Is it worth buying a Dermacare franchise? JK wants to know.

Medical spa franchises are still for sell

 
questions_graphic.jpgThe following was posted by JK on another Dermacare thread. Since it deals with a very specific question, I've reposted it here so that the Dermacare franchisees can answer it.

"Firstly I would like to say, no I am not a part of Dermacare. And my inquiries are serious, I do appreciate your feedback and am asking the question because I really want to research a few things before agreeing to go to DC versus an independant clinic. Those that responded I thank you.

To MD: Your comment: I got a 800K investment which still costs me 15-20K per month to operate (10 months in) and I work anywhere from 40-60 hours a week for zero dollars.

-I know the investment is high I did my research and the investment is around 800k, so yes I do know that. So how are you working so hard and not getting income, are people only requesting low yield services? I did the numbers and something is not adding up. If you are busy where is the rev going to? I have spoken to other DC clinics and they are reporting a consistent rev stream, why is that? I have seen their numbers.

So it seems the customer service is bad at DC, thank you for letting me know I will research that further.

Also I am learning that there are 2 clinics in trouble in AZ, can anyone give me a hint as to who they are? I would love to research this further.

Again thank you for your feedback, and I am sorry you had a bad experience" - JK

But DermaDoc wants to sell me his franchise. Now I'm really in a quandry.

OK Dermacare franchiees. JK wants to know if it's just sour grapes he's reading.

Radiance Medspas & the 23 franchise class action lawsuit.

Is he blood letting at Radiance Medspas just starting?

Blood%20Splat-t.jpg

I'd heard from some Radiance Medspa franchise owners that the 90 day response window that their lawyers had set for Radiance Franchise Group to respond to their petition was up this last Friday... And no word.

For those unfamiliar with what's going on...  As I understand it, 23 Radiance franchisees filed a class action lawsuit against Radiance corporate for failing to live up to the franchise agreement and substantial misrepresentations in the UFOC. Radiance was given 90 days to respond or the franchisees would consider Radiance's franchise agreement to be void.

If Radiance really looses those franchisees I can't see how they can continue to operate since they'll have to disclose that to all potential buyers. Something similar may be in the works at Dermacare if they don't get their act together and make the Dermacare franchisees happier.

I'm wondering what happened? Anyone in the know?

I think Radiance might be down to just one guy huddled behind a folding table. The map showing Radiance's expansion efforts hasn't been current for many months and still shows clinics as open that have left or gone out of business.

usa_map2.gif 

I don't know if the Radiance Medspa in Cedar City is open but I know that the Salt Lake City location split with Radiance months ago. I wonder if they're just really overloaded with buyers and can't get to the little things? 

Dermacare Management: Carl Mudd & the lawyer.

Dermacare has a page on their web site showing Dermacare's management. Guess who's there. Carl Mudd and Dermacares lawyer. That's it.

Dermacare Laser & Skin Care Clinics Management Team: Carl Mudd & the lawyer.

logo.gifDermacare and Carl Mudd have taken some heavy hits from current and former Dermacare franchisees and Dermacare corporate mployees. Even I've received a cease and desist letter. I felt special until DermaDoc let us all know that evidently Dermacare sends them bulk mail.

Now I can see why. There's no one in Dermacare management other than Carl Mudd and the Dermacare Lawyer.

When your only tool is a hammer, every problem looks like a nail. 

How to Terminate a Medical Spa Franchise: Letters of woe.

It seems that I'm being type cast as a medical spa vigalante and I'm being sent all kinds of medspa franchise stuff.

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There's been more than a few questions about how to terminate a medical spa franchise. Since people have sent me info, I've uploaded some scans of letters which franchisees have terminated their franchise agreements with.

Both of these letters were sent ot Radiance Medspa Franshise Group. I've been told that neither letter received any kind of response. That seems to speak volumes.

Successful franchisors make their money from royalties. The 'franchise fee' to a large extent is for training and startup. It's telling that in these instances at least, the franchisor let the franchise go without so much as a phone call. (Of course no one got their $80k back.) I'm curious about what other Radiance owners think?

So, for whoever requested this type of info.... here they are. 

The follwing links will take you to the scans of the letters. All identities have been removed from the letters.

Medical Spa Franchise Termination Letter 1

Medical Spa Franchise Termination Letter 2 page 1

Medical Spa Franchise Termination Letter 2 page 2 

American Laser Clinics Part 1: Armed guards & threats.

This series of posts details how it came to be that American Laser Clinics hired an armed guard to stand in a physicians waiting room and prevent him from seeing his own patients.

draper.bio.security.jpg

While this took place years ago, there are still lessons to be learned.

