FDD Talk 2021: Elements Massage 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 Elements Massage franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for an Elements Massage franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for an Elements Massage franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Elements Massage outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Elements Massage’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average, median, low, and high number of total members and AUV (average unit volume), by month, for all Elements Massage Studios that had been open and operating as of January 1, 2020

• 2020 average, median, low, and high number of total members and AUV (average unit volume), by month, for all Elements Massage Studios that had been open and operating as of January 1, 2019 for comparison as its representations predate the COVID-19 pandemic

Section I – Background Information

19 Things You Need to Know About the Elements Massage Franchise

Parent Company Awards Two Large Multi-Unit Agreements

1.  At the end of May 2020, WellBiz Brands, Inc., the nation’s premiere franchisor of wellness, fitness, and beauty brands, announced that it had awarded seven corporately-owned Amazing Lash Studio locations in Arizona and six corporately-owned Elements Massage locations in Colorado in two separate agreements. Both investors were already established within the WellBiz Brands portfolio of companies and have now become the largest multi-unit franchise owners in their respective franchise brands.

2.  Dan Demolli, who previously served as WellBiz Brands’ vice president of franchise development, acquired six of the eight corporately-owned Elements Massage studios in Colorado. Demolli had been with WellBiz Brands since October 2018. He has over 28 years of franchise experience, including roles as franchisee, area director, and multiple leadership positions in franchise sales. WellBiz Brands continues to own and operate two Elements Massage studios in the Denver market.

3.  Don Gatzemeier acquired the seven corporately-owned Amazing Lash Studio locations in Arizona. Gatzemeier is an experienced multi-unit, multi-brand franchise industry veteran and joined the Elements Massage system in October 2012. He currently also owns four Elements Massage studios in Arizona, as well as studios from other franchise brands. He was named the Elements Massage Franchisee of the Year in 2015. Gatzemeier’s understanding of the Greater Phoenix market as well as the franchise operations team he has in place will enable him and his team to continue providing exceptional service to Amazing Lash Studio members and clients.

4.  Jeremy Morgan, CEO of WellBiz Brands, said, “Having two investors commit to such significant multi-unit agreements is not only a testament to the strength of the Amazing Lash Studio and Elements Massage brands, but also to the support systems they have in place as part of the WellBiz Brands portfolio. Don and Dan now become our two largest multi-unit owners and we look forward to continuing to work with them to grow their businesses.”

Plans Large Expansion in Sacramento Area

5.  In mid-November 2020, Elements Massage announced that it was entering the Sacramento, California area and was recruiting franchisees for locations that could begin opening in 2021. The company has several California locations, but no sites in Sacramento. That could change, as the greater Sacramento region is one of Elements’ target expansion areas.

6.  Elements shares a parent company with Amazing Lash Studio, a franchise chain that specializes in eyelash extensions. Amazing Lash has multiple Sacramento-area locations, which have performed well, according to Matthew Stanton, chief development officer of WellBiz Brands, Inc., parent company of both brands. That’s encouraging for Elements, he said, citing similarities between the chains’ business models.

7.  The pandemic has disrupted personal-care businesses such as massage studios. After temporary shutdowns to slow the spread of COVID-19, the businesses have reopened amid consumers’ heightened focus on safety and cleanliness. Despite those challenges, Elements is thriving. “Honestly, the demand’s never been higher,” Stanton said. Stanton thinks that’s largely because consumers have grown to regard massages as something other than a luxury service. “It’s a part of people’s health routine,” he said.

8.  Continued demand is one of the reasons why Stanton thinks Elements appeals to potential franchisees. Fewer than 2% of Elements’ locations permanently closed during the pandemic. Elements is actively recruiting potential franchisees in the greater Sacramento region. Stanton hoped to secure local franchisees before the end of 2020, and start opening locations in 2021. Stanton said having two franchisees in the market could be a potential “sweet spot” for the chain, though that number might vary. Stanton hopes to ultimately see at least eight Elements locations in the greater Sacramento area.

9.  Financial uncertainty from the pandemic could lead to a surge in new franchisees. “People look at business ownership as a way to control their own destiny,” Stanton said. The average initial investment for a single unit is $225,350 to $374,350, according to Elements’ website. That includes a single-unit franchise fee of $39,900. Elements looks for locations of between 1,600 and 2,000 square feet, preferably near other service-related tenants. Sites generally employ 20 to 25 people, whose hours vary.

10.  Citing “simplicity of operations,” Stanton said Elements also stands out because it only offers massages, as opposed to other studios that also offer various skin-care services. Elements hasn’t significantly changed its business model due to the pandemic, though the company continues to emphasize proper cleaning protocols.

Experiences Growth Even Amid COVID-19 Pandemic

11.  In early April 2021, Elements Massage highlighted its commitment to excellence even during a year as challenging as 2020. When the country went into lockdown mode due to the COVID-19 pandemic and Elements Massage studios had to temporarily close their doors, the brand worked hard to ensure franchisees continued to feel supported by providing resources to help them navigate their local economic market. That meant providing rent relief resources and a templated plan guiding franchisees through the CARES Act and SBA loan relief.

