Relax The Back Franchise: Average Sales ($1.05M) vs. Cost ($190K-$392K)

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

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

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

Section III – Number of franchised and company-owned Relax The Back 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 Relax The Back franchise opportunity

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

• 2022 average, median, high, and low adjusted gross sales, by quartile, for the 77 franchised traditional Relax The Back Stores that were open for the company’s entire fiscal year ended December 31, 2022

• 2022 average adjusted gross sales, by month, for the 77 franchised traditional Relax The Back Stores that were open for the company’s entire fiscal year ended December 31, 2022

• 2022 average, median, high, and low gross profit, personnel costs, marketing costs, and facility cost for the 73 franchised traditional Relax The Back Stores that delivered their annual financial reports to Relax The Back and did not change ownership during 2022

• 2022 average, median, high, and low total revenue, net income, and owner’s discretionary income for the 73 franchised traditional Relax The Back Stores that delivered their annual financial reports to Relax The Back and did not change ownership during 2022

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

Section I – Relax The Back Franchise Costs

• Relax The Back franchise costs, based on Item 7 of the company’s 2023 FDD:

• Initial Franchise Fee:  $5,000 to $29,500
• Real Property Improvements:  $0 to $75,000
• Rent/Security Deposit:  $5,000 to $20,000
• Equipment, Fixtures, and Supplies:  $33,230 to $47,960
• Initial Inventory:  $17,500
• Other Inventory:  $74,900 to $93,000
• Training-Related Expenses:  $2,000 to $7,500
• Grand Opening Expenses:  $10,000
• Insurance:  $3,000 to $5,000
• Exterior Signs:  $6,600 to $19,800
• Computer Hardware and Software:  $3,020 to $3,050
• Visual Merchandising Fee:  $0 to $4,000
• Additional Funds for 6 Months:  $30,000 to $60,000
• Total Estimated Relax The Back Franchise Costs:  $190,250 to $392,310

Section II – Relax The Back’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

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

• Initial Franchise Fee:  $29,500
• Continuing Royalty Fee:  For your first Store: (i) no fee for first 12 months; (ii) 5% of Adjusted Gross Sales for months 13-24; and (iii) for months 25+, the greater of 5% or $1,875. For your second or subsequent Store: (i) for the first 12 months, 3% for Adjusted Gross Sales up to $500,000, then 4% for the remaining year; (ii) 4% of Adjusted Gross Sales for months 13-24; and (iii) for months 25+, the greater of 4% or $1,875
• Marketing Fund Fee:  2% of Adjusted Gross Sales

Section III – Number of Franchised and Company-Owned Relax The Back Outlets

Franchised

2020

• Outlets at the Start of the Year:  85
• Outlets at the End of the Year:  82
• Net Change:  -3

2021

• Outlets at the Start of the Year:  82
• Outlets at the End of the Year:  81
• Net Change:  -1

2022

• Outlets at the Start of the Year:  81
• Outlets at the End of the Year:  79
• Net Change:  -2

Company-Owned

2020

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  1
• Net Change:  -1

2021

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  2
• Net Change:  +1

2022

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

Section IV – News Updates on the Relax The Back Franchise

• Entrepreneur Names Health & Wellness Category a Hot Opportunity for 2022

• Relax The Back Did Not Rank on Entrepreneur’s 2023 Franchise 500 List

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

• The following Item 19 provides information for the 77 franchised Traditional Relax The Back Stores that were open for Relax The Back’s entire fiscal year ended December 31, 2022 (the “Item 19 Stores”), which excludes: (i) 3 franchised locations that closed in 2022, (ii) 1 franchised location that opened in 2022, and (iii) 1 franchised Relax The Back Store that did not constitute a Traditional Relax The Back Store (operating as a store-in-store franchise).

• As used in this Item 19, “Adjusted Gross Sales” includes all revenue (except sales tax collected and paid when due to the appropriate taxing authority, delivery fees charged, and actual customer refunds, adjustments, and credits) which are, or could be, received or earned by you (and/or any affiliate and/or on/for your behalf or benefit):

• (1) by, at, or with respect to a Relax The Back Store;
• (2) which relate to the type of goods or services which are or could be provided, sold, rented, or otherwise distributed at, through, or in association with a Relax The Back Store;
• (3) with respect to any goods or services which are, or could be, distributed in association with the Marks or the Relax The Back System, or the operation of any Similar Business (but Relax The Back’s receipt of any royalties with respect to any Similar Business will not constitute approval of your involvement with any Similar Business); and/or
• (4) with respect to any co-branding activities.

