Sola Salons: $428K Average Sales vs. $1.02M-$2.10M Franchise Cost

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

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

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

Section III – Number of franchised and company-owned Sola Salons 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 Sola Salons franchise opportunity

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

• month 1 to 12 average, median, highest, and lowest occupancy percentage for the Sola Salons franchised locations that: (a) operated in the United States under a Franchise Agreement; (b) had been open and continuously operating for at least 12 months; and (c) submitted all required occupancy reports under the Franchise Agreement during its first 12 months of operations

• December 2022 average, median, highest, and lowest occupancy percentage for the Sola Salons franchised locations that: (a) operated in the United States under a Franchise Agreement; (b) had been open for at least 13 months; and (c) submitted all required occupancy reports under the Franchise Agreement for the month of December 2022

• 2020, 2021, and 2022 average, median, highest, and lowest gross revenue (full year and by quarter) for the Sola Salons franchised locations that: (a) operated in the United States under a Franchise Agreement; (b) had been open for at least 13 months; and (c) submitted all required revenue reports during 2020, 2021, or 2022, as applicable

• 2022 average, median, highest, and lowest gross revenue and operating profit, and average operating expenses (marketing expense, utility expense, repairs and maintenance expense, Royalty and National Marketing Fund Contribution expense, lease expense, labor expense, and general and administrative expense) for the 38 company-owned Sola Salons locations in the United States that: (a) had been open for at least 13 months; (b) operated continuously throughout 2022; and (c) was not under contract to be purchased by Sola Salons or any of its affiliates at any time during 2022

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

Section I – Sola Salons Franchise Costs

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

• Initial Franchise Fee:  $55,000
• Travel and Living Expenses:  $2,500 to $4,000
• Site Selection Assistance:  $0 to $3,500
• Rent Manager Property Management Software (6 months):  $744 to $1,044
• Architectural Fees:  $10,000 to $30,000
• Rent or Real Estate:  $21,000 to $199,000
• Design Services:  $3,200 to $5,000
• Improvements/Conversions:  $705,600 to $1,305,000
• Furniture and Fixtures:  $147,000 to $315,000
• Signage:  $10,000 to $20,000
• Utilities:  $1,311 to $16,645
• Operating Supplies:  $1,000 to $10,000
• Advertising/Marketing:  $10,900 to $20,000
• Insurance (yearly basis):  $6,500 to $10,000
• Computer Equipment and Software:  $1,300 to $2,300
• Repairs and Maintenance:  $2,859 to $20,673
• Labor:  $9,000 to $33,369
• Additional Funds for Initial 3 Months:  $20,000 to $50,000
• Total Estimated Sola Salons Franchise Costs:  $1,028,914 to $2,100,531

Section II – Sola Salons’ Initial Franchise Fee, Royalty Fee, and Marketing Fee

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

• Initial Franchise Fee:  $41,000 to $55,000
• Royalty Fee:  5.5% of Gross Revenue, minimum of $500 per month
• National Marketing Fund (“NMF”):  up to 2% of Gross Revenue per month; currently 1.5% of Gross Revenue
• Marketing Cooperative:  as established by Marketing Cooperative, but not to exceed 2% of monthly Gross Revenue

Section III – Number of Franchised and Company-Owned Sola Salons Outlets

Franchised

2020

• Outlets at the Start of the Year:  459
• Outlets at the End of the Year:  512
• Net Change:  +53

2021

• Outlets at the Start of the Year:  512
• Outlets at the End of the Year:  555
• Net Change:  +43

2022

• Outlets at the Start of the Year:  555
• Outlets at the End of the Year:  585
• Net Change:  +30

Company-Owned

2020

• Outlets at the Start of the Year:  25
• Outlets at the End of the Year:  30
• Net Change:  +5

2021

• Outlets at the Start of the Year:  30
• Outlets at the End of the Year:  39
• Net Change:  +9

2022

• Outlets at the Start of the Year:  39
• Outlets at the End of the Year:  61
• Net Change:  +22

Section IV – News Updates on the Sola Salons Franchise

• Sola Salons Achieves Growth Milestone With Opening of 700th Location

• The Flexibility of Sola Salons’ Franchise Model With Lori Merrall

• Sola Salons Achieves Prestigious, Industry-First Milestone of 20,000 Independent Beauty Professionals

• Sola Salons Reports Rapid Expansion with Signing of Nine Development Agreements

• Salon Freedom Acquires 9 Sola Salons Locations in Houston; Expanding Operator’s Presence Into Texas

