FDD Talk: What You Need to Know About the Seva Beauty Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Seva Beauty franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Seva Beauty franchise, based on Item 7 of the company’s 2017 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Seva Beauty franchise, based on Items 5 and 6 of the company’s 2017 FDD

• Section IV – Presentation and analysis of Seva Beauty’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:

• 2016 average service sales, product sales, labor expenses, occupancy costs, product costs, continuing franchise fees, advertising, and operating cash flow for the 46 Seva Express Studios which, at a minimum, were open for two full calendar years ending December 31, 2016, and remained open as of the date of the 2017 Disclosure Document

• 2016 average service sales, product sales, labor expenses, occupancy costs, product costs, continuing franchise fees, advertising, and operating cash flow for the 33 Seva Express Studios which, at a minimum, were open for two full calendar years ending December 31, 2016, remained open as of the date of the 2017 Disclosure Document, and are owned by franchisees who each own more than one Studio

Section I – Background Information

11 Things You Need to Know About the Seva Beauty Franchise

Group of Franchisees File Lawsuit Against Company

1.  In early April, a group of 15 Seva Beauty franchisees filed a lawsuit against Seva Beauty LLC and top executives, claiming the company lied to them about wide profit margins, an absence of competition, and light workloads. The franchisees said that these deceptions have cost them $2.6 million. According to the franchisees, top executives left out key information from its financial disclosure document and only showed them information from the company’s most profitable location. They also allege that Seva Beauty lied about how hands-on the franchisees need to be and the requirement to hire at least four licensed aestheticians.

2.  They added that Seva promised them they would see profits exceeding $90,000 after two years, but the franchisees say reportedly successful businesses saw only $36,000 after three years. Contrary to what Seva promised the franchisees, they claim competing threading salons opened up nearby, sometimes even in the same Walmart and that the competition was stacked against them because Seva overstated how easy it would be to hire and train experienced threaders.

3.  The complaint also says that in order for franchisees to be successful, they need to actually be at the spas at least 40 hours a week, which conflicts with Seva’s promises that managers would be able to handle running the spas without the owners. The franchisees filed the claims under Washington, Minnesota, Illinois, and Michigan franchise laws, seeking attorneys’ fees, damages, and return of their losses incurred due to Seva’s alleged lies.

New Locations

4.  Since Seva Beauty began franchising in 2010, the company has continued to grow nationally. Throughout 2017, the brand has opened several new locations across the U.S., including studios in Avondale, Arizona; Spring, Texas; Bakersville, California; and Wilkes Barre, Pennsylvania.

5.  The Avondale location is the brand’s newest and opened sometime in mid-August. The Spring, Texas studio is owned and operated by Patrick Fry, who already owns another Seva Beauty franchise. At the end of July, franchisee Sarbjit Kaur opened a Seva Beauty studio in Valley Plaza Mall in Bakersville. Earlier in July, franchisee Prem Bansal selected Wilkes Barre as the location for his next Seva Beauty store.

6.  In addition to new locations, Seva Beauty has also awarded new franchises to existing franchisees including Nilam Patel, who will be opening his third location sometime in the future.

Wide Range of Hair Removal and Beauty Services

7.  Although Seva Beauty started out only offering eyebrow threading, the brand now offers a wide range of beauty services. In addition to brow shaping through threading, Seva offers traditional waxing on facial and body hair. The brand’s other services include lash extensions, flash facials, brow tinting, makeup application, lash boosts, facial boosts, and deluxe facials. Seva Beauty locations also sell skincare and body care products, makeup, and beauty accessories.

8.  According to the company’s website, membership packages in 3, 6, and 12-month increments will be available soon.

Company History

9.  Seva Beauty was founded in 2008 by Vas and Sonal Maniatis in Indianapolis, Indiana. The company was initially called Simply Eyebrows and Vas Maniatis got the idea to start his own eyebrow threading business after accompanying his then-girlfriend Sonal to get her eyebrows threaded. Maniatis liked the cultural roots of threading but did not like how open and public eyebrow threading kiosks in malls were.

10.  Maniatis developed a relationship with Walmart and began opening Simply Eyebrows in Walmart locations, but expanded to other retailers as well. Sometime between 2009 and 2010, Maniatis sold the Simply Eyebrows concept outside of Walmart and changed the name of the threading studios within the retailer to Seva Beauty (Seva means “selfless service” in Sanskrit).

10.  Seva Beauty started franchising in 2010 exclusively within Walmart stores, and expanded its services to include waxing, nail, and spa services. Today, there are over 187 Seva Beauty locations across the United States and Puerto Rico.

Entrepreneur’s Franchise 500

11.  Seva Beauty has appeared on Entrepreneur’s annual Franchise 500 list four times since it began franchising in 2010. The company’s highest rank was No. 148 in 2017, while its lowest rank was No. 429 in 2015.

Section II – Estimated Costs

• Please click here for detailed estimates of Seva Beauty franchise costs, based on Item 7 of the company’s 2017 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Seva Beauty’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

Part 1 – Average Revenues, Expenses, and Operating Cash Flow of Certain Seva Studios

• The following Part 1 contains the average total revenues, expenses, and operating cash flow from 46 Express Studios which, at a minimum, were open for two full calendar years ending December 31, 2016, and remain open as of the date of the Disclosure Document (“Item 19 Studios”).

• There were a total of 59 Express Studios open for the entire 2016 calendar year, and all remain open as of the date of the Disclosure Document, but 13 of the 59 Studios did not submit sufficient and reliable sales data and were therefore excluded from this Section.

• The information contained in this Item 19 relates solely to historical data and was taken from actual Item 19 Studios’ operating statements.

• For the purposes of these Item 19 disclosures, unless otherwise indicated, “total revenues” was calculated in the same manner as “Gross Sales.”

• For purposes of the table below, (a) Year 2 refers to a subset of 12 Item 19 Studios which were in operation for at least 2 full calendar years prior to December 31, 2016; (b) Year 3 refers to a subset of 28 Item 19 Studios which were in operation for at least 3 full calendar years prior to December 31, 2016; and (c) Year 4+ refers to a subset of 6 Item 19 Studios which were in operation for at least 4 full calendar years prior to December 31, 2016.

• Please note this Item 19 only contains information from Express Studios. There were not any Spa Studios that were in operation for a full calendar year prior to December 31, 2016.

Year 2

Revenues