Perspire Sauna Studio Poised for Expansion (2024)
Perspire Sauna Studio offers customers infrared sauna sessions, chromotherapy, and relaxation. Specifically, they utilize the infrared sauna that combines the centuries-old sauna practice with the modern science of infrared technology and red light therapy. Its first-of-its-kind infrared lighting systems enhance the user experience.
Perspire Sauna Studio is striving to bring the benefits of infrared saunas to communities in a friendly, comfortable, spa-like atmosphere. Managed and co-founded by Lee Braun, the studio positioned itself in the $1.1 trillion dollar wellness economy in 2010. It was founded as the founders were shocked to discover there was no easy way to get a sauna session and they aimed to make the benefits of saunas convenient and accessible to the community. To franchise with them, you only need to have minimal labor and no special licensing, skills, or training is required!
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How is Perspire Sauna Studio Positioned in the Health and Wellness Industry?
The concept of wellness has been around for a long time. From 2013 to 2017, the wellness economy grew by 5.8% annually, a growth rate nearly five times as fast as global economic growth. Due to the last few years, especially the COVID-19 pandemic, people throughout the world have become more self-aware of the importance of health and wellness. McKinsey in 2021 estimated the global wellness market at more than $1.5 trillion, with annual growth of 5 to 10 percent. According to the Global Wellness Institute, in 2022, the global wellness industry will grow to $4 trillion and increase to 9.9% average annual growth.
The US has the largest market size in the health and wellness industry at $52.2 billion in value and $15.1 billion in the spa and sauna sector, creating a wide range of opportunities for prospective franchisees who want to join the industry. As the wellness economy includes eleven sectors, the market size of the spa and sauna sector is earning $68 billion. Although it is relatively low compared to other sectors, this indicates a larger room for growth. Prior to 2020, spa revenues were growing by 8.7% annually but were hit hard by the pandemic. However, it is projected to recover quickly to pre-pandemic levels.
PERSPIRE SAUNA STUDIO COMPETES IN THE WELLNESS INDUSTRY AGAINST OTHER BUSINESSES OFFERING SIMILAR SERVICES, INCLUDING OTHER INFRARED SAUNA FACILITIES AND HEALTH-RELATED ESTABLISHMENTS LIKE HOTWORX. PERSPIRE SAUNA STUDIO FRANCHISES ALSO COMPETE AGAINST OTHER FRANCHISEES IN YOUR TERRITORY.
What is the Perspire Sauna Studio Franchise Cost?
The total investment necessary to begin the operation of a Perspire Sauna Studio franchised business is from $370,890 to $562,230. This includes a $45,000 initial franchise fee that must be paid to the franchisor. If you plan to open a multi-unit franchise, you will need to pay the minimum of an additional $35,000 for the second studio and $30,000 for the third and each additional studio.
Once the operations begin, franchisees are expected to pay the company a royalty fee of 6% on annual gross revenue but no less than $500 per month whichever is greater, an advertising fee of 2% on monthly gross sales, and a local advertising fee of $2,500 minimum per month. There are other fees including equipment upgrades and facility upgrades every 4 years with costs between $48,580 to $59,240 and $10,000 to $25,000, respectively.