• Fast-Growing Franchise Sola Salon Studios Sees Memphis as an Expansion Market

• Sola Salons Ranked No. 72 on Entrepreneur’s 2024 Franchise 500 List

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

Part 1 – Median and Average Occupancy by Month During the First 12 Months of Operations for Franchise Locations Satisfying the New Location Occupancy Reporting Criteria

• The following table includes information regarding the total number of Sola Salons franchise locations in the United States that met or exceeded all of the following criteria as of December 31, 2022 (“New Location Occupancy Reporting Criteria”): (a) operated in the United States under a Franchise Agreement; (b) had been open and continuously operating for at least 12 months; and (c) submitted all required occupancy reports under the Franchise Agreement during its first 12 months of operations.

• The New Location Occupancy Reporting Criteria excludes any Sola Salons locations (i) located outside the United States; (ii) owned, operated, or under contract to be purchased by Sola Salons or any of its affiliates at any time during 2022; (iii) reporting over 100% occupancy (as such reporting may suggest an error in the data); and (iv) first opened for business prior to calendar year 2016 (as month-by-month occupancy data for the first 12 months of operations is not available for locations that opened prior to 2016).

• The characteristics of the Sola Salons franchise locations included in the following table do not differ materially from those of a franchise offered under the Disclosure Document.

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

• To calculate the median and average Occupancy, Sola Salons analyzed occupancy records and reports for the first 12 months opening, as reported by franchisees of each of the Sola Salons franchise locations satisfying the New Location Occupancy Reporting Criteria as of December 31, 2022.

Month 1

• Average Occupancy:  48.9%
• Median Occupancy:  44.8%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  2.5%

Month 2

• Average Occupancy:  55.2%
• Median Occupancy:  50.0%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  3.8%

Month 3

• Average Occupancy:  60.0%
• Median Occupancy:  60.0%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  2.9%

Month 4

• Average Occupancy:  63.6%
• Median Occupancy:  64.3%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  2.9%

Month 5

• Average Occupancy:  67.5%
• Median Occupancy:  70.4%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  2.9%

Month 6

• Average Occupancy:  69.7%
• Median Occupancy:  71.9%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  3.1%

Month 7

• Average Occupancy:  72.4%
• Median Occupancy:  75.7%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  7.7%

Month 8

• Average Occupancy:  74.6%
• Median Occupancy:  80.6%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  10.3%

Month 9

• Average Occupancy:  76.7%
• Median Occupancy:  82.1%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  12.1%

Month 10

• Average Occupancy:  78.2%
• Median Occupancy:  85.3%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  12.1%

Month 11

• Average Occupancy:  79.8%
• Median Occupancy:  87.1%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  11.5%

Month 12

• Average Occupancy:  81.3%
• Median Occupancy:  90.3%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  11.5%

• As of December 31, 2022, Sola Salons had 585 Sola Salons franchised locations open and operating in the United States. Of this total, 303 (51.8%) met the New Location Occupancy Reporting Criteria and 282 (48.2%) Sola Salons locations did not meet the New Location Occupancy Reporting Criteria.

Part 2 – Median and Average Occupancy for Franchise Locations Satisfying the Occupancy Reporting Criteria as of December 31, 2022

• The following table includes information regarding the total number of Sola Salons franchise locations in the United States that met or exceeded all of the following criteria as of December 31, 2022 (“Occupancy Reporting Criteria”): (a) operated in the United States under a Franchise Agreement; (b) had been open for at least 13 months; and (c) submitted all required occupancy reports under the Franchise Agreement for the month of December 2022.

• The Occupancy Reporting Criteria excludes any Sola Salons locations (i) located outside the United States; (ii) owned, operated, or under contract to be purchased by Sola Salons or any of its affiliates at any time during 2022; and (iii) reporting over 100% occupancy (as such reporting may suggest an error in the data).

• The operations of Sola Salons locations are not seasonal and, in Sola Salons’ experience, occupancy rates in December are consistent with occupancy rates at other times in the year.

• The characteristics of the Sola Salons franchise locations included in the following table do not differ materially from those of a franchise offered under the Disclosure Document.

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

• To calculate the median and average Occupancy, Sola Salons analyzed occupancy records and reports for the month of December 2022, as reported by franchisees of each of the Sola Salons franchise locations satisfying the Occupancy Reporting Criteria as of December 31, 2022. Sola Salons then provided the lowest occupancy percentage and the highest occupancy percentage.

