dermani MEDSPA Franchise: Average Sales ($975K) vs. Cost ($326K-$668K)

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

Section I – Estimated initial investment (franchise costs) for a dermani MEDSPA franchise, based on Item 7 of the company’s 2023 FDD

Section II – Initial franchise fee, royalty fee, and marketing fee for a dermani MEDSPA franchise, based on Items 5 and 6 of the company’s 2023 FDD

Section III – Number of franchised and company-owned dermani MEDSPA outlets at the start of the year and the end of the year for 2020, 2021, and 2022, based on Item 20 of the company’s 2023 FDD

Section IV – News updates on the dermani MEDSPA franchise opportunity

Section V – Presentation and analysis of dermani MEDSPA’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2023 FDD, including information on the:

• 2022 actual and average gross revenue, cost of goods sold, gross profit, disclosed operating expenses, and net income for the 5 dermani MEDSPA company locations that were open and operating throughout the 12-month period of January 1, 2022 to December 31, 2022

• 2022 actual and average gross revenue, cost of goods sold, and rent for the 6 dermani MEDSPA franchised locations that were open and operating throughout the 12-month period of January 1, 2022 to December 31, 2022

• total amount of membership fees collected in 2021 and 2022 by the dermani MEDSPA company and franchised locations that were open and operating for any amount of time during the respective periods

• total number of memberships processed and total amount of membership fees collected in December 2022 by the dermani MEDSPA company and franchised locations that were open and operating for any amount of time during the respective periods

Section VI – Key ratios, comparables, computations, and analyses for the dermani MEDSPA franchise opportunity (exclusive content for Platinum subscribers)

Section I – dermani MEDSPA Franchise Costs

• dermani MEDSPA franchise costs, based on Item 7 of the company’s 2023 FDD:

• Initial Franchise Fee:  $49,500
• Initial Training Fee:  $5,000
• Initial Licensing Fee:  $0 to $2,500
• Site Selection and Construction Oversight:  $0 to $5,000
• Architectural and MEP Plans:  $5,000 to $12,000
• Real Estate; Prepaid Rent, Utility, and Security Deposit:  $20,000 to $40,000
• Leasehold improvements:  $30,000 to $150,000
• Signage:  $5,000 to $15,000
• Furniture and Fixtures:  $20,849 to $32,526
• dermani MEDSPA Equipment:  $94,689 to $199,450
• Initial Inventory:  $30,000 to $40,000
• Office Equipment, Computers, and Supplies:  $4,750 to $8,550
• Business Software:  $545 to $1,000
• Business Licenses and Permits:  $2,000 to $4,000
• Professional Fees:  $3,000 to $8,000
• Insurance:  $4,500 to $12,000
• Travel and Living Expenses During Training:  $2,000 to $4,000
• Grand Opening Marketing:  $20,000
• Additional Funds (3 months):  $30,000 to $60,000
• Total Estimated dermani MEDSPA Franchise Costs:  $326,833 to $668,526

Section II – dermani MEDSPA’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

• dermani MEDSPA’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2023 FDD:

• Initial Franchise Fee:  $49,500
• Royalty:  5% of Gross Revenue
• System Marketing Fee:  up to 2% of Gross Revenue; currently 0.25%
• Local Advertising Spend:  $500 each month

Section III – Number of Franchised and Company-Owned dermani MEDSPA Outlets

Franchised

2020

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  2
• Net Change:  +2

2021

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  5
• Net Change:  +3

2022

• Outlets at the Start of the Year:  5
• Outlets at the End of the Year:  9
• Net Change:  +4

Company-Owned

2020

• Outlets at the Start of the Year:  6
• Outlets at the End of the Year:  6
• Net Change:  0

2021

• Outlets at the Start of the Year:  6
• Outlets at the End of the Year:  6
• Net Change:  0

2022

• Outlets at the Start of the Year:  6
• Outlets at the End of the Year:  5
• Net Change:  -1

Section IV – News Updates on the dermani MEDSPA Franchise

• Interview with Harvey Hillyer, Founder of dermani MEDSPA

• dermani MEDSPA Did Not Rank on Entrepreneur’s 2023 Franchise 500 List

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the dermani MEDSPA Franchise (Item 19, 2023 FDD)

• As of December 31, 2022, there were five company-owned locations and nine franchised locations.