Estimated Initial Investment
| Site Built Location | |||||
|---|---|---|---|---|---|
| Type of Expenditure | Estimated Amount Low | Estimated Amount High | Method of Payment | When Due | To Whom Payment is to be Made |
| Initial Franchise Fee | 45,000 | 45,000 | Lump Sum | On Signing Franchise Agreement | Us |
| Initial Equipment Package (Saunas) | 48,580 | 59,240 | As Arranged | As Arranged | Approved/Preferred Supplier |
| Travel Expenses During Training at our Studios | 0 | 2,500 | As Incurred | As Incurred | Transportation, Hotels Restaurants |
| Training at your Studio | 5,000 | 5,000 | Lump Sum | Upon Invoice | Us |
| Three Months Rent and Deposits | 18,000 | 30,000 | As Arranged | Monthly | Landlord |
| Audio | 3,000 | 4,500 | As Arranged | As Arranged | Suggested Supplier/Vendors |
| Leasehold Improvements | 140,000 | 250,000 | As Arranged | As Arranged | Contractor and Other Suppliers |
| Construction Management | 15,000 | 17,000 | As Arranged | As Arranged | Approved Supplier or Us |
| Millwork | 20,000 | 28,000 | As Arranged | As Arranged | Approved Supplier |
| Architecture Fees | 6,000 | 12,000 | As Arranged | As Arranged | Architect |
| Permits, etc | 3,000 | 5,000 | As Arranged | Local City and State Agencies | |
| Office/Spa Furniture and Equipment | 2,500 | 4,500 | As Arranged | As Arranged | Suppliers |
| Computer System & Receipt Printer | 2,500 | 3,500 | As Incurred | As Incurred | Apple/MAC |
| Opening Inventory and Supplies | 1,000 | 2,500 | As Incurred | As Incurred | Suggested Suppliers |
| In-Room TVs | 2,610 | 3,190 | As Incurred | As Incurred | Suppliers |
| Pre-Sale Marketing and Gran Opening | 15,000 | 20,000 | As Incurred | As Arranged | Ad Agencies, Local Stations, Us, Suppliers |
| Insurance | 2,000 | 3,500 | As Arranged | As Arranged | Insurance Carrier |
| Miscellaneous Pre-Opening and Organization Costs | 3,000 | 4,000 | As Incurred | As Arranged | Attorney, CPA, STATE/Local Agencies, Utility Companies, etc |
| Estimated Shipping and Sauna Install | 7,200 | 13,800 | As Incurred | As Arranged | Shipping Company and Installer |
| Signage | 6,000 | 12,000 | As Incurred | As Arranged | Approved Supplier |
| Site Visits | 0 | 2,000 | As Incurred | As Invoiced | Us |
| Additional Funds 3-6 Months | 25,000 | 35,000 | As Arranged | As Incurred | You Determine |
| Total | 370,890 | 562,230 | |||
Perspire Sauna Studio Franchise Requirements
The sauna studio is looking for candidates who are any entrepreneurs interested in bringing health and wellness to their community, especially experienced business owners or former franchisees. Although experience in the health and fitness industry is not required, passion for a healthy lifestyle is desired. Specifically, they are expecting their candidates to have $150,000 minimum liquidity and $500,000 minimum net worth.
How Much Do Perspire Sauna Studio Franchise Owners Make?
Although Perspire Sauna Studio Franchise makes representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets, they only present the financial information on a per-Unit basis for the five stand-alone units that were open the full year of 2019 and 2020.
Perspire Sauna Studio Franchise Financials
2019
| Studio 1 | Studio 2 | Studio 3 | Studio 4 | Studio 5 | Average | |
|---|---|---|---|---|---|---|
| Revenue | 543,974.84 | 460,321.12 | 443,590.62 | 462,932.05 | 583,664.00 | 498,896.53 |
| Adjusted EBITDA | 67,446.90 | 94,248.77 | 108,921.78 | 47,747.66 | 158,252.00 | 95,323.42 |
| Profit Margin | 12.40% | 20.47% | 24.55% | 10.31% | 27.11% | 18.97% |
2020
| Studio 1 | Studio 2 | Studio 3 | Studio 4 | Studio 5 | Average | |
|---|---|---|---|---|---|---|
| Revenue | 508,703.98 | 359,228.14 | 179,573.34 | 467,729.76 | 463,604.26 | 395,767.90 |
| Adjusted EBITDA | 104,072.17 | 67,847.81 | 14,881.41 | 135,531.68 | 69,743.18 | 78,415.25 |
| Profit Margin | 20.46% | 18.89% | 8.29% | 28.98% | 15.04% | 18.33% |
Compared between 2019 and 2020, the average revenue for the 5 stores decreased from $498,896 to $395,767 due to intermittent closure in response to government restrictions related to the COVID-19 pandemic, especially for studio 3 which is closed almost all 2020. However, the franchisees performed well in 2020, gaining a similar profit margin as of 2019 by controlling the expenses.