In November of 2005 I was contacted by Dr. Vaugn Moody,  the medical director of an American Laser Center in Draper, Utah. (Yep. The same ALC that's running the laser hair removal infomercials.) Dr. Moody had been the medical director for ALC and had built out a new clinic in Draper. ALC had moved with him and were renting 4 treatment rooms and a front desk area. ALC had a staff of about six young women (early 20's) who were generally autonomous. About medical spa franchises.

Dr. Moody called and asked to meet and discuss the possibility of leaving American Laser Clinics and associating in some way with Surface.

According to Dr. Moody, American Laser Clinics was constantly late paying him for overseeing their operations and operating far outside the acceptable norms of ethics and acceptable medical standards. He was unhappy with a long laundry list.

  • American Laser Clinics was initiating IPL fotofacials without adequate or proper training for their staff.
  • The ALC technicians were being hired, given an hour or so of training from the other technicians and then performing treatments.
  • Dr Moody, the medical director, was entirely removed from any interaction with patients. The staff gossip was that the ALC staff had been told never to referr a patient to Dr. Moody's clinic since he'd try to 'steal them'.
  • Patients were being diagnosed and treated without being seen by anyone other than a technician with no medical licensure or training. 

Dr. Moody twas being sued by a patient who had been burned from a bikini line hair removal. The most interesting thing about this was not the fact that they had burned someone but that the burns showed the treatment pattern and that it was obvious that they had intentionally not treated the entire area but were 'skipping' ever other pulse. During later conversations with staff members they represented to me that they were actually trained to do that to save time.

The patient suing Dr. Moody (and American Laser Clinics) had been treated by a new hire who, without any supervison, had used the IPL Fotofacial head rather than the hair removal. Additonally she'd turned the device up. The result was a perfectly detailed burn that ran from her navel down to her pubis and resembling a zipper with that skipped pattern. The patient, who was supposedly a swim suit model heading for Las Vegas, was not happy. And rightly so.

Dr. Moody also told me that ALC staff treated a number of patients after he told them specifically not to because the laser was not resetting itself correctly and needed to be serviced. The result. Burns again. 

This litany of horrors went on and on. The staffs of both clinics were almost openly hostile. The situation was unmanagable and getting more so.

I should insert here that Dr. Moody went to medical school with one of our physicians and there was some pressure from that quarter to help him out. There was also the idea of converting his entire clinic to a Surface clinic which was Dr. Moodys positon from the start.

I ended up having a number of meetings with Dr. Moody. The situation was bleek but after a few weeks of dinners and a number of long conversations I agreed to convert his clinic to a Surface locaton after he disentangled himself from American Laser Clinics.

Of course there were a few problems. First, Dr. Moody claimed that he was afraid that ALC would not only retaliate by suing him, but that he might be in physical danger from them. He constantly spoke of ALC being run by 'mobsters'. At first I thought this was kind of funny.

Dr. Moody sent a letter to ALC that basically said that he would not sign a lease at that location and that they had 30 days to find another location. I saw and read the letter before it was sent and there were some other notes in there about late payment and such but that was the gist of it. (There was a letter of intent at the time but no lease so Dr. Moody was fine there.)

ALC did not go quietly into the night. 

Rick Frisk, who I think is a vice-president, was one of the founders of American Laser Clinics and had know Dr. Moody for a long time, called. Dr. Moody described the call to me as a lot of yelling and threats. Now I'm aware that people often exaggerate to make a point. But in this case I was there during a number of the calls and could hear the speaker on the other end. (Dr. Moody also recorded at least one of these calls and possibly more with a little recording device he'd bought at Radio Shack.)  I could hear some of what was said and listened to the recorded converstaton that Dr. Moody provided to me. I've never heard or seen anything quite as nasty. Rick's boss, the President of American Laser Clinics (I forget his name as I write this) threatened to spend his last cent to 'break' Dr. Moody among a long list of profanity. There were any number of these calls. The one's I was privy to were at least ten minutes long.

What had really upset Rick and the ALC gang was that Dr. Moody had spent long hours at night copying all of their patient records. Now as the medical director he actually had a right to access these records but ALC was not happy with having their entire database of clients copied by someone who was kicking them out and obviously had designs on their business. Dr. Moody now had copies of every patient contact sheet that ALC had at the clinic. I can't remember exactly how many there were but it was an entire wall full and had taken at least 30 hours of work at night to copy.  

Then the shit really hit the fan.

American Laser Clinics hired an armed guard to protect themselves, their records, and their patients, from Dr. Moody.

The picture at the top of this post is of that guard standing in the front of Dr. Moodys clinic. I took the photo. It's difficult to see but the guard actually had a gun on his hip. It was crazy. The guard had been informed that Dr. Moody was a threat to the patients and staff and he took his posting seriously. Any time that Dr. Moody would walk towards his office (where I was standing and where the picture was taken from) the guard would run down the hall and confront him to prevent him from whatever.

