CST Web Exclusive: Medspa owners weigh in on options, viability of medspa franchises in today's market

CST Web Exclusive: The ‘F’ factor
Medspa owners weigh in on options, viability of medspa franchises in today’s market

Karen Nash
Staff Correspondent

National Report — Radiance, Dermacare, Sona, National Laser Centers, Inaara, Insona — All companies that decided to franchise their medspa model. Who bought and how’s it turning out? Well, physicians of all specialties — from family practice to ER doctors to surgeons — as well as business people and entrepreneurs. However, within a few years several franchise groups have gone out of business — some leaving free-standing spas behind under their formerly franchised names; others closing all doors. Still for other national medspa companies, it’s business as usual, with more franchise purchasers opening their doors. Given the seemingly unpredictable results achieved by doctors within the medspa market — and the continued interest in financial opportunities in the medspa arena — Cosmetic Surgery Times decided to talk with several cosmetic surgeons and other medspa owners to find out first hand what their selection process was and the degree to which it was successful.

The Franchise Predicament
The national organization of Radiance Medspas sold more than 80 franchises before closing its doors, and several franchises are still operating even though the corporate office is not.

Mark Malek, M.D., spent about three months as medical director for the national Radiance group early in the company’s history.

“I found I couldn’t set the medical standards I felt were necessary in order for me to be involved,” says Dr. Malek, a plastic surgeon based in Scottsdale, AZ. “When I realized I wouldn’t have that kind of control, I pulled out right away.”

Dr. Malek acknowledges major financial conflicts between himself and the company, but he is of the opinion that these types of franchises may not be the best way to provide quality care for patients.

“A plastic surgeon who opens his own medspa, implements sound policies and procedures and has complete control over the quality of care, that’s okay. But some of these franchises crop up with a lay — meaning nonmedical — owner and they hire somebody to sign charts once a month. That’s not the kind of facility that’s going to take quality care of the patient.”

In the suburbs of Minneapolis-St. Paul, Scott Jenkins, M.D., is a plastic surgeon listed as the owner-operator of two Radiance Medspas. While he is the medical director, Dr. Jenkins says the ownership is really in name only.

“For corporate reasons and regulations in the various states, Radiance required me, as medical director, to have a percentage ownership, but it was really only one percent,” he tells CST.

Dr. Jenkins, who retired from private practice last year, says that’s the only reason he considers being medical director of the medspas to make any sense at all.

“I don’t find medspas economically viable, especially for a surgeon. Back in the mid ‘90s, my four partners and I set up that period’s version of a medspa in our office,” he explains.  “Surgeons are not necessarily good businessmen, and, quite frankly, running a medspa is nowhere near as remunerative for the time a surgeon will spend doing it compared to what a cosmetic surgeon can make doing surgery. For the most part, these spas will be a loss leader. The advantage is that these two businesses feed each other, and can bring in additional surgical clientele. But because of needing to staff a medspa all day, plus the overhead, it’s not necessarily a big money-making venture.”

Dr. Jenkins agrees with Dr. Malek that it is problematic when a physician does not truly have medical control of the medspa. He insisted on that as medical director at the spas he works with.

“Occasionally, people at my medspas want to incorporate procedures I don’t think are safe. I have told them absolutely not, and they have to abide by that.”

While the national Radiance franchising company decided to look for a buyer, the two Minnesota-based spas Dr. Jenkins works with kept the name.

“It’s a matter of branding. The biggest effect of Radiance closing its doors is that the franchises could stop sending thousands of dollars in monthly payments, as part of its contract, for nothing. The franchise wasn’t getting the service, such as marketing assistance, that was promised.”

The Nonfranchised Medspa
One growing medspa group is Sleek Medspa in Boca Raton, Fla. Owner Andrew Rudnick says one reason his group is successful is that he won’t sell franchises.