2019 Perspire Sauna Studio Average Franchise Sales: $498,896
| Initial Investment – Midpoint | %Profit Margin Of Average Franchise Sales | Estimated Profits | Time to Recoup Investment |
|---|---|---|---|
| 466,560 | 13% | 64,856 | 7 years |
| 18% | 89,801 | 5 years | |
| 23% | 114,746 | 4 years |
2020 Perspire Sauna Studio Average Franchise Sales: $395,767
| Initial Investment – Midpoint | %Profit Margin Of Average Franchise Sales | Estimated Profits | Time to Recoup Investment |
|---|---|---|---|
| 466,560 | 13% | 51,449 | 8 years |
| 18% | 71,238 | 6 years | |
| 23% | 91,026 | 5 years |
In 2020, based on the average sales provided by 5 Perspire Sauna Studio’s franchise locations, at an average of a 18% profit margin it will take around 6 years to recoup your investment. This is longer than most franchise opportunities. You may not get an 18% profit margin which would elongate getting a return on your investment. The time to recoup investments incorporates roughly a 2 year period to scale up the studio. This includes finding the location, building the studio, passing break even, and then reaching significant income. Although the Perspire Sauna claims that it usually takes between five to nine months for the location to open, it can vary across numerous factors mentioned above.
Is the Perspire Sauna Studio Profit Worth the Franchise Cost?
To assign a valuation multiple for Perspire Sauna Studio franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
Under $1 Million Net Sales
- Estimated Selling Price = Net Sales – 0.45
$1 Million – $5 Million Net Sales
- Estimated Selling Price = Net Sales – 0.37
Over $5 Million Net Sales
- Estimated Selling Price = Net Sales – 2.33
When you go to sell a Perspire Sauna Studio franchise based on the median multiple of 0.45 and net sales of $395,767, it would sell for $178,095. This is significantly lower than the midpoint investment of $466,560. If you have at least 3 stores, the median multiple for net sales between $1 million and $5 million is 0.37, resulting in $1,187,301 in franchise sales. Selling these 3 stores would amount to $439,301. Opening 3 stores do not generate much profit to cover your initial investments either.
However, as an owner of multiple (12+) Perspire Sauna Studio franchises, you do have the ability to make a significant profit. Perspire Sauna Studio franchise owners with over $5 million in sales have a median multiple of 2.33. So, if you had 13 Perspire Sauna Studio franchises this would be $5.1 million in sales.
Therefore, selling your multi-unit franchise system could amount to $12 million. The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators. If the seller averaged $466,560 to open each studio, he/ she could net over $12 million when the restaurants are sold!
How Many Perspire Sauna Studio Units Have Opened and Closed?
| State | Year | Outlets at Start of Year | Outlets Opened | Terminations | Non-Renewals | Reacquired by Franchisor | Ceased Operation – Other Reasons | Outlets at End of the Year |
|---|---|---|---|---|---|---|---|---|
| Total | ||||||||
| 2018 | 0 | 2 | 0 | 0 | 0 | 0 | 2 | |
| 2019 | 2 | 4 | 0 | 0 | 0 | 0 | 6 | |
| 2020 | 6 | 7 | 0 | 0 | 0 | 0 | 13 |
The number of franchisees increased over the last three years. There were no termination, non-renewals, and ceased operations. On the other hand, they all performed well even under the COVID-19 pandemic. More franchisees join the business right after the pandemic, proving it a viable business model.
Over the course of 2020 and 2021, Perspire has experienced an influx of signed franchise agreements in areas such as Phoenix, San Diego, Sarasota, and Chicago. Having more than tripled in size since the start of the pandemic, Perspire puts the brand on track to double its current milestone of one million sessions serviced by the end of 2022.