All the while American Laser Clinics is treating patients. That woman in the photo is a patient filling out paperwork.

Let me reiterate:

  • American Laser Clinics is performing medical treatments on patients while an armed guard prevents the physician responsible for their care from seeing them.

I thought I'd seen it all but I guess not. The ALC staff members had been instructed to have no contact with any of other clinic staff and they were telling patients that the guy with the gun was just waiting for someone to get of work or some such nonsense. I would certainly love to have been privy to what the patients were thinking. There were a lot of angry looks from the ALC girls.

By the second day even I'd had enough. 

I called a few contacts I have at the local news and had a camera crew sent out. At the same time Dr. Moody called Utah's Department of Licensure and complained to them about these 'illegal' treatments going on inside his clinic while the guards were there. (They hadn't heard of this before either.)

It was priceless watching the film crew show up. Dr. Moody, who used to be an Elvis impersonator, escorted the camera right up front and started interviewing the guard and the ALC staff. I guess he felt safe enought that the guard wouldn't shoot him in front of the TV camera. The guard went all shades of red. It was somewhat funny but I felt really bad for the entire ALC crew. They were scrambling for cell phones like they were drowning and their cell phones were reserve air tanks. The poor security guard was obviously asking his boss for directions. He didn't know if he should plug'em all or run.

Dr. Moody spent 20 minutes interviewing the ALC staff asking them who their medical director, who's clinic it is, and why there's a guy with a gun there. 

Then the inspector from DOPL showed up. (I have photos of this entire phase.)

The inspector was really a take charge kind of guy. The TV cameras didn't even phase him.

Then two police cars and the security guards company owner show up.

Let me set the stage again: We have an Elvis impersonator with a TV crew, the State, the Cops, Dr. Moodys staff, and the ALC staff.... and patients coming in for laser hair removal. 

 I have to say that the State inspector and the cops were really good. The first thing that the cops did was run the security guards off the property as soon as they determined who owned it. They left in a hurry. ALC was not as fortunate.

The State shut them down on the spot.

They reopened the next day and treated a number of patient without any medical supervison (Dr. Moody took photos of all of this) but the State was on to them and they closed for a few more days while they scrambled. They ended up hiring a PA to literally sit in the waiting area all day. They met the deadline and moved back to their previous location.

But the saga is not yet over.

The patient who was burned sued ALC and Dr. Moody making them co-defendants.

ALC sued Dr. Moody for breech of contract claiming that they had a lease (which they did not).

During these procedures Dr. Moody was ordered to turn over all the American Laser Centers patient records that he had copied. He turned over a few few hundred but the vast majority were never turned over. I don't know specifically what the order stated but every single ALC record was copied and then entered into the front desk computer database with emails and contact info.

So, that's how it happened. Any thoughts? 

Dermacare Medical Spa Franchises Unite?

 big-trouble.gifJust when I thought I was out of the Dermacare saga...

I had an interesting weekend. I spent a fair amount of it talking to and exchanging emails with unhappy Dermacare medical spa franchises. Sheesh... It's a hornets nest. One of the Dermacare owners sent me this email from Carl Mudd, Dermacare's CEO: 

From: Carl Mudd [mailto: Carl@DermacareUSA.net]
Sent: Monday, February 05, 2007 6:54 PM
To: Carl Mudd
Subject: Blog email

To All Franchisees:

   I wanted to make everyone aware of this press we are getting in this public chat space. This type of thing hurts all of us and takes money from the pockets of all franchisee's as this is clearly available to the entire public.

   Perhaps those of you who find this type of thing offensive could respond appropriately.

/the-blog/2007/1/22/dermacare-laser-skin-care-clinics.html

 

Carl Mudd

CEO/ President
Dermacare Laser & Skin Care Clinics(R)
DLC Dermacare LLC
4835 E. Cactus Rd. Suite 345
Scottsdale , AZ 85254
(602) 424-0788 Phone
(602) 424-0811 Fax
(877) 700-0788 Toll Free
www.DermacareUSA.com
Carl@dermacareusa.com

Offensive? It seems that there's much unrest in Dermacare land.

The first two years of owning a franchise are historically the 'honeymoon period' in which the franchisor offers the most support and training. Franchisees tend to get more unhappy as time goes by since the franchisor has less to offer. The trouble with a franchise as young as Dermacare does not bode well.

First, while I was not a recipient of Mr. Mudds email, his reference to 'offensive' makes me think I should make my position know lest you a think I've got a history with Dermacare.

Mr. Mudd says that this is taking money out of all Dermacares franchisees pockets. Ehh?

