FDD Talk: Hand & Stone Massage and Facial Spa Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

• Section I – Background information on the Hand & Stone Massage and Facial Spa franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Hand & Stone Massage and Facial Spa franchise, based on Item 7 of the company’s 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Hand & Stone Massage and Facial Spa franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Hand & Stone Massage and Facial Spa outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of Hand & Stone Massage and Facial Spa’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 average gross sales and number of members for the 280 Hand & Stone Massage and Facial Spa franchised businesses that were open 24 months or more as of December 31, 2018

• 2018 annual gross sales and number of members for the one subsidiary-owned Hand & Stone Massage and Facial Spa franchised business open more than 24 months as of December 31, 2018

• 2018 average gross sales and number of members for the 44 Hand & Stone Massage and Facial Spa franchised businesses that were open between 12 and 24 months as of December 31, 2018

• 2018 average gross sales for the 324 Hand & Stone Massage & Facial Spa franchised businesses that were open greater than 12 months as of December 31, 2018, by year of opening (2008 to 2017)

• 2018 average facial sales for the 324 Hand and Stone Massage & Facial Spa franchised businesses that were open greater than 12 months as of December 31, 2018, by year of opening (2008 to 2017)

• 2018 annual facial sales for the one subsidiary-owned Hand & Stone Massage and Facial Spa franchised business that opened in 2010

• 2018 average size, first year gross rent, and tenant improvement allowance for the 48 Hand & Stone Massage and Facial Spa franchised businesses that opened in 2018

Section I – Background Information

17 Things You Need to Know About the Hand & Stone Massage and Facial Spa Franchise

Upgrades to Zenoti Software to Leverage the Cloud

1.  In late August 2019, Zenoti Software, the leading cloud-based platform for the spa, salon, and med spa industry, announced it had been selected by Hand & Stone Massage and Facial Spa as the company’s new technology partner for POS, digital marketing, and analytics. Hand & Stone is growing rapidly, and sought a solutions provider to support its changing needs – and those of its customers.

2.  The company was recently named to the top 10 of Forbes’ 2019 “Best Franchises to Buy,” and announced plans to add more than 60 locations and over 1,800 jobs in the year ahead. Zenoti will now provide Hand and Stone the competitive tools the company needs to meet the changing landscape of customer expectations.

3.  Joe Brauer, chief technology officer of Hand & Stone, said, “We’re excited to partner with Zenoti to offer a highly personalized and modern spa experience for our guests and members. We started our evaluation of software providers knowing we needed a proven cloud-based system that could reliably support our network of spa locations. Zenoti stood out as the most robust platform, and as a partner that will lead with innovation for years to come. Their solution provides a one-stop business management tool capable of supporting our business’s custom workflows, for the individually tailored spa experience that our guests have come to expect.”

4.  Zenoti provides businesses with a robust, cloud-based platform focused on increasing revenue and enhancing the guest experience. The system offers powerful guest engagement and modern, mobile check-in and check-out experiences through its Zenoti GO application by streamlining the process for both guests and staff; a robust, all-in-one system with an intuitive user interface that allows franchise owners to fully leverage technology across their business; and equips franchise owners with fully integrated marketing, loyalty management, inventory management, and more solutions.

5.  According to Sudheer Koneru, CEO of Zenoti, “We are thrilled to welcome Hand & Stone to the Zenoti community. As guest expectations evolve, spa operators will need to make pivotal changes in their guest engagement strategies. With Hand & Stone, we’ve found a partner that is able to fully leverage our solution in order to meet the changing demands of customers. We will remain focused on solving the needs of the largest businesses in the industry as the industry goes through a transformation.”

Appoints New Chief Technology Officer

6.  At the beginning of February 2019, Hand & Stone Massage and Facial Spa announced the appointment of Joe Brauer as chief technology officer. Brauer now oversees the development and execution of the company’s long-term technology strategy and roadmap, including the adoption of a new POS platform and customer management tools.

7.  Hand & Stone supports all technology requirements for over 400 franchised locations nationwide performing over three million consumer services annually. In addition, the new position has responsibility for ongoing management of the brand’s website, networking, infrastructure, security, and consumer privacy.

8.  For the past 13 years, Brauer was vice president of applications systems at Bon-Ton, a 267-unit big box retail chain with approximately $2.67 billion in sales in 2016. Brauer’s most recent focus was in the areas of ecommerce and omnichannel retail systems. He also led consumer facing applications such as mobile ordering. Previous major implementations included CRM applications, POS, and other cross-functional projects.

