Recurring Revenue Franchise w/ Great Margins

I love learning about new franchise business models.

HelloSugar is a new favorite of mine:

- Innovative
- Very Scalable
- Recurring revenue
- Quick to cash flow
- Low start-up costs & risk

HelloSugar is a Brazilian Wax & Sugar salon.

Sugaring is less painful than traditional waxing. Their motto is: "It hurts less here". Their entire focus is on reducing the pain of waxing, which will lead to more recurring customers.

Business Model

A traditional salon takes 9 to 12 months to find, construct & open. You're investing $300,000 to $400,000 and signing a big lease; all while praying it'll be a successful location.

It's a huge risk.

The founder, Brigham Dallas, flipped the model upside down.

For an investment of $62k to $78k, you get launched in a single salon suite within 90 days.

(A salon suite rents rooms to beauty professionals who do waxing, nails, lashes, hair, tattoos, make-up, massage & more. Salon suites exist in every major market.)

While in the suite, you hire a team, learn the business, establish your reputation, build recurring revenue & generate some cash.

When the time is right, you pull the trigger on investing in the $200k+ in a flagship location, saying goodbye to the suite. This approach dramatically lowers risk, which is critical for new business owners.

Start-Up Costs

They offer three start-up models based on your budget & goals.

Just suites (flagship later) - $62k to $78k

Start with the flagship (skip the suites) - $199k to $482k

Suite while flagship is developed - $238k to $537k

As you go through the franchise discovery process, you will determine which model makes the most sense.

They offer a multi-unit development agreement, up to 3 units to start. Once you learn the business you continue to expand.

Scalable

These salons can print money! 🖨️ 💰

The 2023 FDD Item 19 provides full monthly P&Ls for all corporate & franchise locations open for 12 months in 2022.

Corporate Locations - The founder has 11 locations in the FDD. The 5 flagships averaged $976k in sales with a net operating income of $211k per location.

The 6 suites averaged $432k in sales with a net operating income of $123k.

The corporate locations generated $7.5M in sales with almost $1.8M in net operating income.

As of December 2023, they expanded to 14 locations (all in Phoenix). The founder is entirely hands-off so he can focus on growing the franchise side.

He's got 3 District Managers & a CEO who runs the day-to-day. As a franchisee, you could build the same type of business (This is exactly how I run my 33-unit auto repair franchise)

Franchisee Locations - In the FDD there are 6 franchisee-owned suites represented that were open a full 12 months in 2022. They average $273k in sales with $56k net-operating income.

I know that $56k NOI isn't exciting. Keep in mind the suite isn't permanent. It's a stepping stone to give you time to build the business & test the market before you invest in a flagship.

All of the numbers summarized above are provided in Item 19 of the FDD. Here is an example of their corporate flagships for August 2022. They provide the same P&L’s for every corporate & franchise location, month by month from Jan 22 to Dec 22.

Note: see Item 19 for their “net operating income” definition.

It’s very rare for a franchisor to provide this level of transparency.

Ideal Franchisee

Today they have over 75 franchise locations. They expect to have 200 by the end of 2024.

Because of the nature of the business they require female ownership.

They have many husband & wife power couples. The husband runs the numbers/back office/real estate side while the wife handles the employees & quality of service.

Most importantly, they need driven entrepreneurs who want to be part of a fun, customer-centric culture.

Next Steps

I just had the founder, Brigham Dallas, on my podcast. Listen to the episode here.

They have open territory throughout the country. (Unfortunately not available yet in CA, NY, or IL).

Complete this short form if you'd like to learn more.

We'll check if your market is open, introduce you to the HelloSugar team, and provide you with due diligence resources to help you through the process.

Franchising is the best business model in the world since it empowers ordinary people, like me & you, to build amazing cash-flowing businesses.

Cheers!

Brian Beers