Franchise Med Spa Investment Breakdown (2025)
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So my suspicion is when you dig into this, location number one is doing pretty good. Location number two is struggling because she, he has struggled to scale. And there's also that effect that caused people to really, you know, take care of their looks and, you know, kind of consider that more of a necessity than a luxury. Can somebody not get Botox? Sure. But will they? I would think once you are on that train, you're inclined to continue. Another episode of Acquisition Anonymous.

We don't have 100% beard anymore. And thumbs down on just the plus inventory alone.

Welcome to Acquisitions Anonymous, internet's number one podcast about buying, selling, and investing in small businesses. Today, myself, Michael, Heather, and Connor, we went through and looked at a deal in my hometown of San Antonio, Texas, that is in the med spa space. And it was kind of surprising how we felt about it. So here's the episode. Hope you enjoyed it. We enjoyed making it for you. And stay tuned for the episode after a quick message from our sponsor.

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And we're proud to call Walker and Chelsea, the lab's director, longtime friends of the podcast. They're passionate about helping entrepreneurs like you take the next big step. So don't wait to make your business ownership dream a reality. Visit acquisitionlab.com today to learn more and schedule your free consultation. And when you do, be sure to tell them the Acquisitions Anonymous podcast sent you. How's everybody doing? Also, why are you guys wearing the same clothes as last week? I've just been wearing this all week. Yeah.

It's not smelling very good, but I like it. How is weather in SoCal, Heather? Is it crazy again? Have you guys put on the parkas because it dropped below 70 or what's up? It was. Yes. This morning I actually said it was freezing and it was like 65. And so, yeah, to me that was freezing. But no, it's actually nice. We have nice spring weather. The sun is out. Like we're going to the beach to walk on the weekends. It's beautiful. Not too hot yet. This is a great time to...

visit if anyone's thinking about that. And how close is your whole life to like being the movie Point Break, like on a scale of one to 10? It's not that close, but...

But we've got beautiful scenery. We can always, you know, if we're having a bad day in Southern California, you can just get outside and see something so beautiful in nature that you go, okay, I guess everything's fine. Connor, have you ever rented a car and gone and drove around SoCal? Like doing the same thing, go to LA drive? I have not been to SoCal. I need to get to SoCal. But yeah. I highly recommend it. There's a drive. You could do the drive. You can rent like a car in San Diego and drive up to LA. Yeah.

But if you go through Orange County, there's like a Whole Foods that's like on a cliff, like overlooking the ocean, the Pacific Ocean. And like the, what's the name of the train? The California Zephyr? Is that the one? Oh yeah. The train goes right along the coast. It's beautiful. Like you're sitting there watching like the trains coming through. There's like whales out there. Like it's the most crazy Whole Foods in history. And you can like just sit out front and- Whales, dolphin, seals. It's beautiful. Highly recommend it.

So Connor, you brought a deal and it's in San Antonio. Are you kidding me? Let's go.

That I did. I thought we could find a buyer while we're here. And it's MedSpa, so I'm excited. I'm excited now. Yeah, the heading says leading multi-site MedSpa franchise with high margins. So the asking price is $4 million. Gross revenue is just over $3 million with $813K of cash flow. They pay $5,700 a month per rent. And it says multi-site, so I don't know if that's combined or that seems low to be combined, but we'll see.

FF&E of 185K and was established in 2022.

So this high-performing med spa offers a unique opportunity for a potential buyer to acquire a thriving business with significant growth potential. The practice has demonstrated impressive revenue growth and has the potential to expand to a new territory. The business operates two locations with a third territory available for expansion, providing a solid foundation for continued growth and a booming market. The practice's focus on injectables as a core offering coupled with high margin product lines like IV vitamin therapy positions it well for future profitability.

The business benefits from being part of a leading franchise system, offering exclusive training, marketing support, and a proven business model. This is a great opportunity for a medical professional or entrepreneur with healthcare experience to enter the rapidly growing aesthetics space.

So sounds like they have two operations that are up and running, and then there's a third territory that they own with the opportunity to develop, which opportunity to develop means obligation to develop typically. Yeah.

