In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Phenix Salon Suites franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Phenix Salon Suites franchise, based on Item 7 of the company’s 2021 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Phenix Salon Suites franchise, based on Items 5 and 6 of the company’s 2021 FDD
- Section IV – Number of franchised and company-owned Phenix Salon Suites 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 Phenix Salon Suites’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:
- 2020 average, median, highest, and lowest gross revenue for 61 franchised Phenix Salon Suites locations that were in operation for over one year as of December 31, 2020 and that reported results to Phenix
- 2020 average, median, highest, and lowest adjusted EBITDA for 61 franchised Phenix Salon Suites locations that were in operation for over one year as of December 31, 2020 and that reported results to Phenix
- average, median, highest, and lowest occupancy rate and number of suites as of December 31, 2020 for 123 franchised Phenix Salon Suites locations that were open as of December 31, 2019 and that reported results to Phenix
- 2020 average gross revenue and adjusted EBITDA for 61 franchised Phenix Salon Suites locations that were in operation for over one year as of December 31, 2020 and that reported results to Phenix, grouped by salon size (less than 4,500 square feet, 4,501 to 6,000 square feet, greater than 6,000 square feet, and total)
- average occupancy rate as of December 31, 2020 for 123 franchised Phenix Salon Suites locations that were open as of December 31, 2019 and that reported results to Phenix, grouped by salon size (under 4,500 square feet, 4,501 to 6,000 square feet, greater than 6,000 square feet, and total)
- 2019 and 2020 average and median annual gross revenue, adjusted EBITDA, and occupancy (as of December 31, 2020) for those Phenix Salon Suites locations reporting over each respective period
Section I – Background Information
12 Things You Need to Know About the Phenix Salon Suites Franchise
Opens 300th Salon Location
1. In mid-March 2021, Phenix Salon Suites announced that it had opened its 300th salon location in Atlanta, Georgia. Franchisee Randa Shebly-Cobb joins Phenix with a strong background in executive leadership and entrepreneurship as an expert in various industries including consulting, real estate, direct sales and marketing, and mining. After opening her first company at the age of 22, she has never lost her passion for pursuing business ventures across the globe. Supporting and mentoring minority entrepreneurs in the lifestyle industry is close to Shebly-Cobb’s heart, making her personal mission align closely with that of Phenix Salon Suites.
2. Randa Shebly-Cobb, owner of the brand’s 300th location in Atlanta, said, “After working with a number of diverse business concepts, I was looking for the perfect opportunity to engage my passion for the beauty and lifestyle industry. Once I came across Phenix Salon Suites’ business model and mission, I realized that I had found the right match. I feel lucky to join the company at this time of exponential growth. I relish in the opportunity to put my favorite acronym, TEAM: Together Everyone Achieves More, into practice in partnership with Phenix Salon Suites.”
3. Adding to the exciting milestone of Shebly-Cobb’s opening, Phenix had opened 9 salons since the start of 2021. Welcoming locations in California, New Jersey, Texas, Tennessee, Idaho, and of course Georgia, the team was eager to continue this momentum throughout the year. As Phenix continues to expand at an impressive rate, the brand was named one of the Top 20 Franchises in America by Mirror Review and also ranked in the top 100 on Entrepreneur’s Fastest-Growing Franchises list.
4. According to Brian Kelley, president and COO of Phenix Salon Suites, “These exciting milestones for Phenix speaks to the strength and momentum of the brand. Being named one of the Top 20 Franchises in America is testament to our passion and commitment in supporting our franchise base while attracting new and exciting individuals like Randa who are interested in how our model meets the current trends. Embodying all the characteristics of a Phenix franchisee and beyond, we are so excited to see Randa continue her entrepreneurship journey with our brand. We expect 2021 to be a very big year for the Phenix Salon Suites brand, starting with the major milestone of opening our 300th location in Atlanta owned and operated by a very bright and entrepreneurial partner in Randa Shebly-Cobb.”
5. Moving forward, Phenix Salon Suites has its sights set on expanding in Houston, Chicago, Columbus, Detroit, Boston, Upstate New York, and New York City. Phenix also has room to grow in Washington, Oregon, Louisiana, Mississippi, Alabama, and Northern California.