Perspire Sauna Studio Income Statement and Balance Sheet Takeaways
As there were increasing revenues from franchise fees and royalties, there were decreases in marketing fees and product sales which drove down the total revenues. Additionally, Perspire Sauna Studio had an increase in its operating expenses, resulting in a $464,676 net loss in 2020, $127,382 more loss than that of 2019. In 2020, they also had taken on a total of $229,609 and $1,350,440 short-term debt and long-term debt, respectively. This resulted in over a $1 million increase in liabilities.
| 2020 | 2019 | |
|---|---|---|
| REVENUES | ||
| Franchise Fees | 18,500 | 16,250 |
| Royalties | 159,979 | 131,959 |
| Marketing Fees | 102,851 | 19,761 |
| Product Sales | 30,089 | 98,696 |
| Total Revenues | 311,419 | 376,666 |
| Cost of Sales | 42,609 | 60,633 |
| Gross Profit | 268,810 | 316,033 |
| OPERATING EXPENSES | ||
| Payroll Expenses | 210,914 | 170,995 |
| Advertising and Marketing | 184,146 | 209,351 |
| Office Expenses | 91,611 | 54,033 |
| Guaranteed Payment | 60,000 | 60,500 |
| Legal and Professional Fees | 54,371 | 38,999 |
| Consulting Fees | 34,708 | 7,500 |
| Travel, Meals and Entertainment | 31,309 | 38,217 |
| Rent and Leases | 29,599 | 26,275 |
| Computer and Web Management | 12,274 | – |
| Dues and Suscriptions | 8,095 | 45,700 |
| Taxes and Licenses | 5,375 | 4,383 |
| Office Supplies | 4,579 | 1,127 |
| Outside Services | 4,010 | – |
| Auto and Truck Expenses | 3,361 | 2,361 |
| Amortization | 2,533 | 2,142 |
| Total Operating Expenses | 736,885 | 661,584 |
| Income (Loss) From Operations | (468,075) | (345,551) |
| OTHER INCOME (EXPENSES) | ||
| Interest Expense | (6,601) | (1,754) |
| Interest Income | – | 11 |
| Total Other Income (Expenses) | (6,601) | (1,743) |
| Total Income (Loss) before Income Taxes | (474,676) | (347,294) |
| Provision for State Income Taxes | – | – |
| NET LOSS | (474,676) | (347,294) |
Perspire Sauna Studio Cash Flows Statement Takeaways
Liquidity is one of the most important measurements of a company’s ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund business operations, operations, and expansion of franchised restaurant locations. According to the cash flows statement, Perspire Sauna Studio has a $461,257 increase in cash and cash equivalents. At the end of the fiscal year, its total cash and cash equivalents amounted to approximately $598,760. Compared to 2019, there was a $400 thousand increase in cash in 2020.
| 2020 | 2019 | |
|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Net Loss | (474,676) | (347,294) |
| Adjustments to reconcile net loss to net cash provided by (used for) operations: | ||
| Amortization | – | 2,142 |
| Changes in assets and liabilities | ||
| (Increase) Decrease in: | ||
| Accounts receivable | (12,535) | 3,250 |
| Deferred commision fees | (82,050) | (56,000) |
| (Increase) Decrease in: | ||
| Accounts payable | – | (5,152) |
| Credit card payable | 18,493 | 17,972 |
| Deferred revenue | 346,500 | 373,750 |
| Net cash provided (used) by operating activities | (204,268) | (11,332) |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Proceeds from SBA loan (EIDL/PPP) | 55,257 | – |
| Proceeds from Short term loan | 130,000 | – |
| Proceeds from SBA loan | 156,998 | – |
| Borrowings from affiliated companies | 325,000 | – |
| Capital contributions | – | 30,000 |
| Net cash provided (used) by financing activities | 461,257 | 18,668 |
| NET INCREASE IN CASH | 137,503 | 118,835 |
| CASH – BEGGINING | 598,760 | 137,503 |
| CASH – ENDING | ||
| SUPPLEMENTAL INFORMATION | ||
| Cash paid for interest | – | – |
| Cash paid for taxes | 800 | 800 |
Conclusion
Investing in a Perspire Sauna Studio franchise is an interesting opportunity especially post COVID-19 outbreak, as there is increasing awareness in the wellness industry. The average entry investment of $466,560 is not relatively low compared to other industries, but it will be worth it to enter the 1.1 trillion industry and the prospects for growth within the industry are huge. Although the company is not performing well during these years, the current franchisees are earning positive income even during the pandemic and have stable profit margins. If you are interested in stepping into the health and wellness industry, Perspire Sauna Studio can be your opportunity!