• All sales and billings, whether collected or not, will be included in Adjusted Gross Sales, with no deduction for credit card or other charges.

• All information presented in this Item 19 for franchised Relax The Back Stores is based on the financial reports Relax The Back receives from franchisees. These figures are unaudited, and Relax The Back has not reviewed or verified the information reported to it by its franchisees.

Part 1 – 2022 Annual Adjusted Gross Sales (by Quartile) for Franchised Item 19 Stores

• The following table provides annual Adjusted Gross Sales for all 77 franchised Item 19 Stores.

• These Item 19 Stores were divided into 4 quartiles based on each Item 19 Store’s annual Adjusted Gross Sales in the calendar year ended December 31, 2022.

• Quartile 1 represents those Item 19 Stores with the highest annual Adjusted Gross Sales in the calendar year ended December 31, 2022, and the other Quartiles are in descending order with Quartile 4 representing those Item 19 Stores with the lowest annual Adjusted Gross Sales in the calendar year ended December 31, 2022.

Quartile 1

• Units in Quartile:  19
• Average Annual Adjusted Gross Sales:  $1,677,677
• Low Annual Adjusted Gross Sales:  $1,164,735
• High Annual Adjusted Gross Sales:  $3,357,491
• Median Annual Adjusted Gross Sales:  $1,507,581
• Number/Percentage That Met or Exceeded Average:  5 (26.3%)

Quartile 2

• Units in Quartile:  19
• Average Annual Adjusted Gross Sales:  $1,060,718
• Low Annual Adjusted Gross Sales:  $961,795
• High Annual Adjusted Gross Sales:  $1,162,127
• Median Annual Adjusted Gross Sales:  $1,070,161
• Number/Percentage That Met or Exceeded Average:  11 (57.8%)

Quartile 3

• Units in Quartile:  19
• Average Annual Adjusted Gross Sales:  $868,324
• Low Annual Adjusted Gross Sales:  $773,195
• High Annual Adjusted Gross Sales:  $956,114
• Median Annual Adjusted Gross Sales:  $874,976
• Number/Percentage That Met or Exceeded Average:  11 (57.8%)

Quartile 4

• Units in Quartile:  20
• Average Annual Adjusted Gross Sales:  $650,048
• Low Annual Adjusted Gross Sales:  $471,962
• High Annual Adjusted Gross Sales:  $768,108
• Median Annual Adjusted Gross Sales:  $664,904
• Number/Percentage That Met or Exceeded Average:  10 (50%)

All Stores

• Units in Quartile:  77
• Average Annual Adjusted Gross Sales:  $1,058,813
• Low Annual Adjusted Gross Sales:  $471,962
• High Annual Adjusted Gross Sales:  $3,357,491
• Median Annual Adjusted Gross Sales:  $956,114
• Number/Percentage That Met or Exceeded Average:  30 (38.9%)

Part 2 – 2022 Average Adjusted Gross Sales by Month for All Item 19 Stores

• The following table provides the average Adjusted Gross Sales by calendar month for the Item 19 Stores during the calendar year ended December 31, 2022.

• January 2022:  $94,209
• February 2022:  $95,330
• March 2022:  $98,556
• April 2022:  $94,807
• May 2022:  $85,664
• June 2022:  $87,143
• July 2022:  $78,295
• August 2022:  $83,640
• September 2022:  $85,557
• October 2022:  $75,370
• November 2022:  $77,943
• December 2022:  $102,300

Part 3 – 2022 Annual Costs for Franchised Item 19 Stores

• The following table provides certain cost data for 73 franchised Item 19 Stores, which in addition to the exclusions noted in the methodology section above, excludes: (1) 1 franchised Item 19 Store that failed to deliver its annual financial reports, and (2) 3 franchised Item 19 Stores that changed ownership during 2022 and therefore were not able to deliver a consistently prepared accounting record.