Launches International Growth in the United Kingdom
6. In mid-October 2021, Phenix Salon Suites revealed its strategic global expansion plan, starting with its first British location in Manchester, which opened in early October. Leading the charge for Phenix Salon Suites’ international growth is esteemed development group, Phenix LTD-UK, who signed an agreement to open 75 Phenix Salon Suites locations throughout the United Kingdom and the Republic of Ireland. Assisting the group with development and overseeing the milestone opening in Manchester is world-renowned hairdressing expert and Phenix’s European Operations Director John Gillespie.
7. Gillespie said, “It’s such an exciting time to be a part of Phenix Salon Suites and we’re extremely buzzed about the opening of our first European salon location. Having been in the salon industry for more than 20 years, I’m familiar with the operations style that is crucial to the success of not only the franchisee, but also the lifestyle professionals. Phenix has definitely mastered the art of seamless operations which has been clear as we’ve established the Manchester location. Our UK team has a ton of developments in the pipeline and we’re eager to continue expanding across England.”
8. Brian Kelley, president and COO of Phenix Salon Suites, added, “Phenix has had an eye on expansion overseas for a while now and we’re so excited to finally announce our entrance into international markets. We have a strong team behind our global growth with industry expert John Gillespie being a key player to streamline salon operations and Lesley Hawks leading the charge on development. This Manchester salon opening is just the beginning of our international expansion and we’re eager to see the UK development group pioneer our growth internationally. The United Kingdom is a stepping stone to the rest of Europe as the brand explores opportunities in Sweden, Spain, Germany, Switzerland and France.”
9. Phenix Salon Suites’ push for international growth is complemented by founder Gina Rivera’s international expansion of Colours By Gina, her product line which has grown in popularity throughout Europe and South America in recent years. Designed by Rivera, Colours By Gina is a specially formulated, curated hair color line that allows for limitless intermixing and multi-functional results for hairstylists.
10. Phenix Salon Suites was founded in 2007 by Gina Rivera in California. Rivera’s family had been in the salon industry since 1929 and she followed in their footsteps. For many years, Rivera ran her own salon out of a booth renter salon. While she built a strong reputation, Rivera realized that there were many stylists who rented booths that did not have the same kind of support she did. Rivera began advocating for better working conditions for lifestyle professionals who had the desire to operate their own salons but perhaps lacked the financial resources.
11. Rivera developed the concept for Phenix Salon Suites so that she could help others in the industry reach their goals. Phenix Salon Suites allows lifestyle professionals to own and operate a business at a fraction of the cost of traditional salon settings. Rivera’s concept was a success and after a few years of growing the business, Rivera began franchising Phenix Salon Suites in 2012. Today, there are Phenix Salon Suites across the United States.
Entrepreneur’s Franchise 500
12. Phenix Salon Suites ranked No. 75 on Entrepreneur’s 2022 Franchise 500 list.
Section II – Estimated Costs
- Detailed estimates of Phenix Salon Suites franchise costs, based on Item 7 of the company’s 2021 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Detailed information on Phenix Salon Suites’ 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
- Outlets at the Start of the Year: 189
- Outlets at the End of the Year: 224
- Net Change: +35
- Outlets at the Start of the Year: 224
- Outlets at the End of the Year: 255
- Net Change: +31
- Outlets at the Start of the Year: 255
- Outlets at the End of the Year: 285
- Net Change: +30
- Outlets at the Start of the Year: 1
- Outlets at the End of the Year: 4
- Net Change: +3
- Outlets at the Start of the Year: 4
- Outlets at the End of the Year: 5
- Net Change: +1
- Outlets at the Start of the Year: 5
- Outlets at the End of the Year: 6
- Net Change: +1
Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis
- The charts below show the annual gross revenue and adjusted EBITDA, occupancy rates, and operating results for fiscal year ended December 31, 2020 for certain franchise locations that were in operation for over one year as of that date, and the occupancy rates at the end of 2020 that were reported to Phenix by its franchisees for certain franchise locations that were open as of December 31, 2019.