• Average Occupancy:  89%
• Median Occupancy:  93%
• Highest Occupancy Percentage in Range:  100%
• Lowest Occupancy Percentage in Range:  23%

• As of December 31, 2022, Sola Salons had 585 Sola Salons franchised locations open and operating in the United States. Of this total, 532 (90%) met the Occupancy Reporting Criteria and 53 (10%) Sola Salons locations did not meet the Occupancy Reporting Criteria.

Part 2 – Franchised Sola Salons Average and Median Gross Revenue for 2020, 2021, and 2022

• The following table includes 2020, 2021, and 2022 Gross Revenue information regarding the Sola Salons franchise locations in the United States that met or exceeded all of the following criteria as of December 31, 2020 (“2020 Reporting Criteria”), December 31, 2021 (“2021 Reporting Criteria”), or December 31, 2022 (“2022 Reporting Criteria”), as applicable: (a) operated in the United States under a Franchise Agreement; (b) had been open for at least 13 months; and (c) submitted all required revenue reports during 2020, 2021, or 2022, as applicable.

• The 2020, 2021, and 2022 Reporting Criteria exclude any Sola Salons locations (i) located outside the United States, or (ii) owned, operated, or under contract to be purchased by Sola Salons or any of its affiliates at any time during 2020, 2021, or 2022, as applicable.

• The median and average information for Gross Revenue was prepared from the records and reports, as reported by franchisees of each of the Sola Salons locations satisfying the 2020 Reporting Criteria, 2021 Reporting Criteria, or 2022 Reporting Criteria, as applicable.

• Pursuant to the Franchise Agreement, “Gross Revenue” includes the total of all income derived from gross sales and gross receipts, whether the income is received by cash, credit, checks, services, property, or other means of exchange and excludes only those sales taxes that a franchisee must by law collect from customers and that franchisee pays to the government, promotional or discount coupons to the extent that franchisee realizes no income, and employee or lessee receipt of services, if free, or any portion not paid for by an employee or studio lessee.

2020

• Average Q1 Gross Revenue:  $80,425.62
• Average Q2 Gross Revenue:  $38,274.11
• Average Q3 Gross Revenue:  $84,951.46
• Average Q4 Gross Revenue:  $92,516.17
• Average Full Year Gross Revenue:  $296,167.36

• Median Q1 Gross Revenue:  $78,605.00
• Median Q2 Gross Revenue:  $37,111.00
• Median Q3 Gross Revenue:  $82,390.00
• Median Q4 Gross Revenue:  $89,085.00
• Median Full Year Gross Revenue:  $284,446.00

2021

• Average Q1 Gross Revenue:  $96,346.33
• Average Q2 Gross Revenue:  $102,810.30
• Average Q3 Gross Revenue:  $105,244.11
• Average Q4 Gross Revenue:  $106,549.87
• Average Full Year Gross Revenue:  $410,950.61

• Median Q1 Gross Revenue:  $91,732.57
• Median Q2 Gross Revenue:  $99,501.17
• Median Q3 Gross Revenue:  $101,493.14
• Median Q4 Gross Revenue:  $103,750.00
• Median Full Year Gross Revenue:  $399,254.07

2022

• Average Q1 Gross Revenue:  $105,593.45
• Average Q2 Gross Revenue:  $106,847.62
• Average Q3 Gross Revenue:  $108,110.69
• Average Q4 Gross Revenue:  $107,837.39
• Average Full Year Gross Revenue:  $428,389.14

• Median Q1 Gross Revenue:  $101,635.85
• Median Q2 Gross Revenue:  $101,665.00
• Median Q3 Gross Revenue:  $102,872.00
• Median Q4 Gross Revenue:  $104,580.00
• Median Full Year Gross Revenue:  $407,810.13

Part 3 – Company-Owned Sola Salons Average and Median Gross Revenue and Operating Profit for 2022

• The following tables include 2022 Gross Revenue, Operating Profit, and operating expenses figures regarding the company-owned Sola Salons locations in the United States that met or exceeded all of the following criteria as of December 31, 2022 (“Company Reporting Criteria”): (a) had been open for at least 13 months; (b) operated continuously throughout 2022; and (c) was not under contract to be purchased by Sola Salons or any of its affiliates at any time during 2022.

• The Company Reporting Criteria excludes a Sola Salons location that received primarily non-operating income during 2022 from insurance proceeds following property damage and business interruption.