I'm glad that they said healthcare professional or someone with a healthcare background, because that's the challenge with this industry is in order, there are regulations, especially when they're doing Botox or injectables, like they said they're doing here. The company that does the billing for that service has to be owned by someone who's licensed to do the injections. So either a nurse practitioner or a physician, whatever the local rules require is

And for someone who's a non-physician to own a business like this, they have to set up a workaround basically to that regulation. And we call that an MSO or a medical service organization where they basically create a pass-through entity that is owned by the physician.

And the revenue just passes through that into the operating business that the non-healthcare professional can own. But however you slice it, it's a workaround. The regulation still says what it says. And this MSO situation is sort of a workaround. So it's kind of in a gray area in some states, depending on what the rules are there.

Holy crap, I know this broker. I just looked at it. I know this guy, Jason. He's here in San Antonio. Yeah, he's a business broker. Yeah, Heather, I know a lot of the franchise organizations, like they establish relationships with MSOs for that reason, which hopefully that's, you know, a way that

This works to the benefit of being a franchise if they have relationships that have been established that can help work that around. So a couple of salient points in here. So the first thing here, it says in support and training, the owner is also willing to continue as a paid injector for up to six months, which that's kind of a sign that this was a technician who decided to get into a franchise owning his or her own injection facility.

kind of franchise, our beauty franchise, med spa franchise here. And then there's another detail here that's pretty interesting. They have two locations and one is 2,100 square foot that is triple net with a monthly rent of $5,700. And then there's another one, which is location number two, which is just about half the size as 1,200 square feet. And it's a sublease, which leads me to believe this owner is probably one of those technician types who has struggled to scale past own

owning and operating the one flagship location where she he works and spends a lot of time being a technician much less being a business owner and operator so my suspicion is when you dig into this location number one is doing pretty good location number two is struggling because she he has struggled to scale i think you nailed it because that was going to be something i was going to ask is why if they just started in 2022 and it seems to be doing reasonably well uh

you know, why are they looking to sell now? But that, that would check out. Also when you, when you lose an injector, sorry, and even whether it's the owner or an employee, you always have a little bit of a drag on earnings when that happens, because it's a very personal service. The, the, the clients follow the injector to wherever, you know, other new salon they go to. So there's a little bit of a risk there that they're only going to be around for six months. It's going to lose some of those clients that are only comfortable with that person.

Heather, that was my point. I don't know if you guys are aware. I spent a weekend and then several hours of my time recording a YouTube video on the med spa industry and why it's boomed. And a good 800 people watched it, some all the way to the end. So it was fantastic. But that was one of the points like...

The part of the reason why this industry hasn't scaled so much is unlike say massage and some of the other kind of semi healthcare services, people pick their injector and they stick with them.

Because ultimately, there's a big downside to the injection. And we haven't talked about the B word here, which is most of the business for these types of med spas is Botox. People getting Botox injections. And people, women now are getting a ton more scared about getting Mar-a-Lago face that they stick to their injectors like glue. So have we talked about Mar-a-Lago face on the...

No, but I immediately knew what you were describing there. It popped right in my head. Yeah. That's real. Yeah. I've heard a lot of my friends go to these like Botox parties too, where they like host it at somebody's house and have the injector come and everybody sits around and drinks wine and they do it all at once. Never been to one personally, but I've just heard about that. And so, yeah, I wonder just how different trends like that could impact your

how inclined people are to get Botox done at a place like this. So some stats here on Botox, I'm going to pull them out of my head, but I got them from doing my video. Only like 5% of the US population has gotten Botox, but like another 3% is strongly considering it. And the second thing is around this, the med spa growth markets, you'll see that like they have a number here that it's 14% CAGR is...

is predicted from 2024 to 2030. The main driver of those assumptions around this growth rate is not Botox. They think generally Botox is going to stay relatively flat and slightly grow because women, especially their appreciation of how they want to look is changing. The whole Mar-a-Lago phase and the duck lips, they don't want to do that.

So, this whole bet is that things like Wigovi and the weight loss stuff will find their way into these med spas and that's where the growth will happen. This whole growth is assuming that new treatments are coming online and that that will provide the top line growth for med spas, not Botox and stuff like that. Where does filler fit into that or does it? I think it's like a pretty small percentage. Yeah.

Because I guess what I was wondering is my understanding is filler, that's something that you do like every year, every two. And Botox is what is it, every quarter? Three months. Yeah, exactly. Botox is your recurring revenue. And that's why...