• Presented below in Part 1 are the historic gross revenue figures for the five company-owned locations (each, a “Company Location”) that were open and operating throughout the 12-month period of January 1, 2022 to December 31, 2022 (the “Measurement Period”). All Company Locations in the below charts are all located within, or surrounding, the greater Atlanta, Georgia area, and operate in locations that are between 1,500 to 2,400 square feet.

• Based upon applicable local laws, none of the Company Locations currently contract with a PC or a management company. Except as noted below, the five Company Locations are substantially similar to the franchised business being offered and sold under the disclosure document.

• Also presented in Part 2 of this Item 19 are gross revenues and selected expenses for the six franchised locations that were open and operating throughout the 12-month period of January 1, 2022 to December 31, 2022 (each, a “Franchised Location”). The Franchised Locations are approximately between 1,400 to 2,100 square feet.

• None of the Franchised Locations currently contract with a PC or a management company. Three franchised locations were excluded from Part 2 because they were not open and operating for a full year as of December 31, 2022. One of the Franchised Locations included in the below charts had been a company-owned location that was then sold and converted to a franchise in 2022.

• Parts 3 and 4 include company and franchised locations that were open and operating for any amount of time during the respective periods in each part.

• Some outlets have earned this amount. Your individual results may differ. There is no assurance that you’ll earn as much.

Part 1 – Company-Owned Locations During Measurement Period (2022 Calendar Year)

Company Location 1

Opened Since:  September 2013

Gross Revenue

• Retail Product Sales:  $53,146.97
• Services Income:  $1,481,771.46
• Total Gross Revenue:  $1,534,918.43

Cost of Goods Sold:  $595,646.19

Gross Profit After COGS:  $939,272.24

Expenses

• Advertising and Promotion:  $21,801.30
• Imputed Royalty:  $76,745.92
• Social Media/Technology Fee:  $5,400.00
• Merchant Account Fees:  $49,120.24
• Business Licenses and Permits:  $3,339.90
• Computer and Internet Expenses:  $9,770.64
• Insurance Expenses:  $12,806.50
• Office Supplies:  $6,528.09
• Payroll Expenses:  $468,692.81
• Professional Fees:  $3,000.00
• Rent Expense:  $95,232.91
• Spa Supplies:  $109,886.85
• Telephone Expense:  $1,942.21
• Utilities:  $5,219.63
• Total Expenses:  $869,487.00

Net Income:  $69,785.24

Company Location 2

Opened Since:  April 2014

Gross Revenue

• Retail Product Sales:  $78,812.88
• Services Income:  $2,427,115.73
• Total Gross Revenue:  $2,505,928.61

Cost of Goods Sold:  $781,103.10

Gross Profit After COGS:  $1,724,825.51

Expenses

• Advertising and Promotion:  $24,228.82
• Imputed Royalty:  $125,296.43
• Social Media/Technology Fee:  $5,400.00
• Merchant Account Fees:  $68,696.53
• Business Licenses and Permits:  $4,769.62
• Computer and Internet Expenses:  $10,012.40
• Insurance Expenses:  $20,908.07
• Office Supplies:  $7,954.93
• Payroll Expenses:  $759,857.92
• Professional Fees:  $3,000.00
• Rent Expense:  $127,973.68
• Spa Supplies:  $170,240.69
• Telephone Expense:  $2,194.13
• Utilities:  $6,080.41
• Total Expenses:  $1,336,613.63

Net Income:  $388,211.88

Company Location 3

Opened Since:  April 2014

Gross Revenue

• Retail Product Sales:  $51,084.24
• Services Income:  $1,419,417.30
• Total Gross Revenue:  $1,470,501.54

Cost of Goods Sold:  $498,935.73

Gross Profit After COGS:  $971,565.81

Expenses

• Advertising and Promotion:  $21,640.25
• Imputed Royalty:  $73,525.08
• Social Media/Technology Fee:  $5,400.00
• Merchant Account Fees:  $40,415.14
• Business Licenses and Permits:  $3,503.07
• Computer and Internet Expenses:  $8,334.00
• Insurance Expenses:  $12,269.04
• Office Supplies:  $5,575.45
• Payroll Expenses:  $495,777.62
• Professional Fees:  $3,000.00
• Rent Expense:  $63,371.64
• Spa Supplies:  $115,084.27
• Telephone Expense:  $1,989.42
• Utilities:  $4,604.00
• Total Expenses:  $854,488.98