- Not all franchisees or developers with franchise locations that have operated more than one year as of December 31, 2020 were open as of December 31, 2020.
- Phenix’s franchisees or developers have supplied Phenix with their gross revenues and adjusted EBITDA for only 61 franchise locations that have operated more than one year as of December 31, 2020, representing approximately 24% of the franchise locations that have operated for more than a year.
- They have also supplied Phenix with the occupancy rates for only 123 franchise locations that were open as of December 31, 2019, representing approximately 47.5% of the 259 franchise locations that were open as of December 31, 2019.
- Accordingly, Phenix only used the information provided by these franchisees or developers to prepare the following charts.
Part 1 – Annual Gross Revenue (of Certain Franchise Locations)
- Part 1 below reflects the annual gross revenues for fiscal year ended December 31, 2020, for the 61 franchise locations that were in operation for over one year as of that date and that reported results to Phenix.
- The results in Parts 1 and 2 also include Businesses that temporarily closed during fiscal year 2020 as a result of COVID-19. These temporary closures were either mandated by the government or, in certain instances, the individual franchisee decided to close on its own.
- “Gross Revenue” means all money generated by the Business, without taking into account any part of that total that has been or will be used for expenses.
- Average: $310,497
- Highest: $630,808
- Lowest: $96,995
- Median: $302,585
- Average of Top 50%: $393,065
- Average of Bottom 50%: $225,177
Part 2 – Annual Gross Revenue (of Certain Franchise Locations)
- Part 2 shows a breakdown of the annual revenue of these 61 locations by range of annual revenue.
- < $200,000: 9 locations (15%)
- $200,001 to $300,000: 21 locations (34%)
- $300,001 to $400,000: 20 locations (33%)
- $400,001 to $500,000: 9 locations (15%)
- > $500,000: 2 locations (3%)
Part 3 – Adjusted EBITDA (of Certain Franchise Locations)
- Part 3 below reflects the Adjusted EBITDA for fiscal year ended December 31, 2020 that were realized by the 61 franchise locations included in Parts 1 and 2.
- “EBITDA” means earnings before interest, taxes, depreciation, and amortization.
- “Adjusted EBITDA” represents EBITDA adjusted for a few non-operational expenses as reported by franchisees including management fees paid to owners, charges for auto expenses above the cost of operating a salon suite, items that would be capitalized if not for bonus depreciation, offsite storage, and other non-site level charges.
- Sales, expenses, EBITDA, and Adjusted EBITDA vary for franchises depending on many factors, including lease terms, financing terms, location, size of business, amount expended on marketing, regional variation in telephone/internet rates, insurance rates, local and state taxes and wage rates, cost of supplies used, services offered and the time invested in the business by the franchisee and the efficiency and managerial skill of the franchisee, local economic factors, the proximity of competition, length of time the franchise has been in operation, type of area, and whether the franchise is managed by the owner or an employee manager.
- Average: $114,413
- Highest: $272,365
- Lowest: $(57,532)
- Median: $109,581
- Average of Top 50%: $169,179
- Average of Bottom 50%: $57,821
- The information in Part 3 is based on the financial information reported by Phenix franchisees which, in some cases, includes certain non-operating expenses. In those circumstances, adjustments were made to EBITDA in order to report actual salon level operational results.
- As stated above, some of the locations included in Part 3 were temporarily closed because of COVID-19.
Part 4 – Occupancy Rates as of December 31, 2020 (of Certain Franchise Locations)
- Part 4 below reflects the occupancy rates at the end of 2020 that were reported to Phenix by its franchisees or developers for 123 locations that were open as of December 31, 2019 with a few exceptions.
- All 61 locations included in Parts 1 through 3 were part of the 123 locations that reported occupancy rates in Part 4 below.
- Average: 90.5%
- Median: 95%
- High: 100%
- Low: 36%
- Average of Top 50%: 99%
- Average of Bottom 50%: 82%
- Number of Locations at or Above Average: 73 of 123 reporting
- Total Number at 100%: 49 of 123 (40%)
Number of Suites
- Average: 32
- Median: 31
- High: 61
- Low: 14
- Average of Top 50%: 31
- Average of Bottom 50%: 34
- While the figures for occupancy and number of suites correlate to the average and median figures represented above, the figures for high and low occupancy and suites do not. The high and low figures represent the high and low of each respective category.