The real problem for Dermacare and Mr. Mudd is not potential Dermacare patients who might stumble across this site, it's the physicians who are reading and may have second thoughts about getting involved with a business in which the franchisees are terrified that Dermacare will find out who they are... and the existing Dermacare franchises who now have a place to post their opinions in a group without having to remain in isolation.

Since DermaDoc first started commenting I've received three other direct contact (by phone or email) from Dermacare franchise owners. While I still don't know who DermaDoc is, I now know some others... and they're even less happy than DermaDoc. I've been sworn to secrecy but suffice it to say that there's trouble brewing. I don't have much experience with Dermacare (other than their threatening letters) but the owners seem to think that it's run by the Sopranos and if anyone finds out they've talked Paulie Wallnuts will be by to wack'em. 

Here's the consensus from the four contacts I've received (Three owners and one in 'corporate'.)

  • No one is happy with Dermacares corporate support. It sounds errily like Ron's experience with Sona.
  • Dermacare's turnover at headquarters must be tremendous. Three of the four mentioned that they're constantly working with new people who they don't know. 
  • They're ecstatic that this site exists and that there's a venue where they can air their grevences without being identified and targeted for cement shoes.
  • They don't want to say what they really think since they're already in Dermacare's boat and don't want to sink it underneath them.

 So I'm going to post a new thread for discussing medical spa franchises. If you're an owner or medical director, please feel free to comment or contribute. If you're one of the owners who Mr. Mudd feels should be running to Dermacares defense or feel that this site's 'offensive', we're happy to hear from you too.

So, while I'll occasionally mention Dermacare, Sona, Sleek, American Laser Clinics, Solana, Solara, and whoever, it's up to you as individual readers to draw conclusions.

Medical Spa Franchises & Non-Compete Agreements.

Since Dermacare send me a cease and desist letter, there have been a number of supportive comments from readers. Dermacare is not the first or only medical spa franchise who might not like what I've written. Ron's probably not on the Christmas card list for writing his series on Sona; Inside a medical spa franchise.

compensation.gifDuring our email conversations, Ron has expressed surprise that no other medical spa franchisees have really stepped forward to share their experiences. There's two possible explanations for this; all the medspa franchisees are really happy... or, those who are involved with the current crop of medical spa franchisees are 'concerned' about rocking the boat they're sitting in. Physicians are also know for the being terrified of lawyers and inherently resistant to change. You'll have to make your own decision on that but I'd invite Dermadoc, Ron, Midwest, and anyone else with experiences either way to comment. (I'd also like to hear from physicians who've investigated Sona, Radiance, American Laser Clinic, Solara, or other medical spa franchise to comment on what they found and why they decided not to buy.

Here's an Anonymous comment from the post on Dermacare's cease and desist letter.

I'm enjoying reading this blog. It gives a clear picture of what is actually occurring in our neck of the woods. I'm a franchise owner as well, and have found the start-up to be an incredible journey, but not always fun. Here are my observations thus far:

The franchise I am with, has been very helpful for the most part. I do have a problem with all the energy and money expended to ensure that the corporate name is not "tarnished" however. I have a 10 year contract with no out clause. So should I decide at some time in the future that i no longer want to be a part of the franchise the only way i can do that is by selling my practice. Then I have a restrictive covenant that forbids me from practicing cosmetic medicine anywhere else. I am also restricted in what procedures I can perform in my franchise. The last time I looked, I have an UNRESTRICTED LISENCE to practice medicine. I'm not sure if these non-competes will hold up in court, but, I do know one thing. The franchise will do everything in their power to enforce it. And that i have a problem with.

And here's another comment from What's wrong with medical spa franchises & medspa consultants.

Thank you for these posts. As a franchisee, just starting my clinic, I have spent many a sleepless night worrying how I will succeed in an ever increasing competetive market. When you get right down to it, selling laser cosmetics is nothing more than selling TV sets or cameras. Some companies will thrive, others won't. Up until now, medical cosmetics has been the domain of plastic surgeons and dermatologists. However, in the past few years we're witnessing a whole new realm. And the sharks with MBA's have found a new breeding pool: MD's disatisfied with their current medical practice. They blindside unsuspecting doctors with promises of riches and offer examples of fellow physicians who have prospered. What is not being told are the risks involved, the difficulty of actually opening up a clinic, the costs and the failures along the way.
I, for one, have extended myself far beyond my comfort level. I've trusted those who smile to my face and tell me that they have my best interest in mind, but underneath have scales and circle the tank for any signs of blood or weakness. They expect that I have no business experience and they are correct. I can bring back life to dying infant, but ask me to balance a ledger and I have no clue.
I am their pray and fodder.
Time will tell if I ever get up and running. But, I caution my fellow physicians to be very weary of the sharks and do you're due diligence

About Medical Spa Franchise Non-Compete Clauses 

 
Any lawyers out there? Anonymous is right in that it's probably not enforceable in the medical sense. It may well be entirely enforceable for that location in a business sense. This is often not a problem for a restaurant franchise, but if you're a physician, you might want to think long and hard about what you're getting intomedspamedspa franchise will tell you that this is all 'standard' and 'boilerplate' language and that it's required. It's not. (I did extensive research on franchising when I was investigating offering a Surface franchise.)

