In The News
FranNet’s Gary Prenevost Featured in Financial Post
Mar 13, 2012
Gary Prenevost, president of FranNet of Southern Ontario, gives his insight on successful franchises. “Franchising a business model successfully really comes down to systems, systems, systems,” says Prenevost. Owners and operators of Massage Addict, Lori MacKenzie and Chris Harker explain the reasoning behind the success of their recession-proof business model.
Massaging the deal to build a franchise
Mary Teresa Bitti Jan 23, 2012 – 12:53 PM ET
Massage Addict founders Lori MacKenzie and Chris Harker
The pitch: Accessible, affordable massage therapy. That is the concept behind Halifax-based Massage Addict, the latest venture for Lori MacKenzie, owner and president of the company. She hit on the idea when she injured her back a few years ago. “I was seeing a massage therapist a couple of times a month and it became very expensive. I remember thinking, surely if the therapist knew I was coming in for treatments so often they could afford to charge me less.”
A commitment to regular visits at a discounted rate is proving to be an attractive differentiator for the membership-based clinic. Becoming a member at Massage Addict requires clients to commit to one treatment a month at a cost of $59 a treatment, significantly less than $70 to $90 fees being charged by Massage Addict’s competitors, Ms.MacKenzie says. Depending on the clinic, there are anywhere from 13 to 15 therapists on site. “It’s easy to get appointments, even same-day appointments,” she notes.
After launching the business in 2008, Ms. MacKenzie quickly realized she had a recession-proof business model. And that, she says, is largely because 80% of Massage Addict’s members have health-care benefits that cover massage therapy. The demand has been strong from Day 1.
“I had just opened my first clinic in Dartmouth, N.S., and someone came in and assumed it was a franchise and approached me about opening another location in Halifax,” says Ms. MacKenzie, who was a multi-unit owner of a fitness franchise for seven years before launching Massage Addict. “I went through the steps to franchise it and here we are. We now have six locations in Nova Scotia and two in Ontario.”
The franchise fee is $39,000 plus a 5% royalty. “Getting a location up and running costs between $100,000 and $200,000 depending on the area and the lease you are able to negotiate on office space. And we help you with all that,” Ms. MacKenzie says. “We want to be within 10 minutes’ drive of people’s homes.
“We perfected the model in Atlantic Canada and now we are rolling out across Ontario. It’s definitely going to be a national brand but right now we are focusing on Ontario,” says Ms. MacKenzie who is scouting out locations in Ottawa, Vaughan, Richmond Hill and Mississauga.
Ms. MacKenzie and Chris Harker, chief operating officer of Massage Addict, approached the dragons to help bring the brand to the next level quicker. “The exposure the dragons offer was something we just couldn’t pass up,” Ms. MacKenzie says.
The deal: She asked for $125,000 for a 10% stake, valuing the company at $1.25-million. That valuation was based on strong sales and a proven business model and four of the dragons’ jumped on the opportunity to get on board. Jim Treliving was the first to make an offer: $125,000 for a 20% and his franchising expertise set him apart. “When we were standing there it was very exciting to have all those offers coming in, but we just knew that Jim was more the direction we wanted to take it,” Ms. MacKenzie says. “He could see what the model was and he seemed to really get it.” But as is often the case, things can change after taping. “As a direct result of our experience on the Den, we were able to structure an even stronger deal with an outside investor but we are not ruling out any future deal with dragons,” Ms. MacKenzie says. At the time of writing, Mr. Treliving was unavailable for comment.
The expert’s opinion: John Cho, partner in Transaction Services at KPMG Enterprise likes the model and the deal. “It’s an on-trend niche. The aging demographic will help drive demand and even if you’re employed with a plan, massage therapy often isn’t fully covered and these prices are very attractive. I like that she’s targeting small towns and suburbs and locating in strip plazas. The lease rates are more attractive and she’s close to her customer base. This is the type of service that will translate into any geographic area and the franchising model is a good idea.”
On franchising: “Franchising a business model successfully really comes down to systems, systems, systems,” says Gary Prenevost, president of FranNet of Southern Ontario. “The vast majority of franchise systems fail because they didn’t build the correct infrastructure to support their growth. It’s one thing to have a location that’s going well but to be able to duplicate it again and again you need to grow the support in terms of people, point of sale, IT and marketing. It can’t be a myopic view. A lot of franchisors grow their staff after they have a certain number of franchisees. But my position is hire staff, build capacity, service your franchisees so that they can get up and running fast and effectively.”
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