Net Income:  $117,076.83

Company Location 4

Opened Since:  September 2015

Gross Revenue

• Retail Product Sales:  $96,185.37
• Services Income:  $2,100,580.69
• Total Gross Revenue:  $2,196,766.06

Cost of Goods Sold:  $804,755.99

Gross Profit After COGS:  $1,392,010.07

Expenses

• Advertising and Promotion:  $23,455.92
• Imputed Royalty:  $109,838.30
• Social Media/Technology Fee:  $5,400.00
• Merchant Account Fees:  $60,066.48
• Business Licenses and Permits:  $1,971.44
• Computer and Internet Expenses:  $8,061.90
• Insurance Expenses:  $18,328.59
• Office Supplies:  $6,265.23
• Payroll Expenses:  $709,855.80
• Professional Fees:  $3,000.00
• Rent Expense:  $52,045.92
• Spa Supplies:  $106,913.06
• Telephone Expense:  $2,189.50
• Utilities:  $5,616.72
• Total Expenses:  $1,113,008.86

Net Income:  $279,001.21

Company Location 5

Opened Since:  April 2017

Gross Revenue

• Retail Product Sales:  $76,362.42
• Services Income:  $1,523,073.90
• Total Gross Revenue:  $1,599,436.32

Cost of Goods Sold:  $522,147.50

Gross Profit After COGS:  $1,077,288.82

Expenses

• Advertising and Promotion:  $21,962.59
• Imputed Royalty:  $79,971.82
• Social Media/Technology Fee:  $5,400.00
• Merchant Account Fees:  $47,584.86
• Business Licenses and Permits:  $1,829.00
• Computer and Internet Expenses:  $7,832.98
• Insurance Expenses:  $13,344.80
• Office Supplies:  $7,026.13
• Payroll Expenses:  $551,186.81
• Professional Fees:  $3,000.00
• Rent Expense:  $47,748.18
• Spa Supplies:  $114,433.74
• Telephone Expense:  $1,942.19
• Utilities:  $3,472.95
• Total Expenses:  $906,736.04

Net Income:  $170,552.78

Average

Gross Revenue

• Retail Product Sales:  $71,118 (3.8%)
• Services Income:  $1,790,392 (96.2%)
• Total Gross Revenue:  $1,861,510 (100.0%)

Cost of Goods Sold:  $640,518 (34.4%)

Gross Profit After COGS:  $1,220,992 (65.6%)

Expenses

• Advertising and Promotion:  $22,618 (1.2%)
• Imputed Royalty:  $93,076 (5.0%)
• Social Media/Technology Fee:  $5,400 (0.3%)
• Merchant Account Fees:  $53,177 (2.9%)
• Business Licenses and Permits:  $3,083 (0.2%)
• Computer and Internet Expenses:  $8,802 (0.5%)
• Insurance Expenses:  $15,531 (0.8%)
• Office Supplies:  $6,670 (0.4%)
• Payroll Expenses:  $597,068 (32.1%)
• Professional Fees:  $3,000 (0.2%)
• Rent Expense:  $77,274 (4.2%)
• Spa Supplies:  $123,312 (6.6%)
• Telephone Expense:  $2,051 (0.1%)
• Utilities:  $4,999 (0.3%)
• Total Expenses:  $1,016,067 (54.6%)

Net Income:  $204,926 (11.0%)

• “Gross Revenue” represents the actual gross revenue, less refunds, from the sale of products and services, including skincare products, cosmetic injectables services, skin rejuvenation facial services, laser hair removal, hydrafacial, microneedling, and skin tightening for each Location during the Measurement Period.

• One Company Location (Company Location #1) also performs services that will not be offered or sold at franchised dermani MEDSPAs, such as Coolsculpting. Therefore, the revenues received from this service at this one Location has been excluded from the Gross Revenue figures for that Location in the table above.

• Amounts for tips collected on behalf of the staff have been removed from Revenue and from Payroll costs. Sales Tax cost is also not included in Revenue.