Giving you a UFOC is required, a waiting period to accept payment is required, what the franchise agreement says is not required. It's a contract between you and a medspa franchise and is open to negotiation in the same way that any agreement is. Ten years of your life is a lot to sign away. Franchises typically start to have problems after the second year, when the gloss of promises starts to wear thin and the doc starts wondering what they're paying for.

The reason that medical spa franchises give to physicians for this kind of 'buy in' and term is that the costs to the franchise are all up front and that the local name recognition is so valuable that they can charge for it. Read the posts on medical spa franchises and a different picture emerges. 

If you're in a position to have an opinion, please comment, but pick a name... and not Anonymous. If you're willing, on the comments form put your medical spas web address (http://www.medicalspa-whatever.com) so we can see who you are. Of course, if you fear retribution from the medical spa powers, no link is necessary.

Dermacare sends Medical Spa MD a cease and desist letter.

Dermacare Laser & Skin Care Clinics sent me a nasty cease and desist letter.

 
It seems Dermacare objected to their mark on this page where some Dermacare Franchises posted less than flattering comments.

Certainly its every businesses right and obligation to protect their intellectual property. (I've removed the offending image.) It's also true that Dermacare has a reputation of trying to quash anyone who questions their business practices. As DermaDoc says:

"I appreciate the option for more open communication in a confidential fashion, but at least for the time being, I don't want to subject you or us to potential litigation / subpoena action for any type of mis-statements perceived by Dermacare. Corporate is very open about how many cease-and-desist orders and lawsuits have been filed to 'protect their name'."

Good call DermaDoc.

I would have suggested that Dermacare take a different approach and send me a list of happy doctors and plump testimonials. In fact, since I know at least someone at Dermacare reads this...

Open Letter to Dermacare & Dermacare Medical Spa Franchisees 

Dear Dermacare Laser & Skin Care Clinics,
This is an open invitation to send Medical Spa MD any number of physician contacts who are happy franchisees. Here's your big chance. With more than 8000 monthly readers you'll have an opportunity to get your message and testimonials in front of a large number of physicians who are actively seeking information. I will print any current franchisee's opinion as a separate post in it's entirety.

If you are a Dermacare Franchise, please send me a testimonial or comment of support from your corporate email (which I have) and I'll post it as well. (You may of course just comment below if you wish.)

So lets hear from the franchisee's. I'm as anxious as anyone to know if I should change to Dermacare's franchise model.

I wonder if It was Dermacare that sent me this previous email threatening me with imminent criminal sanctions. Hmmm.

I did a search on medical spa lawyers and found that S.Blair is an attorney practicing medical spa law in Arizona... Coincidence?

Here's what S.Blair said:

"The legal information and comments made in this site are wrong. I am an attorney who has been contacted by one of your readers. The reader wants to take legal action against the owners of this blog. You need to have your comments reviewed by an attorney before posting any further blogs."

and an email: "I am an attorney. First, the legal comments and advice you are providing constitutes the practice of law and, thus, you could be facing criminal sanctions. Second, I have been contacted by one of your readers you wants to take legal action against you for improper legal advice. I suggest that you refrain from providing any further legal advice in your blog or have it reviewed by an attorney before posting it."

S.Blair (Unregistered. No profile. Email entered is .......00@hotmail.com)

My suggestion is still to retain lawyers who don't have hotmail accounts. Is this an X File? Perhaps its that Arizona sun.

PS: Future interactions, threats, letters, or whatever will be posted on this site as well.

Dermacare Laser & Skin Care Clinics


The "Dermacare Laser & Skin Care Clinics" logo at one time appeared on this page. Dermacare sent me a nasty cease and desist letter so I've taken it down. You'll have to use your imagination.

 

The post on 'what's wrong with medspa franchises' is usually somewhere near the top of the list of most view posts on medical spa MD. The comments below were made on that thread. I'm reposting them here.