- For example, the “low” figure of 14 represents the smallest location reporting the number of suites, while the low figure of 36% occupancy is the lowest occupancy rate reported to Phenix.
Part 5 – Operating Results Categorized by Ranges of Salon Size Square Footage
- Part 5 below reflects operating results categorized by ranges of salon size square footage.
Salon Size: Less Than 4,500 Square Feet
- Number of Units: 8
- Average Occupancy as of December 31, 2020*: 94%
- Average Revenue: $198,585
- Average Adjusted EBITDA: $73,650 (37.1%)
Salon Size: 4,501 to 6,000 Square Feet
- Number of Units: 30
- Average Occupancy as of December 31, 2020*: 90%
- Average Revenue: $276,847
- Average Adjusted EBITDA: $106,155 (38.3%)
Salon Size: Greater Than 6,000 Square Feet
- Number of Units: 23
- Average Occupancy as of December 31, 2020*: 87%
- Average Revenue: $393,315
- Average Adjusted EBITDA: $139,362 (35.4%)
- Number of Units: 61
- Average Occupancy as of December 31, 2020*: 90%
- Average Revenue: $310,497
- Average Adjusted EBITDA: $114,413 (36.8%)
* For those reported.
Part 6 – Fiscal Years 2019 and 2020 Annual Gross Revenue, Adjusted EBITDA, and Occupancy
- Part 6 compares the results for those salon suite locations reporting over each respective period. The salon suite locations reporting for each period are not necessarily the same locations year-to-year, since franchisees that submitted information in 2019 were, in some cases, not the same franchisees that submitted information for 2020, but are representative of the locations opened during each respective year accordingly.
- The occupancy results reported in Part 6 reflect the results as of each respective year end.
- Average Annual Gross Revenue: $394,958
- Median Annual Gross Revenue: $343,551
- Average Annual Adjusted EBITDA: $136,568
- Median Annual Adjusted EBITDA: $124,892
- Average Annual Occupancy (as of December 31, 2020): 90.0% (47 locations reporting)
- Median Annual Occupancy (as of December 31, 2020): 93.0% (47 locations reporting)
- Average Annual Gross Revenue: $310,497
- Median Annual Gross Revenue: $302,585
- Average Annual Adjusted EBITDA: $114,413
- Median Annual Adjusted EBITDA: $109,581
- Average Annual Occupancy (as of December 31, 2020): 90.5% (123 locations reporting)
- Median Annual Occupancy (as of December 31, 2020): 95.0% (123 locations reporting)
- COVID-19 had a different impact across salon suite locations depending on the state where each salon suite was located and the individual operating decision of the franchisee. Each state implemented its own policy restrictions and impacted virtually every business across the country not just salons.
- In addition, certain franchisees of the Phenix system temporarily closed their locations in states or localities where there were no mandated closures.
- While mandated temporary closures impacted revenue and, to a lesser degree Adjusted EBITDA, Phenix Salon Suites Businesses were able to recover occupancy levels ending the year ahead of the previous year from an average of 90.0% in 2019 to an average of 90.5% in 2020.
- While open air, conventional salons had to change their business model in an effort to meet social distancing requirements, Phenix Salon Suites Businesses faced minimal needs for adjustment since the individualized salon suite structure has always provided for one-on-one service in a controlled environment with individualized wash bowls limiting cross-contamination.
- With the exception of an increase in existing cleaning procedures, the additional requirements to satisfy social distancing needs had minimal impact in terms of incremental costs to Phenix’s franchise base.
- In addition, Phenix Salon Suites Businesses had zero permanent closures resulting from COVID-19 during fiscal year 2020.
- The data is based on the historical results from existing franchisee Businesses as reported to Phenix by its franchisees. Neither Phenix nor an independent accountant has independently audited or verified the information.
- Some Businesses have sold this much. Your individual results may differ. There is no assurance you will sell as much.