FDD Talk: Sola Salon Studios 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 Sola Salon Studios franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Sola Salon Studios franchise, based on Item 7 of the company’s 2020 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Sola Salon Studios franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned Sola Salon Studios outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of Sola Salon Studios’ financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• average, median, highest, and lowest occupancy rate for the month of December 2019 for the 309 Sola Salon Studios franchised locations in the United States that met or exceeded all of the following criteria as of December 31, 2019 (“Reporting Criteria”): a) operated in the United States under a Franchise Agreement; (b) had been open and continuously operating for at least 13 months as of December 31, 2019; (c) submitted all required reports under the Franchise Agreement during 2019; and (d) was not under contract for purchase by the franchisor or any of its affiliates at any time during 2019

• 2019 average, median, highest, and lowest square feet, gross revenue, and lease expense for the 309 Sola Salon Studios franchised locations that met the Reporting Criteria

Section I – Background Information

17 Things You Need to Know About the Sola Salon Studios Franchise

Signs Multi-Unit Franchise Agreement with Seasoned Foodservice Operator

1.  At the beginning of March 2020, Sola Salon Studios announced the signing of a multi-unit franchise agreement with distinguished foodservice operator and franchising industry veteran, Mitch Cohen. As part of the agreement, Cohen, along with business partners Marvin Goldfarb, Al Goldstein, and Seth Goldstein of SAMM Property MGMT, will develop six units over the next five years across Nassau and Queens counties in New York, with the first projected to open before the end of the year.

2.  Mitch Cohen is the newest foodservice franchisee to diversify with Sola, joining 15 other franchisee groups that also currently operate leading restaurant brands such as Panera Bread, Tim Hortons, McDonald’s, Taco Bell, Pizza Hut, and more.

3.  Christina Russell, CEO of Sola Salon Studios, said, “The trend of restaurant operators investing in Sola is a relatively recent development within our brand and has been completely organic. We’ve found that restaurant operators are attracted to the simplicity of Sola’s model when compared to the complexities of today’s foodservice landscape. When you consider factors like the ease of Sola’s day-to-day operations, turnkey real estate model and low labor cost, it’s a no-brainer.”

4.  Mitch Cohen has more than 37 years of franchise industry experience operating foodservice concepts like Baskin-Robbins, Dunkin’, and Nathan’s Famous Hot Dogs, and his agreement with Sola marks his first foray into the salon space. Cohen has been a longstanding pillar in the franchising community, serving as co-chair of Dunkin’s Joy in Childhood Foundation from 2016 to 2018 where he led efforts in raising $5 million supporting the organization, as well as on the International Franchising Association’s board of directors since 2016.

5.  Currently, Cohen owns and operates five Jersey Mike’s Subs locations throughout Long Island, New York and is a founding partner of PerforMax Franchisee Advisors, a team of experienced multi-unit franchisees providing authentic, operator-focused strategies to improve franchisee performance, engagement, and trust.

6.  According to Cohen, “As the foodservice segment became increasingly crowded over the past several years, my business partners and I began looking into non-food-based businesses where we could diversify our portfolio and gain more market share in our territories – that’s when we discovered the salon space. We happened to be neighbors with Sola in a few centers where we operate our restaurants, so we saw the brand’s potential firsthand and knew it was something we wanted to be a part of immediately. One of our greatest passions working in the franchising industry has been empowering and helping aspiring business owners to fulfill their dreams of being in their own business for themselves, but not by themselves, and we loved that we could do that all under one roof with Sola.”

7.  Sola Salon Studios leads the largest segment within the $88 billion salon services market, more than doubling in size in the last five years, and was named the salon suites category leader on Entrepreneur magazine’s prestigious and highly competitive Franchise 500 ranking of the top franchise opportunities.

8.  Each Sola location features a collective of 20-40 boutique, move-in-ready salon suites all under one roof where hair stylists, estheticians, nail technicians, and massage therapists can each individually operate their own businesses without the risk and hassle of traditional salon ownership.

9.  Sola also provides various support programs, such as education and technology, to help its community of independent salon owners succeed in business ownership. As the most dominant brand in the segment, Sola Salon Studios has created a turnkey solution for beauty professionals to explore a better life as an entrepreneur, and has led the way as the largest and fastest-growing salon studios concept.

Accelerates U.S. Expansion Amid Year of Record Growth

10.  In mid-November 2020, Sola Salon Studios announced the signing of 17 franchise development agreements that will expand its presence in 14 key states across the U.S., including Illinois, Arizona, Texas, New York, California, and Florida. These new signings will bring 44 new Sola locations nationwide over the next several years and come on the heels of the eight development deals that Sola announced in August, emphasizing the brand’s aggressive domestic franchise development plans. Year-to-date, Sola has opened 54 new locations across North America and signed more than 25 franchise development agreements with both new and existing franchisees.