• At the end of Sola Salons’ most recent fiscal year ended December 31, 2022, Sola Salons had a total of 61 company-owned Sola Salons locations. Of those, 38 (62%) met the Company Reporting Criteria. The company-owned Sola Salons locations that met the Company Reporting Criteria operate in Colorado (16) and California (22), which are markets where the Sola Salons brand is well known and established. Future franchised Sola Salons locations may be located in undeveloped, underdeveloped, or emerging markets in terms of the brand’s market penetration.

• No company-owned Sola Salons locations closed in 2022.

• Number of Sola Salons That Met the Company Reporting Criteria:  38

• Average Gross Revenue:  $475,381.83
• Number/Percentage That Met or Exceeded Average Gross Revenue:  16 / 42%
• Median Gross Revenue:  $449,661.86
• Highest Gross Revenue:  $735,365.41
• Lowest Gross Revenue:  $212,917.62

• Average Operating Profit:  $171,096.45
• Number/Percentage That Met or Exceeded Average Operating Profit:  19 / 50%
• Median Operating Profit:  $174,687.10
• Highest Operating Profit;  $318,981.04
• Lowest Operating Profit:  $33,539.69

• The following table includes 2022 Gross Revenue and operating expenses data regarding the company-owned Sola Salons locations in the United States that met the Company Reporting Criteria.

• Average Gross Revenue:  $475,381.83 (100%)
• Marketing Expense:  $1,759.97 (0.37%)
• Utility Expense:  $27,567.21 (5.80%)
• Repairs and Maintenance Expense:  $26,069.28 (5.48%)
• Royalty and National Marketing Fund Contribution Expense:  $29,699.43 (6.25%)
• Lease Expense:  $215,694.84 (45.37%)
• Labor Expense:  $2,618.76 (0.55%)
• General and Administrative:  $4,142.04 (0.87%)

• “Operating Profit” means Gross Revenue minus all ordinary and recurring operating expenses before the deduction of expenses for interest, income taxes, depreciation, and amortization.

• Company-owned Sola Salons marketing expense does not include the fees, wages, or salaries of employees or agencies providing marketing services for these locations. Franchisees may choose to hire an agency or employee to assist with marketing franchised Sola Salons. Some franchise owners elect to provide their own marketing services or have a general manager perform marketing services.

• Franchisees are required to spend a minimum $3,600 per year on local marketing. Sola Salons also recommends franchisees spend an additional minimum of $10,000 towards pre-opening and post-opening marketing in the franchisee’s individual market during the first year of operation.

• The Royalty Fee for company-owned Sola Salons is 5% of Gross Revenue. By contrast, the Royalty Fee for franchisees under the current form of Franchise Agreement is 5.5% of Gross Revenue. Company-owned Sola Salons locations contribute to the National Marketing Fund on the same basis as franchisees: 1.5% of Gross Revenue. In 2022, Sola Salons elected to waive the Royalty Fee and National Marketing Fund contribution for franchisee and company-owned outlets for the months of October and November.

• At the same Royalty Fee paid by new franchisees (5.5% of Gross Revenue) plus the National Marketing Fund contribution paid by franchisees and company-owned Sola Salon locations (1.5% of Gross Revenue), the combined average Royalty and National Marketing Fund Expense for these company-owned Sola Salons locations would have been approximately $33,276.73 for the full 12 months of 2022.

• Lease Expense will vary greatly depending on the area of the country the Sola Salons is located. These company-owned Sola Salons locations that met the Company Reporting Criteria operate in Colorado (16) and California (22) and have an average of 6,143 square feet. Sola Salons locations typically range from 4,200 square feet to 9,000 square feet, and the average Sola Salons franchised location is approximately 6,000 square feet.

• Company labor costs does not include wages or salaries of the personnel managing these locations. For both company-owned Sola Salons and franchised Sola Salons, a single employee may manage one or multiple Sola Salons. Multiple company-owned Sola Salons are managed by a single, shared employee.

• Some franchise owners elect to serve as the manager of their Sola Salons franchised location(s); whether or how much such franchise owners paid themselves for such managerial role is left to their sole discretion.

• If each company-owned Sola Salons location were managed by a single site-specific employee, the additional imputed annual labor cost for such manager would be at least $36,000.

• A franchisee’s labor costs will vary depending on the number of employees the franchisee hires to manage the franchised location(s) as well as prevailing wage rates in that area of the country.

• A franchisee may incur additional costs not described above, including, for example, regarding insurance. Insurance expenses for Sola Salons and its affiliates (including regarding company-owned Sola Salons) are shared and distributed among various affiliates. A franchisee’s insurance expense will be between $6,500 to $10,000 annually for a single location.

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