The valuation on any kind of med spa is going to be higher, a higher percentage it does of Botox because it's recurring revenue or reoccurring revenue, basically. Where all the other treatments you might find someone only does it once or once a year. And a lot of times I think of those other services as a gateway to bring them in for the reoccurring revenue for the Botox.

But I agree with Michael. There's a lot of anti-aging stuff coming online all the time. And I think the more successful of these med spas will be bringing in those new treatments that are sort of cutting edge. But it's hard to know which ones of those are going to be the reoccurring revenue. Everything else kind of so far seems to be like a one-shot deal or once a year maybe.

Do you all know what the, like, what does the COGS look like in a business like this? Like, I have absolutely no idea how much it costs to buy a vial of Botox or whatever. They will usually, the manufacturers of the Botox, and there's competitors to Botox, I forget what they're all called, but they will provide the inventory, basically, they don't pay for it until they use it.

So they provide it for free on the shelf if they'll use it. And then it's almost like a gas station business. The more they inject of that product, the lower their ultimate cost ends up being. So the manufacturers are trying to provide all these incentives to use their product and to push more of it. There are even analytics companies. I'm going to forget the one I saw, the name of it, but...

A lot of these med spas kind of feed into the same anonymized billing systems. And you can buy data on what is the most popular drug or product that is being sold and at what price point. There's all kinds of really fascinating data on that.

Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions. Because when you're buying a business, the best financing isn't one size fits all. There's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things. That's why my company, Viso Business Capital, works with over 30 different lenders to find you the best funding in

less time and with less friction so you can focus on the deal. Sign up for a free live Q&A session on SBA loans at visocap.net. Then click Zoom sign up in the top right corner. That's visocap.net and click Zoom sign up. I think they run at like 60% gross margins, if memory serves. I talked to my buddy who actually is a dermatologist here in

who did Botox for a while when it first came out, because that's how Botox started back in the early 2000s, was the idea where you could go into your dermatologist and they would do the injection. And there were two problems. One is the dermatologist started to do what my buddy did, which was he did not like

doing the procedures because of what was happening with the clients. And he described to me the last Botox injection he ever did was a lady who was basically on public assistance coming in and spending...

$500 on Botox injections that she did not need in his opinion. And it was her last $500. She was coming, she was addicted to the treatment. And he was just like, I don't know why I'm doing this. So basically what happened was is the dermatologists weren't set up for these type of cash patients coming in and doing that type of stuff.

So the lobbying came in from basically the Botox industry, the pharmaceutical industry, to get the laws changed that just these semi-trained injectors could go around just puffing up people's lips and all that kind of stuff. So that's the shift. But the dermatologists, by and large, didn't want to do this stuff because it felt yucky to them. So anyway. Yeah.

But he described to me like the 60% gross margins when he was doing it. He would – it would be a $500 thing and he would pay $200 for the injection. Got it. The play that I've seen go well with med spas is to buy a platform, one good size, well-located med spa and then –

de novo clinics after that. And the idea being that, you know, this is not yet a saturated market. There's lots of areas of the country where there's not a lot of density of these. And so you kind of find your first one to acquire, but then you grow with de novo startup clinics because a lot of times they can become profitable in less than 12 months. So, you know, acquiring two of these with a third location is,

doesn't fit that playbook. I think that's one of the things I'm seeing about this one that I'm not loving. I would rather see someone buy one that's doing well and think about where they might put some de novo clinics after that. Yeah, and this is, you know, franchise med spas, there really aren't as many dominant players in the franchise space in med spas as there are in others. And that could be some of the other reasons that you all are mentioning. But there are several that are growing really quickly because I think that there's a lot of folks that are bullish on

the industry overall. But yeah, it is interesting how there's not, you know, one dominant name that you would think about like you would in boutique fitness or anything like that. So here's another data point. As of late last year, only 3% of med spas were private equity owned.

Pretty small considering like what was the last industry you ran into? Now, there's a lot of them trying to roll these up. But, you know, it comes back to that fundamental challenge that we talked about, which is people follow their injector. And like if you're following your injector, what are you owning as private equity? Like your entire private equity is not known for keeping good employees around. Ask any HVAC roll up.

