
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