• “Cost of Goods Sold” means the total amount of products and goods, including, without limitation, injectables and skincare products, that were sold or consumed by each Company Location during the Measurement Period. To the extent Company Locations had costs or expenses for items such as Coolsculpting cycles that will not be used, offered, or sold at franchised dermani MEDSPAs, those costs were excluded from the Cost of Goods Sold.

• “Gross Profit” means the Gross Revenue minus the Total Cost of Goods Sold.

• “Advertising and Promotion” is the amount of advertising and promotional costs that a franchised dermani MEDSPA would be expected to spend under the Franchise Agreement. For this table, dermani has included a figure that includes the following fees and expenses that would be required under the Franchise Agreement: (i) the standard Online Management Fee, which is currently equal to $997 per month; (ii) the minimum local advertising requirement spend of $500 per month; and (iii) a System Marketing Fee equal to 0.25% of Gross Revenues (which was the System Marketing Fee rate for 2021). dermani may require you to pay a System Marketing Fee up to 2% of your Gross Revenues.

• The amount of Advertising and Promotion that dermani actually spent during the Measurement Period for each Location was different than the respective amounts listed in the above chart (an actual total of $113,089 or an average of $22,618 per location).

• “Merchant Account Fees” are actual merchant account fees incurred. Excluded are any merchant account fees related to the delivery of Coolsculpting services.

• “Imputed Royalty” is the amount of royalty that would have been paid during the Measurement Period, based on the standard 5% royalty rate, for the Gross Revenues of each particular Location.

• “Social Media/Technology Fee” is the imputed Social Media/Technology Fee that would have been paid by each Location during the Measurement Period, which is currently equal to $300 per month plus the assumed optional add-on services for a total of $450 per month.

• “Business Licenses and Permits” includes those actual costs and expenses that each Company Location incurred during the Measurement Period in connection with obtaining or maintaining various business licenses.

• “Computer and Internet Expenses” are the actual amounts that each Company Location paid in connection with using such hardware and software that meets dermani’s current standards, plus internet expenses. It also includes the Software Fees actually paid by the Location, which is currently equal to $400 per month.

• “Insurance” means the actual aggregate amount of insurance coverage paid for all six Locations (in the total amount of $77,656.92). Because the Company Locations are affiliates, dermani pays one premium that covers all six Locations, and the table has allocated the total amount on a pro-rata basis based upon the Gross Revenue of each Company Location. Your insurance premiums may be higher on a per dermani MEDSPA basis.

• “Payroll Expenses” means the total amount each Company Location paid its employees in 2022 for the types of payroll expenses that a franchisee is likely to incur in operating its dermani MEDSPA, including pay, benefits, and payroll taxes.

• The number and type of specific personnel varies among each Location, but generally includes 1 to 2 front desk coordinators per Company Location, 3 to 7 full-time employee (“FTE”) estheticians/laser practitioners per Company Location, and 1 to 3 nurse practitioners and/or physician assistant cosmetic injectors per Company Location.

• Because dermani does not contract with a PC or management company, Payroll Expenses also includes each Company Location’s medical director’s fees. Payroll Expenses does not include any amounts that you (or an Operating Principal) may pay yourself.

• “Professional Fees” means those estimated accounting and legal fees that dermani would anticipate a dermani MEDSPA to incur in any given year, for an existing dermani MEDSPA operation.

• “Rent Expense” means the total amount that each Company Location paid to its landlord for rent, CAM, and all other expenses charged by the respective landlord during the Measurement Period. Excluded are any pro-rated costs of space related to the delivery of Coolsculpting services.

• “Spa Supplies” means the actual amount that each Company Location spent on various supplies, including, without limitations, chemical peels, gloves, towels, and table covers. The Spa Supplies do not include the items described in the Cost of Goods Sold. This line item also includes expenses that dermani requires for its designated supplier to inspect biohazards waste and OSHA compliance.

• “Total Expenses” does not include certain expenses incurred by the Company Locations, including sales and property taxes, costs and expenses incurred by dermani to attend continuing education programs, meals and entertainment, and non-recurring repairs and maintenance.

• “Net Income” means the Gross Profit After COGS minus the Total Expenses.