For all intents, these posts are anonymous. On one had I can understand that Dermadoc and Fiona might not want to be identified if they're offering less than flattering comments on a business relationship they're in. On the other handt, they're anonymous. So... DermaDoc and/or Fionna, please contact me through the email link here. I'd very much like to contact you. (I maintain all correspondence in absolute confidence.) Here are the comments:

From DermaDoc 

"I appreciate the opportunity to get a few things out in the open about one of the 'up and coming' MedSpa franchisors - Dermacare.
We have been associated with them for nearly 24 months and have found A LOT of problems, beginning with the 'song and dance' of the franchises being sold at a phenomenal rate because they are so successful. The numbers they disclosed were impressive, but in fact included the Master Region clinics that were under contract to be opened over the next 5 years, not those that were in process currently.
Their Gold Standard procedures were oddly enough only available through one laser manufacturer, Cutera, whose products you are obligated to purchase. I always found it hard to believe that one company can have the state-of-the-art technology for all procedures.
Dealing with corporate is like a revolving door - it takes a long time to get an answer to your question because the person you asked yesterday is already gone and likely took all their notes along with them. It seems as though the majority of the staff is involved in the legal department, which is an eyebrow raiser in itself. Marketing assistance is essentially 'send us money and we'll do it from Scottsdale'. There is a strong sense of denial that marketing in Scottsdale is different than marketing on the East or West Coasts. While they do furnish extensive manuals and background materials for franchisees, a review of the contents shows that it is focused more on what the franchisee must do to avoid having their rights revoked (which has happened to more than one franchisee), than what the franchisor is doing to help create a successful enterprise.
Dermacare does require on-site physician oversight, which I believe is quite valuable to the patients, but they are creating a smoke-and-mirrors image that is leaving a bad taste in the mouths of more than a few of its franchisees.
Thanks for listening to a late night rant!" - DermaDoc

And from Fionna:

"DermaDoc, I worked at a Dermacare facility where there was no physician "on site." I am a midlevel who was there "in place of" the doc. Has something changed in that they now require on-site physician supervision? I find that hard to believe since the physician had his own practice and was off-site most of the time." - Fionna

Wall Stree Journal Article on Medical Spa Franchises: Medspa boom is a bust for some

Via Wall Stree Journal. Read the entire article here.

Read the Medical Spa MD series: Inside a medical spa franchise.

Medspa Boom Has Become a Bust for Some

a.medspalogos2.gifBy RHONDA L. RUNDLE
November 21, 2006

...Medspa ownership turnover generally reflects business stumbles rather than safety issues. Ms. Leavy says many of the troubled spas are affiliated with franchise chains with flawed business models, such as those requiring too much of a franchisee's revenue to go for marketing. (She estimates that about 10% of medspas are franchises, although other industry experts put the percentage at 30% or higher.)

Several Sona franchisees, though not Mr. Nebot, are in private arbitration over problems that include misrepresenting a complicated business as a turnkey operation and failing to provide needed support. Sona officials declined to comment.

Several franchisees of Radiance MedSpa Franchise Group PLLC, a franchiser in Scottsdale, Ariz., say the company's financial projections overestimated revenue and underestimated initial start-up costs, including working capital.

The president of Radiance, Charles L. Engelmann, recently said: "There are currently 32 open stores and we will have 47 or 49 open by the end of the year. None of the stores have closed." He also acknowledged that some franchisees are attempting to get their money back.

One common pitfall for medspa operators is the failure to properly account for prepaid services, such as discounted packages of laser or light-based facial treatments. At Mr. Nebot's shop, for instance, clients would routinely pay $1,000 in advance for a package of laser hair-removal treatments to be delivered over a year or more. The shop's rooms were then filled with nurses treating customers who had paid months earlier. Finding new customers with fresh cash was a constant struggle.

Mr. Nebot says he felt like a cartoon character, "running faster all the time but falling further behind." He used radio advertising to draw more clients, moved to a larger space and extended his operating hours. To avoid alienating customers, he gave away free treatments to those who complained that their hair kept growing back after they finished the five-treatment regimen they purchased.

In the wake of the recent legal changes in Florida, some medical-spa owners there must shell out an extra $60,000 a year or so to a dermatologist or plastic surgeon to oversee operations.

"I can't be my own medical director any more, which is an added expense I can't afford," says one Florida physician who is not a dermatologist. He says he is "facing personal bankruptcy and trying my best to get out while there is something left for my family" after miscalculating what it would take to market, advertise and build his business. Indeed, many medspa owners are doctors who hope to make easy cash at a time when income is shrinking from their traditional medical practices.

Some franchisers have run afoul of state regulators by violating laws against the corporate practice of medicine. In February 2005, California denied a franchise application from HealthWest Inc., a Los Angeles firm that had more than a score of Inaara MedSpas around the country. California ruled that HealthWest had "falsely represented" to owners that they could legally own a medspa without a medical background. HealthWest has gone out of business, but some Inaara shops broke away from the founders and still are operating as independent, stand-alone shops. (Note: The former owners of HeathWest are now 'licensing' medspas under the name Solana.)

Another bust was Skin Nuvo International LLC, which filed for bankruptcy and sold its 37 stores to a private equity firm that in turn sold them to Pure MedSpa, a Toronto company.