9.  Todd Leff, president and CEO of Hand & Stone Massage and Facial Spa, said, “We are very excited to have someone with Joe Brauer’s retail background join our corporate team. Joe’s long tenure at Bon-Ton stores, leading over 65 IT professionals, has prepared him to be the Chief Technology Officer for our fast growing Company. His insights and experience in bringing new applications and technology to the consumer experience will assure that Hand & Stone remains at the forefront of the industry.”

Donates Over 2,500 Backpacks Full of Food With the Help of Blessings in a Backpack

10.  Near the end of October 2019, during its annual company-wide conference, Hand & Stone Massage and Facial Spa partnered with Blessings in a Backpack for the third year to aid in the fight against child hunger. Blessings in a Backpack is a non-profit organization that mobilizes communities, individuals, and resources to provide food on the weekends for elementary school children across America who might otherwise go hungry.

11.  According to Bob McQuillan, vice president of franchise development for Hand & Stone, “At Hand & Stone, we recognize the importance of giving back. It’s part of our core values, and we dedicate a portion of our annual conference to showcase that commitment each year. This year, we were so excited to partner with Blessings in a Backpack again and focus on fighting the crisis of hunger for children in the United States.”

12.  The Hand & Stone 2019 Fall Conference took place on October 24 at the Gaylord Opryland Resort and Convention Center in Nashville, Tennessee. The corporate team joined over 175 other Hand & Stone employees, franchisees, and management to fill 2,500 backpacks, each with a weekend’s supply of food for a child.

13.  McQuillan added, “Every weekend, over 13 million children wake up not knowing how they’ll get their next meal. We are so proud to come together as a team and partner with Blessings in a Backpack to combat this issue. Hand & Stone wrote a check in the sum of $15,000 to the organization in order to fill all 2,500 backpacks with food, helping continue the fight against hunger and making a difference in the lives of our most important asset – our kids.”

14.  2019 marked the third time Hand & Stone has teamed up with Blessings in a Backpack after the non-profit partnership was suggested by a franchisee. The first event was held in Phoenix, Arizona, and the second was held in Las Vegas last year. Blessings in a Backpack is currently feeding over 87,000 children in 1,092 schools in 45 U.S. states and the District of Columbia. It only takes $130 to feed one child on the weekends for one 38-week school year through the Blessings in a Backpack program.

Company History

15.  Hand & Stone Massage and Facial Spa was founded in 2004 by John Marco, a former physical therapist, in Toms River, New Jersey. Marco wanted to offer luxury massages at affordable prices. Since the beginning, Hand & Stone has offered a wide array of massages, including Swedish massage, hot stone massage, couples massage, foot massage, and facials.

16.  By 2007, Marco had grown Hand & Stone Massage and Facial Spa to three locations and franchising started that same year. The following year, the company announced its goal of reaching 100 locations over the next few years. At the end of 2017, Hand & Stone Massage and Facial Spa became the second largest massage franchise, behind Massage Envy, with over 300 locations open in North America.

Entrepreneur’s Franchise 500

17.  Hand & Stone Massage and Facial Spa ranked No. 133 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Hand & Stone Massage and Facial Spa franchise costs, based on Item 7 of the company’s 2019 FDD.

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

• Please click here for detailed information on Hand & Stone Massage and Facial Spa’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  256
• Outlets at the End of the Year:  307
• Net Change:  +51

2017

• Outlets at the Start of the Year:  307
• Outlets at the End of the Year:  354
• Net Change:  +47

2018

• Outlets at the Start of the Year:  354
• Outlets at the End of the Year:  404
• Net Change:  +50

Company-Owned

2016

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2018

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• This Item presents certain historical data as provided by Hand & Stone franchisees and a subsidiary-owned outlet.

• The following information is for the period January 1, 2018 through December 31, 2018.

• As of December 31, 2018, Hand & Stone had 377 United States franchisees (including a subsidiary-operated business) and 27 franchise locations in Canada.

• The following tables present the Average Gross Sales submitted to the franchisor by 324 United States franchisees and a subsidiary-operated business in Hamilton, New Jersey, which are substantially similar to those being offered through the Franchise Disclosure Document and were open and operating for at least 12 months as of December 31, 2018.

• Tables 1 through 4a exclude 48 United States franchisees that were not open more than 12 months as of December 31, 2018 and 27 franchises located in Canada.

Table 1 – Average Gross Sales Information for Franchised Businesses Open 24 Months or More (Calendar Year 2018)