Adjusted Gross Sales

• Average:  $1,096,009 (100.0%)
• Median:  $983,043
• Low:  $496,498
• High:  $3,478,398
• Number/Percentage That Met or Exceeded Average:  26 / 35.6%

Gross Profit

• Average:  $609,396 (55.6%)
• Median:  $546,469
• Low:  $242,345
• High:  $2,021,475
• Number/Percentage That Met or Exceeded Average:  29 / 39.7%

Personnel Costs

• Average:  $150,989 (13.7%)
• Median:  $133,596
• Low:  $15,179
• High:  $803,041
• Number/Percentage That Met or Exceeded Average:  27 / 36.9%

Marketing Costs

• Average:  $56,929 (5.2%)
• Median:  $50,208
• Low:  $7,030
• High:  $282,490
• Number/Percentage That Met or Exceeded Average:  26 / 35.6%

Facility Cost

• Average:  $122,222 (11.5%)
• Median:  $118,283
• Low:  $24,000
• High:  $269,109
• Number/Percentage That Met or Exceeded Average:  29 / 39.7%

• Gross profit is calculated as Adjusted Gross Sales less cost of goods sold.

• Cost of goods includes product costs, freight, and delivery.

• Personnel costs include all wages, employment taxes, and benefits reflected on the applicable franchisee’s financial statements. The column identifying the number/percentage that met or exceeded the average is the number of franchisees who had lower personnel costs than the shown average.

• Marketing costs include expenditures for local advertising, marketing, and promotions. It does not include contributions to the Marketing Fund. The column identifying the number/percentage that met or exceeded the average is the number of franchisees who had lower marketing costs than the shown average.

• Facility cost includes rent, CAM, utilities, repair, and maintenance. The column identifying the number/percentage that met or exceeded the average is the number of franchisees who had lower facility costs than the shown average.

Part 4 – 2022 Annual Owner’s Discretionary Cash Flow for Franchised Item 19 Stores

• The following table provides certain cost data for 73 franchised Item 19 Stores, which in addition to the exclusions noted in the methodology section above, excludes: (1) 1 franchised Item 19 Store that failed to deliver its annual financial reports, and (2) 3 franchised Item 19 Stores that changed ownership during 2022 and therefore were not able to deliver a consistently prepared accounting record.

Total Revenue

• Average:  $1,096,009
• Median:  $983,043
• Low:  $496,498
• High:  $3,478,398
• Number/Percentage That Met or Exceeded Average:  26 / 35.6%

Net Income

• Average:  $103,365
• Median:  $75,620
• Low:  -$78,443
• High:  $848,384
• Number/Percentage That Met or Exceeded Average:  29 / 39.72%

Owner’s Discretionary Cash Flow

• Average:  $144,015
• Median:  $110,943
• Low:  -$68,202
• High:  $871,218
• Number/Percentage That Met or Exceeded Average:  30 / 41.09%

Owner’s Discretionary Cash Flow Percentage

• Average:  13.14%
• Median:  10.12%
• Low:  -13.73%
• High:  25.04%
• Number/Percentage That Met or Exceeded Average:  29 / 39.72%

• “Total Revenue” is calculated as the total gross revenue from the Store’s operations. This is not the same calculation as Adjusted Gross Sales described above and used to calculate the Continuing Royalty Fee and other fees based on Adjusted Gross Sales. As described further above, Adjusted Gross Sales subtracts certain categories of revenue such as customer refunds, adjustments, and credits, which are not excluded from Total Revenue.

• “Net Income” is calculated as Total Revenue, less the total cost of operations of the Store, including lease expenses, payroll, cost of goods sold, interests, amortization, taxes, the Continuing Royalty Fee, and all other associated costs and deductions reflected on the applicable franchisee’s financial statements.

• “Owner’s Discretionary Cash Flow” is calculated as Net Income, plus the compensation paid by the owner of such Store to himself/herself and his/her direct family members, including personal expenses, retirement contributions, travel, insurance, auto expenses, and cell phone expenses. These expenses were deducted from the calculation of Net Income, but added back in the calculation above of Owner’s Discretionary Cash Flow.

• “Owner’s Discretionary Cash Flow Percentage” is calculated as the total amount of the Owner’s Discretionary Cash Flow, divided by the Total Revenue.

• The numbers provided in this Item 19 are historic numbers for certain Relax The Back Stores. Some franchises have earned this amount. Your individual results may differ. There is no assurance that you’ll earn as much.

Section VI – Relax The Back Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️