So to some extent, I think this is still a business that's going to remain pretty darn fragmented over time, which is good, like if you're a small entrepreneur. How do you all think about a business like this in a recessionary environment? Because this to me is an example of how, like I always talk about there are

Two layers to something being discretionary. It's first of all, can someone cut it from their budget? And second of all, will they? And to me, this is an example of where those two things can differ. Can somebody not get Botox? Sure. But will they? I would think once you are on that train, you're inclined to continue. So yeah, how do you think about the durability of something amidst macroeconomic turmoil? Yeah.

I think it's pretty durable because it's beauty related. And actually, I believe they called it the lipstick effect during the Great Recession. The two industries that tended to do well and even grew a little bit were cosmetics and alcohol.

And so the cosmetics, both of them made people feel better when things were bad. And so I think that there is an effect here where people will keep this going. I also think, you know, here we're on screen right now. A lot of people, their work is on Zoom or on screen a lot. And there's also that effect that caused people to really change.

you know, take care of their looks and, and, you know, kind of consider that more of a, uh, necessity than a luxury. So I think it's a little more durable than a lot of other things might be. I remember that being discussed like right on the onset of COVID is that that was part of the thesis was that people were going to be diverting a lot of the resources they would otherwise sink into nice clothes and things like that into their, you know, into their facial appearance. I think that's happened. Uh,

Liquor stores were, at least here in Texas, were considered essential businesses because attics turned out to be pretty durable customers.

And I think a lot of people are addicted to, and it's very important to them that they have some of this Botox stuff going on. And I will say that visits to the salon that our house pays for, it ain't getting cut. Like we're going, we're declaring bankruptcy before that gets cut. What was the other thing I was going to tell you guys about this? I did a whole video about this. It was amazing. Oh, here's the last thing before we kind of start to dig into what we think about this.

I think these two salons, at least one of them is underperforming. This profit margin, I think we did that one, maybe we did that chain of two of these in Vegas, Heather, it was probably two years ago when we did it or a year and a half ago.

And like their profit margin was way higher than this. Like this, just to tell the listeners, they're making $800,000 on 3 million in sales. Like that's super. I remember the one we looked at was at least over 30%. It was much better than this. I think the standards is at least 25% margin. So maybe it's okay. But yeah, I do think the fact that they're saying three locations, I guess two now, and you've got to build out the third. Yeah.

it's probably not fully utilized, especially if the owner is one of the injectors that just, I think you're probably correct about that. Yeah. So, uh,

Before we close, I have a question for you, Connor. The owner wants to be one of your injectors. Would you hire him or her to continue working for you after you buy this? No. I mean, it depends on obviously the situation. Maybe if it's required to transfer customers and stuff, but no. It would have to be a gem of a human being.

personality-wise for me to want the owner in the building every day after I've bought a business. Would you agree? Hiring a newly rich person to come in and work in your business, you either need to give them a very

seductive role that's non-critical or you need to let them see the door. That's typically the way it works. Agreed. It does look like, Heather, they have a monthly membership population, I guess, where people are doing subscriptions for Botox. Right. And then that means as a buyer, you've got some prepaids in there that you've got to make sure you include in your structure of your deal. But I like that. The gift cards in some states...

If they go unused, you can take them into income after a certain period of time. So there's kind of a little extra bonus there. It did say also SBA pre-approved, but I want to say...

If you're a non-healthcare provider and you have to do this MSO, MSO with SBA, it can be done, but super difficult. Most of your banks out there are going to want the pass-through entity and the physician that's your medical director to guarantee the SBA loan, which is a non-starter. So there's only, I've got a couple banks that we've gotten these done without that, but most banks are going to be very confused. Most SBA banks are going to be very confused by the MSO and it makes it

kind of challenging. Yeah. All right. Before we wrap this one up, Heather, where are you? Thumbs up? Thumbs down? I like it. I like med spas. Yeah. Connor? I'm a thumbs up with the caveat of understanding if there's another location that's performing and what is the line of sight to improving that. And then also understanding the obligation that you have to develop that third location. Where is it? How much is it going to cost you to build out, et cetera?

But I love the space. Yeah. I think this has some hair on it. I would probably negotiate them down a good bit. And I still would like the deal. Agreed. Yeah. I like the deal. I mean, the price at 5X, oof. It's a little high. Why isn't everything cheaper, Heather? Why is everything so expensive? I tell people, don't worry what the list price is. Nothing ever sells for that. That's what I'm talking about.

All right, guys, we'll see you next week. Thanks everybody for being here. If you enjoyed this episode, send it to a friend and we'll see you next week.