Case file 003 · Restore Hyper Wellness franchise
How 4 Cryotherapy Studios Went Broke in One Year
Two couples went from one cryotherapy studio to four in a little over eight months, and a year after opening day one of their companies listed $434 in the bank.
The numbers
The story in 30 seconds
Restore put cold chambers, IV drips and red light under one roof on one monthly membership, and investors backed the brand with $140 million. Two couples signed on, and a little over eight months after their first studio opened, they were running four.
One owner said the first studio was planned at $660,000 and cost just under $1.2 million, and three more came before it had a full year of results. By that owner's account, the studios they bought were losing $40,000 to $50,000 a month.
One year to the day after opening, three of their companies filed for bankruptcy, owing $3.4 million. The plan for the studio they kept forecast $1,190 left over in its first month, and that goes to creditors, not the owners.
Follow the $100
Every $100 the studio they kept was forecast to take in, in its first month:
Every cost on the sheet: ≈ $98.20
about 80% of it rent, payroll and other costs that don't move with sales, and that's with the brand's royalty still at zero
Left over: ≈ $1.80
and under the plan, it goes to creditors, not the owners
our arithmetic
What this means for your business
- 1
The second location doesn't fix the first one.
Try thisRun one location until it pays every bill in the line, with something left over. Then think about a second.
- 2
Write the line down before you sign.
Try thisList everyone who gets paid before you, in order: lenders, rent, payroll, the seller, the brand. And borrow against what your business earns, not against the brand's average.
- 3
Count your bad months before you need them.
Try thisWork out how many bad months your cash can cover. Keep enough to survive the months when you're wrong.
More plays from the video
- A franchise royalty is charged on your sales, not your profit. Ask what the fees will be after year one.
- Stand in the landlord's spot where you can: McDonald's generally owns or controls the land and the building, and its franchisees pay it rent.
- Spread the same rent across more customers: Orangetheory runs one coach, one room, a whole class at a time.
How you compare
Their first studio was planned at $660,000 and cost just under $1.2 million. What two membership studios from the 40 cost to open:
Opening one costs $764,698 to $1,269,588.
Opening one costs $764,577 to $1,104,920, before buying any real estate.
Run your numbers
Before you open a second location, or sign anything with a monthly payment, work out two numbers.
Divide the first by the second. If the answer is two, you don't have a business yet. You have a tightrope.