12.  Lauren Wanamaker, senior director of development for WellBiz Brands, Inc., the manager of the Elements Massage brand, said, “Our first step was to figure out what to provide franchisees in terms of navigating their market. Every market and every state handled this pandemic differently, so we wanted to make sure we provided franchisees with the right tools. The primary focus right now is helping them get through this time.”

13.  But support wasn’t just coming from the Support Center, it was coming from the brand’s loyal clients as well. “It’s been really refreshing to see so many members step up and say, ‘Please don’t freeze my membership. I want to continue supporting you,’” Wanamaker said. “They insist on using their massage sessions at a later time.”

14.  The pandemic forced many segments of the franchise industry to pivot their business models and adapt as a means of survival. The Elements Massage brand hunkered down and held true to its mission: a commitment to providing top-notch, customized massage therapy services. Instead of broadening its offerings to spa services and beauty products, the Elements Massage brand stuck to what it knew best: customized therapeutic massage therapy services. The brand kept its model simple, making it easy to build long-term relationships – and revenue – with clients.

15.  In 2020, the Elements Massage system signed 11 new agreements and opened 5 new locations, adding to its growing presence across the country. As the U.S. continues to bounce back following COVID-19 shutdowns, the brand is planning for continued expansion in 2021 with plenty of territories available throughout the U.S.

Company History

16.  Elements Massage was founded in 2002 by Michele Mehrib in Aurora, Colorado. Mehrib had been working as a massage therapist for a year at a country club when the club’s new owners told her that they didn’t want a massage therapist anymore. After the loss of her space, Mehrib decided to find retail space and open a retail massage studio.

17.  Mehrib set out to open a general wellness center where therapeutic massage was just one of many services. However, she quickly found that customers primarily wanted massages and she shifted her business model. This first Elements Massage location was a success and Mehrib opened a second location in 2005.

18.  In 2006, Mehrib partnered with Fitness Together – now Wellbiz Brands – to start franchising Elements Massage. Over the next decade, Elements Massage grew quickly around the United States and by 2016 there were over 223 studios open across 36 states. Today, there are also Elements Massage studios in British Columbia, Canada.

Entrepreneur’s Franchise 500

19.  Elements Massage ranked No. 371 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Elements Massage franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• Please click here for detailed information on Elements Massage’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  245
• Outlets at the End of the Year:  237
• Net Change:  -8

2019

• Outlets at the Start of the Year:  237
• Outlets at the End of the Year:  242
• Net Change:  +5

2020

• Outlets at the Start of the Year:  242
• Outlets at the End of the Year:  245
• Net Change:  +3

Company-Owned

2018

• Outlets at the Start of the Year:  o
• Outlets at the End of the Year:  8
• Net Change:  +8

2019

• Outlets at the Start of the Year:  8
• Outlets at the End of the Year:  8
• Net Change:  0

2020

• Outlets at the Start of the Year:  8
• Outlets at the End of the Year:  2
• Net Change:  -6

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• Due to the COVID-19 pandemic and/or executive orders from applicable health and governmental authorities during 2020, many Studios temporarily closed or otherwise operated on a limited basis during 2020.

• Part 1 presents monthly data for 2020 for all Studios that had been open and operating as of January 1, 2020. Part 2 presents monthly data for 2019 for all Studios that had been open and operating as of January 1, 2019 for comparison as its representations predate the COVID-19 pandemic.

• Elements Massage does not anticipate making substantial changes to the Franchise System or its business model in response to the COVID-19 pandemic, although it is continuing to monitor consumer demands.

• Studios are deemed “Open” in any given month in which they processed transactions, including the collection of monthly membership fees, from guests and/or members.

• “Members” are clients who sign up for Elements Massage’s wellness membership program. Figures in Part 1 related to Members include suspended memberships, whereby members are temporarily exempt from paying monthly membership fees and unable to use services at Studios.

• “AUV” refers to “Average Unit Volume.”

• Revenue figures in Part 1 are based upon actual data Elements Massage requires its franchisees to submit to it on a monthly basis and are defined in the same manner as Gross Receipts are defined under the Franchise Agreement.

• Specifically, as described in Item 6, “Gross Receipts” include all of your revenue and receipts, including those taken by cash, credit card, debit card, check, electronic funds transfer, ACH, trade, barter, or exchange.

• Gross Receipts also include: (a) any other means of revenue derived from the operations of your Studio, including the sale of memberships, merchandise, or any products or services that are sold by you, whether sold at the Premises or from an off-Premises location; (b) all revenue from the sale or redemption of gift cards, in accordance with Elements Massage’s then-current System Standards; and (c) the gross amount of any business interruption or similar insurance payments.

• Gross Receipts exclude: (i) sales, use, or privilege taxes paid to the appropriate taxing authority; (ii) refunds that are provided to clients; and (iii) tips received from clients for payment to your employees.

• Elements Massage compiled this data using information submitted to it by its franchisees. It did not audit or otherwise verify the accuracy of the information submitted. These revenue results are based upon historical data.

Part 1 – Average Total Number of Members and Unit Volume for All Studios Open as of January 1, 2020

• Part 1 presents monthly 2020 information from all 250 Studios open and operating as of January 1, 2020, including those that were formerly operated by Elements Massage’s wholly-owned subsidiaries until May 2020.