Sleek MedSpa, a closely held chain in Boca Raton, Fla., recently acquired SkinKlinic's Fifth Avenue flagship in Manhattan, but SkinKlinic's two other stores, one in Las Vegas and the other in Greenwich, Conn., have closed. SkinKlinic's founder, Kathy Dwyer, is a former senior executive of cosmetics giant Revlon Inc. Attempts to reach her for comment were unsuccessful...

Sona Medspas: Inside a medial spa franchise.

Medical Spa MD Series: Inside a Sona Medspa Franchise

Q&A from former Sona Franchise owner Ron Berglund.

Ron posted a number of thoughtful comments regarding the problems with medspa franchises.

After exchanging emails, Ron's agreed to answer a number of questions about his experiences with Sona including the good, bad, and ugly. Why he chose Sona? What he was told? What really happended? What went wrong?

As far as I'm aware, Ron is the first medical spa franchisee who's been willing to come forward and tell his side of the story in a comprehensive way.

SEC Sues Skin Nuvo: False promises & bankruptcy.

nuvo17.jpgMedical spa franchises are getting a lot of bad press lately. The Wall Street Journal article: Medspa boom is a bust for some being just the latest. 

Last year Skin Neuvo made some waves by opening a lot of locations. It would seem that Skin Neuvo's fouders were building a business on a foundation of lies, false promises, and fraud. I would think that Ron Berglund might be right when he predicts a 'huge shakeout' in the medical spa market next year.

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Wall Stree Journal Article on Medical Spa Franchises: Medspa boom is a bust for some

The following article on problems with medical spa franchises ran in the Wall Stree Journal. It's a telling article that points the finger at the current crop of medical spa franchises. I signed up and read it after Ron posted his comments on being an unhappy Sona owner.

Medspa Boom Has Become a Bust for Some

a.medspalogos2.gifBy RHONDA L. RUNDLE: November 21, 2006

Jeff Nebot thought he had struck gold. Two years after opening a laser hair-removal franchise in St. Louis, annual revenue hit $3 million. And over time, the lavish salon added other cosmetic services as Mr. Nebot joined the rush of entrepreneurs into the emerging business of medical spas. Medspas (also called medispas) offer such medical treatments as Botox injections and laser hair removal in a luxurious environment rather than a doctor's office. The field has been rapidly expanding in recent years as entrepreneurs and doctors alike have sought to profit from the dual quests of many affluent consumers: prettification and pampering. For an increasing number of those who entered the business, the boom is proving a bust.

"Several Sona franchisees, though not Mr. Nebot, are in private arbitration over problems that include misrepresenting a complicated business as a turnkey operation and failing to provide needed support. Sona officials declined to comment.

Several franchisees of Radiance MedSpa Franchise Group PLLC, a franchiser in Scottsdale, Ariz., say the company's financial projections overestimated revenue and underestimated initial start-up costs, including working capital.

The president of Radiance, Charles L. Engelmann, recently said: "There are currently 32 open stores and we will have 47 or 49 open by the end of the year. None of the stores have closed." He also acknowledged that some franchisees are attempting to get their money back.

"I can't be my own medical director any more, which is an added expense I can't afford," says one Florida physician who is not a dermatologist. He says he is "facing personal bankruptcy and trying my best to get out while there is something left for my family" after miscalculating what it would take to market, advertise and build his business. Indeed, many medspa owners are doctors who hope to make easy cash at a time when income is shrinking from their traditional medical practices.

You can read the entire article on the Wall Street Journal site here. It does require a subscription. 

Sona MedSpas: An unhappy franchise owner.

Ron Berglund, a Sona medspa owner, left this comment on one of the most widely read articles on this site: What's wrong with medical spa franchises? The article Ron refers to is referenced here: Medspa boom is a bust for some.

"You may want to check out the November 21 issue of the Wall Street Journal. There is a very informative article about mdeical spas (primarily the Sona MedSpa and Radiance franchises).

Having been a franchisee (St. Paul, MN) for almost three years and now facing personal bankruptcy and financial ruin, I can vouch for the accuracy of the article. I have personal knowledge that perhaps 33% (and maybe over 50%) of the Sona franchisees have either already failed or are struggling. The Sona business model-- and I am guessing most of the franchised medspa models-- are replete with flaws, problems and booby traps.

For starters, any business that tells you to spend 25% of gross revenues on marketing and advertising is giving you a recipe for financial disaster down the road. Relying almost entirely on inflated revenues from prepaid multi-treatment packages (allowing you to take in - and spend-- thousands of dollars today without making any provision for the steadily growing future service liabilities) are also a trap for the undercapitalized and unsophisticated. Finally, Sona encouraged us to commit the mortal sin of cosmetic practice-- they coached us to overpromise results to the point of commiting fraud with thousands of clients. When the Sona-required lasers failed enable us to deliver these impossible results we were literally murdered with demands for additional treatments.