Part 2 – Franchised Locations During Measurement Period (2022 Calendar Year)

Franchised Location 1

Opened Since:  October 2020

Gross Revenue:  $855,670

Disclosed Expenses

• Cost of Goods Sold:  $376,210
• Rent:  $81,207

Franchised Location 2

Opened Since:  December 2020

Gross Revenue:  $775,611

Disclosed Expenses

• Cost of Goods Sold:  $211,681
• Rent:  $57,909

Franchised Location 3

Opened Since:  June 2018

Gross Revenue:  $979,375

Disclosed Expenses

• Cost of Goods Sold:  $377,481
• Rent:  $57,814

Franchised Location 4

Opened Since:  April 2021

Gross Revenue:  $1,633,509

Disclosed Expenses

• Cost of Goods Sold:  $578,399
• Rent:  $49,461

Franchised Location 5

Opened Since:  May 2021

Gross Revenue:  $983,159

Disclosed Expenses

• Cost of Goods Sold:  $284,301
• Rent:  $81,512

Franchised Location 6

Opened Since:  July 2021

Gross Revenue:  $625,547

Disclosed Expenses

• Cost of Goods Sold:  $196,737
• Rent:  $69,023

Average

Gross Revenue:  $975,478 (100.0%)

Disclosed Expenses

• Cost of Goods Sold:  $337,468 (34.6%)
• Rent:  $66,154 (6.8%)

• “Gross Revenue” has the same meaning as Part 1 above. One Franchised Location (Franchised Location #2) also performs services that will not be offered or sold at franchised dermani MEDSPAs, such as Coolsculpting. Therefore, the revenues received from this service at this one Location has been excluded from the Gross Revenue figures for that Location in the table above.

• “Cost of Goods Sold” has the same meaning as Part 1 above. To the extent Locations had costs or expenses for items such as Coolsculpting cycles that will not be used, offered, or sold at franchised dermani MEDSPAs, those costs were excluded from the Cost of Goods Sold.

• “Rent” means the total amount that each Franchised Location reported as paying during the Measurement Period.

• Franchised Location 3 was a company location that was sold and converted to a franchise in August 2022.

Part 3 – Systemwide Membership Fees Collected in 2021 and 2022 Calendar Years

• Presented below are the total systemwide annual Gross Revenues from membership fees that were collected throughout 2021 and 2022 by all company and franchised locations that were open for any amount of time during 2021 and 2022. This includes 5 franchised locations in 2021 and 9 franchised locations in 2022, and 6 company locations in 2021 and 2022.

Company Outlets

• Total Amount of Membership Fees Collected in 2021:  $4,145,898
• Total Amount of Membership Fees Collected in 2022:  $4,659,014
• % Increase:  12%

Franchise Outlets

• Total Amount of Membership Fees Collected in 2021:  $598,190
• Total Amount of Membership Fees Collected in 2022:  $2,017,708
• % Increase:  237%

Total

• Total Amount of Membership Fees Collected in 2021:  $4,744,088
• Total Amount of Membership Fees Collected in 2022:  $6,676,812
• % Increase:  41%

• These figures represent the membership fee portion only and do not reflect any upgrades to premium services at actual delivery of service or any other Gross Revenues collected by the locations.

Part 4 – Systemwide Number and Amount of Membership Fees Collected in December 2022

• Presented below are the total systemwide number of memberships and membership fees that were collected in December 2022, by all company and franchised locations that were open and operating throughout December 2022. This includes 9 franchised locations and 5 company locations.

Company Outlets

• Total Number of Memberships Processed in December 2022:  6,577
• Total Amount of Membership Fees Collected in December 2022:  $363,403

Franchise Outlets

• Total Number of Memberships Processed in December 2022:  3,891
• Total Amount of Membership Fees Collected in December 2022:  $221,242

Total

• Total Number of Memberships Processed in December 2022:  10,468
• Total Amount of Membership Fees Collected in December 2022:  $584,645

• These figures represent the membership fee portion only and do not reflect any upgrades to premium services at actual delivery of service or any other Gross Revenues collected by the locations.

• The financial information dermani used in preparing the preceding financial performance representations was based entirely upon unaudited information reported to it by each affiliate that operates the respective Location. Prospective franchisees or sellers of franchises should be advised that no certified public accountant has audited these figures or expressed his/her opinion with regard to their contents or form.

Section VI – dermani MEDSPA Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️