Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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FDD Talk 2013: Average Revenue and Adjusted Operating Results of Certain MassageLuXe Spas (2013 FDD)

by Franchise Chatter on May 27, 2013

in Franchise Earnings, Massage Franchise



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Highlights of MassageLuXe’s Item 19 Financial Performance Representations (2013 FDD)

  • The franchise offered is a massage therapy spa featuring massage services, together with related services, products, merchandise, and accessories.
  • This financial performance representation contains (1) the actual 2012 average annual revenue of all Spas (both franchised and affiliate-owned) in operation during the entire 2012 calendar year (Part I, below); and (2) the adjusted average 2012 operating results of certain affiliate-owned Spas (Part II, below).

Explanatory Notes for Part I – Actual 2012 Average Annual Revenue of Franchised and Affiliate-Owned MassageLuXe Spas

  • Massage Luxe Photo from Massage LuxeThe financial performance representation in this Part I contains the actual 2012 average annual revenue of 8 franchisee-owned Spas and 6 affiliate-owned Spas that were open during the entire 2012 calendar year.
  • These 14 Spas represent approximately 67% of the total 21 Spas open for business as of December 31, 2012. Spas that were not in operation for all of 2012 have been excluded from the financial performance representation as their partial year performance is not indicative of the performance a MassageLuXe Spa would reasonably expect to see over an entire calendar year.
  • MassageLuXe has also excluded 2 of its affiliate-owned Spas that were open for all of 2012 because their operations are materially different from the operation of a franchised Spa.
  • One of those excluded, affiliate-owned Spas does not operate in its own, stand-alone facility (it shares facilities with one of the franchisor’s affiliate-owned Tanco businesses), has no aestheticians on staff, and fewer rooms than a typical franchised outlet.
  • The other excluded, affiliate-owned Spa operated down the street from another affiliate-owned business that offered facial and waxing services during part of the 2012 year. Only after that business ceased operating did this affiliate-owned Spa offer the full compliment of services that a franchisee will offer.
  • MassageLuXe believes these operating differences make the financial performance of these 2 affiliate-owned outlets not indicative of the performance it would reasonably expect to see from an outlet that had the typical number of rooms, staff, and store layout, or the typical list of services being offered.
  • The Spas used to compile the information below have been in operation between 1 and 5 years. In addition, 9 of the 14 Spas are located in the St. Louis, Missouri metropolitan area and surrounding communities, where MassageLuXe has a more concentrated market presence.
  • These results are based on the sales data MassageLuXe collects from the computer system software used by its franchised and affiliate-owned Spas. MassageLuXe has not independently audited this information.
  • The actual average annual revenue numbers do not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from revenue to obtain net income or profit.

Explanatory Notes for Part II – Adjusted Average Operating Results of Certain Affiliate-Owned MassageLuXe Spas

  • The financial performance representation in this Part II contains the adjusted average 2012 operating results of 4 affiliate-owned Spas. These results are based on the internally-prepared financial statements of MassageLuXe’s affiliates and have not been audited. MassageLuXe has adjusted certain expenses for presentation purposes in order to assist you in understanding the net income experience from the operation of a Spa.
  • MassageLuXe has only included affiliate-owned Spas because it does not receive reliable expense reports for franchised Spas. MassageLuXe has only included information for affiliate-owned Spas that were operated by its affiliates for the entire 12 months during this period. These 4 Spas represent 57% of the 7 total affiliate-owned Spas open for business as of December 31, 2012, and 19% of the 21 total Spas open for business as of December 31, 2012.
  • MassageLuXe has also excluded 2 of its affiliate-owned Spas that were open for all of 2012 because their operations are materially different from the operation of a franchised Spa.
  • One of those excluded, affiliate-owned Spas does not operate in its own, stand-alone facility (it shares facilities with one of the franchisor’s affiliate-owned Tanco businesses), has no aestheticians on staff, and fewer rooms than a typical franchised outlet.
  • The other excluded, affiliate-owned Spa operated down the street from another affiliate-owned business that offered facial and waxing services during part of the 2012 year. Only after that business ceased operating did this affiliate-owned Spa offer the full compliment of services that a franchisee will offer.
  • MassageLuXe believes these operating differences make the financial performance of these 2 affiliate-owned outlets not indicative of the performance it would reasonably expect to see from an outlet that had the typical number of rooms, staff, and store layout, or the typical list of services being offered.
  • The Spas used to compile the information below have been in operation for an average of 3.67 years. In addition, all 6 of the Spas are located in the St. Louis, Missouri metropolitan area and surrounding communities, where MassageLuXe has a more concentrated market presence.
  • The expenses reflected below have been adjusted. They do not include certain expenses that were attributed to specific experiences of its affiliates and are either atypical of an outlet’s operation (such as legal fees incurred by one of its affiliates related to a dispute with its landlord) or are materially different expenses than what a typical franchise-owned outlet would experience.
  • For example, affiliates do not pay a royalty fee at the same rate paid by franchisees, and affiliates also share certain management overhead that would not be experienced by a franchisee, including district manager salaries, benefits, automobile expenses, and meal and entertainment expenses.
  • For these reasons, these sorts of expenses have not been included in calculating the average net income reported below. In addition, MassageLuXe has excluded depreciation expenses.
  • A new franchisee’s results are likely to differ from the results listed below since new Spas commonly experience lower revenues than Spas that have been operating for a number of years, such as those Spas included in the sample.

Part I – Actual 2012 Average Annual Revenue of Franchised and Affiliate-Owned MassageLuXe Spas



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