“I own them. I don’t think medspas are a franchise-able business. Too many franchises are going under because the franchisor just wants to make money selling the franchise and doesn’t really care where people put their locations or the quality of care they give.”

Mr. Rudnick adds, “Also, medspas have to be driven hard with marketing. That’s where a lot of them fail. They see advertising as an expense rather than an investment.”

For Physicians Only
But other franchises, such as Dermacare Laser & Skin Care Centers, headquartered in Scottsdale, Ariz., are still open and growing.

Dermacare corporate owner Carl Mudd says several factors contribute to the success of his company, including one unique aspect.

“We're 100 percent physician based. We only sell our franchises to medical doctors, a number of whom are cosmetic surgeons,” Mr. Mudd says.

“Then we set our priorities — safety first. Our four core competencies are technology, training, marketing and management. We have an overriding emphasis on safety and we only provide mainstream procedures that actually work.”

Facial plastic surgeon Gael DeRouin, D.O., along with his wife, emergency room physician, Pamela, own a Dermacare franchise at Litchfield Park, a suburb of Phoenix.

He says it was the perfect opportunity for him to open his own office.

“After working in a hospital setting for 25 years, the medspa works as a way for my wife and I to start our own practice. We didn’t have a built in patient-base, so this keeps us busy while we develop a private practice.”

Track Record
Looking at the various franchise opportunities around, Dr. DeRouin says Dermacare had several advantages.

“We’re in a highly competitive market and we had associates who bought Dermacare and it worked well. They have proven success, so that influenced us,” explains Dr. DeRouin. “The people who make up Dermacare franchises are physicians. They aren’t business people and nurses, or other nonphysicians.”

Many cosmetic surgeons who want the medspa affiliation start their own as an outgrowth of their practice, but Dr. DeRouin says there’s an advantage to being part of a franchise group rather than starting off alone.

“First of all, you have name recognition. That’s particularly helpful when you’re starting from scratch,” he says.

“The franchise comes with proven marketing strategies so we’re not scratching our heads or experimenting with something that might not work. That information is not just qualitative, it’s quantified, so you know what results to expect from any specific marketing effort.”

“It also provides an association with strategic partners, so you get price breaks on everything from disposables to laser systems. Those savings are substantial. I think we just about paid off our franchise fee from our savings on laser equipment in the first seven months of operation.”

Dr. DeRouin says that it’s important to do due diligence on any franchise opportunity.

“Talk to franchise owners, not the sales reps. That way, you’ll know if the headquarters is not coming through with the appropriate marketing support or equipment connections. It’s like any business, you’ve got to check it out.”

Aesthetic Partners
Recognizing the difficulties of starting a medspa from scratch or of buying a franchise, dermatologist Stephen Victor, M.D., New York and London, chose a different option. He contracted with Medsurge Advances, a national company that helps doctors start their own medspas and uses a fee-for-service type structure.

“One of my partners bought a franchise and never got the support he was supposed to get, so he dropped that. And we didn’t have the time to do the research into all of the lasers and injectables and take courses here and there and try to figure it all out,” Dr. Victor says.

“Medsurge sends someone to look over the office and you can start doing the easy procedures — usually injectables and hair removal. They suggest what the doctor should buy, and will train them, help them set up their facility, and with marketing,” he says.

“The doctor decides what procedures he or she wants to add and when, and Medsurge helps with the expansion. Or the physician can decide to do it all at once and Medsurge will train you and your staff, make sure you get the right equipment,” Dr. Victor explains. “They will literally hold your hand.”

Dr. Victor now does training for Medsurge on the OSIRIS laser (though reports no other financial interests in the company) and feels that Medsurge offers some of the advantages of a franchise: training, help with marketing, purchasing through a group — without the drawbacks of paying royalties or paying for services not performed.

Assessing the franchise situation, Dr. Victor concludes, “There is no leader among medspa franchises or anyone to look up to. There is just no gold standard among the medspa franchises right now.” CST