11.  Christina Russell, CEO of Sola Salon Studios, said, “The growth we have experienced this year in spite of all the challenges the pandemic brought to our industry reflects the strength of our business model and the resilience of our franchise opportunity. All of our 2020 signings, with the exception of just one, have come after the mandated closures of salon businesses earlier this year, serving as a true testament to that. As we gear up for a new year ahead, we feel proud to welcome so many new franchisees to the Sola brand and that many of our existing owners are continuing to grow with us following these unprecedented times.”

12.  Alongside these recent signings, Sola Salon Studios opened 16 new locations in Texas, Pennsylvania, Virginia, New York, Maryland, South Carolina, Tennessee, Georgia, Illinois, New Jersey, and Delaware over the past three months. The brand planned to open seven additional locations before the end of 2020, closing out the year with 548 salons open and operating.

Company History

13.  Sola Salon Studios was founded in 2004 by Stratton Smith and Matt Briger in Denver, Colorado. Smith and Briger set out to build a thriving community where independent beauty professionals could create a life and career they were proud of.

14.  When they were developing the idea for Sola Salon Studios, Smith and Briger sat down with Denver-based stylist Kim Bennett to learn more about what was important to her in creating the salon career of her dreams. Bennett was impressed with Smith and Briger’s idea and she became the first Sola stylist. The following year, in 2005, Sola Salon Studios began franchising.

15.  Over the past few years, Sola Salon Studios has launched various tools to make things easier for stylists and clients. In 2016, Sola launched Sola Pro, an exclusive app, to host industry deals, special offers, and a variety of educational resources to bridge the gap between the professional beauty industry and the Sola community. A few years later, Sola launched its online booking search engine, BookNow, which allows clients to search, discover, and book appointments directly on the brand’s website.

16.  Today, there are Sola Salon Studios across the United States and Canada.

Entrepreneur’s Franchise 500

17.  Sola Salon Studios ranked No. 26 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Sola Salon Studios franchise costs, based on Item 7 of the company’s 2020 FDD.

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

• Please click here for detailed information on Sola Salon Studios’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  304
• Outlets at the End of the Year:  362
• Net Change:  +58

2018

• Outlets at the Start of the Year:  362
• Outlets at the End of the Year:  413
• Net Change:  +51

2019

• Outlets at the Start of the Year:  413
• Outlets at the End of the Year:  459
• Net Change:  +46

Company-Owned

2017

• Outlets at the Start of the Year:  12
• Outlets at the End of the Year:  13
• Net Change:  +1

2018

• Outlets at the Start of the Year:  13
• Outlets at the End of the Year:  13
• Net Change:  +0

2019

• Outlets at the Start of the Year:  13
• Outlets at the End of the Year:  25
• Net Change:  +12

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

Part 1 – Occupancy

• The figures below represent the median and average occupancy reported in accordance with the typical monthly royalty and occupancy reporting procedure for the month of December 2019 by Sola Salon Studios franchise locations that satisfied the Reporting Criteria.

• The following table includes information regarding the total number of Sola Salon Studios franchise locations in the United States that met or exceeded all of the following criteria as of December 31, 2019 (“Reporting Criteria”): (a) operated in the United States under a Franchise Agreement; (b) had been open and continuously operating for at least 13 months as of December 31, 2019; (c) submitted all required reports under the Franchise Agreement during 2019; and (d) was not under contract for purchase by the franchisor or any of its affiliates at any time during 2019.

• The Reporting Criteria excludes any Sola Salon Studios locations (i) located outside the United States, or (ii) owned, operated, or under contract to purchase by the franchisor or any of its affiliates at any time during 2019.

• As of 12/31/2019, Sola Salon Studios had 459 franchised locations open and operating in the United States. Of this total, 309 (67.32%) met the Reporting Criteria and 150 (32.68%) Sola Salon Studios locations did not meet the Reporting Criteria. One franchised outlet, which had been open for more than 12 months, closed during 2019. No franchised outlet closed during 2019 after being open less than 12 months.

• The median and average occupancy information was prepared from the records and reports, as reported by franchisees of each of the Sola Salon Studios locations satisfying the Reporting Criteria. Sola Salon Studios has relied solely on the information reported to it by franchisees.

• Sola Salon Studios does not know of an instance, nor does it have reason to believe, that any franchisee would misstate its information. However, these occupancy reports have not been audited and Sola Salon Studios has not independently verified these occupancy numbers.

• To calculate the median and average Occupancy, Sola Salon Studios analyzed occupancy records and reports for the month of December 2019, as reported by franchisees of each of the Sola Salon Studios franchised locations satisfying the Reporting Criteria as of December 31, 2019. Sola Salon Studios then provided the lowest occupancy percentage and the highest occupancy percentage.

Median and Average Occupancy for Franchised Locations Satisfying the Reporting Criteria as of December 31, 2019