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

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

• Section I – Background information on the Spavia Day Spa franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Spavia Day Spa 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 Spavia Day Spa franchise, based on Items 5 and 6 of the company’s 2017 FDD

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

• 2016 median, high, and low average monthly gross sales for (i) the 3 Day Spas that were open and operating for more than 36 months as of December 31, 2016 (each, a “Mature Location”); (ii) the 5 franchised Day Spas that were open between 13 and 36 months as of December 31, 2016; and (iii) the 6 franchised Day Spas that were open between 6 and 12 months as of December 31, 2016

• 2016 actual gross sales, cost of good sold, gross profit, occupancy costs, other reported operating expenses, royalty, and operating income for the 2 Mature Locations that provided Spavia with the appropriate financial statements or information necessary to detail such costs and expenses

Section I – Background Information

10 Things You Need to Know About the Spavia Day Spa Franchise

Newest Location

1.  Spavia Day Spa continues to open new locations across the country and one of its newest locations opened in the Bridge Park neighborhood of Dublin, Ohio in October 2017. Craig Andrew, co-owner of the new Spavia location, said, “We chose Bridge Park for our first Spavia in the Columbus metropolitan area because it is the most dynamic area with Dublin and its surrounding communities.”

2.  Andrew also talked about participating in local charity events, such as the event at the Bridgewater facility in Powell that was put on by Sweat Local and benefited Ronald McDonald House Charities. He added that Spavia Bridge Park was going to participate in a 5K and 10K race called “Run Like A Girl,” which benefits the American Heart Association’s Go Red for Women movement to end heart disease and stroke in women.

Looking for Franchisees in Salt Lake City

3.  As Spavia Day Spa continues to expand across the U.S., the company has been looking for prospective franchisees in target areas such as Salt Lake City, Utah. In early January 2018, Spavia announced that it was looking for entrepreneurs in the Salt Lake City area who have some management/leadership experience in just about any industry (spa/salon experience isn’t required), about $500,000 in net worth, $120,000 in available capital, and the drive to create a successful entrepreneurial venture.

4.  Spavia cited some statistics that make Salt Lake City a desirable area:

• Visitors spend $7.8 billion annually throughout Utah.
• Salt Lake City households have a “real median income” of $65,792 (most recent numbers are from 2015), which is 19 percent higher than the real median income of households across the country ($55,775).
• More disposable income means that Salt Lake City residents have more money to spend on food, shopping, culture, and personal pampering such as spas.

5.  Spavia is also seeking franchisees in Minneapolis, Minnesota; Orlando, Florida; and Dallas, Texas for similar reasons.

Offers Environmentally-Friendly Services and Products

6.  Spavia Day Spa offers products and services that are geared towards giving natural, environmentally-friendly solutions that improve its customers’ health. The company prefers suppliers who sell products that are organic, minimize toxicity, and reduce packaging waste or have any other environmentally-preferable attributes, with minimal sacrifice to price and delivery requirements.

7.  Spavia also uses products that are paraben-free and as organic and natural as possible. Some of the brand’s green efforts include:

• Not using paper hand towels;
• Recycling;
• Using biodegradable cleaning products and laundry detergents;
• Not using Styrofoam cups and plastic water bottles;
• Buying locally made products;
• Using only natural ingredients in its skin and body care products;
• Using 100% mineral make-up without fillers and synthetics; and
• Using high efficiency washers and dryers.

Company History

8.  Spavia Day Spa was founded in 2005 by Allison and Marty Langenderfer in Ann Arbor, Michigan. The Langenderfers wanted to start a spa business that offered premium services at an affordable price. The brand has its own “spalosophy,” which aims to change the perception that spas are only a costly luxury. Spavia believes that its services are for anyone who wants to relax, escape, and thrive.

9.  The company started franchising in 2007 and has purposely grown slowly. According to Spavia, “it’s been about a journey, not a race, to build a legacy and reputation of being the best, delivering the best and creating a Spavia culture that [it is] proud of each and every day.” The brand’s growth has picked up in recent years and today, there are over 25 Spavia locations across the United States.

Entrepreneur’s Franchise 500

10.  Spavia Day Spa has ranked once on Entrepreneur’s annual Franchise 500 list at No. 237 in
2017.

Section II – Estimated Costs

• Please click here for detailed estimates of Spavia Day Spa 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 Spavia Day Spa’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 of this Item 19 discloses the average monthly revenue generated by the following subsets of Day Spas that are operated in a substantially similar manner to the Franchised Business being offered in the Disclosure Document: (i) the 3 Day Spas that were open and operating for more than 36 months as of December 31, 2016 (each, a “Mature Location”); (ii) the 5 franchised Day Spas that were open between 13 and 36 months as of December 31, 2016; and (iii) the 6 franchised Day Spas that were open between 6 and 12 months as of December 31, 2016.

• For each of the foregoing 3 groups of Day Spas, Spavia will disclose the median, high, and low average monthly Gross Sales generated by the Day Spas in that group over the 2016 calendar year (the “Measurement Period”).

• In Part 1, be advised that the average monthly Gross Sales for each individual Day Spa was calculated by taking the total Gross Sales of that Day Spa over the Measurement Period and dividing that figure by the total number of calendar months that Day Spa was open and operating during the Measurement Period.

• Part 2 of this Item 19 discloses certain of the operating costs and expenses incurred by the 2 Mature Locations over the Measurement Period. In Part 2, Spavia excluded: (i) 1 Mature Location that did not provide Spavia with its expenses over the entire Measurement Period; and (ii) the other Day Spas disclosed in Part 1 because these other Day Spas did not provide Spavia with their respective operating cost and expense information in the format Spavia required for disclosure in this Item.

Part 1 – Average Monthly Gross Sales Information for 3 Groups of Day Spas (Grouped Based on Number of Months Open as of December 31, 2016)

• The chart below excludes 5 Day Spas that were not open and operating for at least 6 months as of December 31, 2016.

Number of Months in Operation as of December 31, 2016:  Over 36