I predict a huge "shakeout" in 2007 as other medspa franchisees hit the courthouses with litigation and financial nightmares. The profitable delivery of esthetic medical services is a tricky and demanding challenge for anyone. I believe it takes a unique combination of business and marketing acumen together with great medical skill and emotional intelligence to navigate these tumultuous waters without drowning."

Ron Berglund 

The article Ron refers to is referenced here: Medspa boom is a bust for some.

From the same thread.

JustCurious asks: How does a medspa franchisee handle closing its doors? Aren't there agreements (in years) that must be signed with the franchisor and wouldn't there be penalties for closing shop? I've notice several medspa franchises closing or selling their business within 2 years of opening their doors and I'm wondering (a) what motivates them to close or sell so quickly and (b) what the penalties of closing/selling could be. Also, if a franchisee sells their medspa in this "billion dollar industry" so quickly, is that usually an indication of a failing business?

Dear Just Curious: Thanks for the response to my recent comment. You are asking two additional questions which are very important with regard to the subject at hand. First, you are asking how does a medspa legally close its doors. Closing shop would be no problem if all transactions were handled on a "pay as you go" basis. Unfortunately, most med spas sell primarily multi-treatment "packages". The Sona model encouraged us to do that almost exclusively. We typically sold five-treatment packages for laser hair removal, and often offered BOGO promotions wherein the client would purchase -- and pay cash up front for --five treatments at the "regular" price (full bikini @ $975 for example) and then would receive five FREE treatments for the underarms area. I had an excellent first year of operations since I was taking in thousands of dollars each month for treatments to be performed in the future. After signing up an average of 100 clients per month and pushing the future service obligation forward, you end up "painting yourself into a corner" and facing an insurmountable liability for performing treatments already paid for. Jeff Nebot had the same problem in St. Louis, except that his numbers were typically about triple my numbers. As this isn't enough of a problem, just imaging what happens when you try to sell or close the business!! You have several thousand clients who have prepaid and are legally entitled to the treatments they have already paid you for-- but you cannot afford to keep the Pnonzi scheme going! Believe me-- this makes any medspa almost impossible to sell because any prospective purchaser is scared to death to walk into this huge liability. That is the primary reason Jeff Nebot and I ended giving away our centers for free. Our buildout, furniture and equipment in St. Paul had cost us almost a million dollars and Jeff Nebot's investment was probably twice as much. I know first hand of several former Sona franchisees losing more than a million dollars on the whole mess-- in addition to a million headaches. There was a story posted on the Internet about the former Salt Lake City Sona franchisee closing her doors and failing to provide hundreds of clients with their pre-paid treatments. The article stated that Utah authorities chased the owners down in Texas and instituted some type of legal proceedings against them. I never heard how the matter was resolved, but I heard that the state was trying to impose some stiff penalties against the (Sona) owners.

Your second question asked how can it be that all these problems are occuring when this "med spa boom" is supposed to be happening all around us. The answer-- in my opinion-- is that the so-called med spa "boom" is to a large extent hype. I predict that the majority of the marginal operations will fall by the wayside during the next twelve month and the survivors will be the operatoins that are well funded and operated on sound business principles. Sona and many of the other franchised systems were attempting to offer a "get rich quick" scheme and also a model which-- for the most part-- utilized the physician as essentialy a mere figurehead. My personal belief is that the only truly successful med spa model requires three key components: 1. The physician is the key to the business-- similar to the dentist in the traditional dental office model; 2. The physician needs to be "on site" for a number of reasons-- business, professional and regulatory; and 3. The model requires superb marketing including a ton of cross-promotion and "guerrilla" marketing. Due to competition. typical profit margins and a number of other factors, med spas simply cnnot afford to allow advertising and marketing expenses to exceed over 10% of gross revenues. Whereas most physicians already have from 5000 to 15,000 patients in their data base who can serve as a "warm" client base for a med spa, all of the franchised med spa models start with zero and need to "buy" each client they recruit. Believe me--these outrageous advertising expenses eventually catch up with you! There is a reason the typical fast food franchises absolutely require that advertising expenses remain in the neighborhood of 7% of gross revenues. In order to survive in the low margin marketplace, there is no other way.

Ron Berglund 

Medspa Consultants writing business & marketing plans.

The infamous Medical Spa Business Consulting Plan: The emperor has no clothes.


chart.gifI've received a few emails lately castigating a number of medspa consultants by name. (Since I have no other information those names will not be mentioned.) You might first read my view of most medspa consulting and/or franchises here.

The physicians/owners feel that they were over-promised and under-delivered. One doc referred numerous times to the 'medspa business plan' that his medical spa consultant wrote for him. I thought I'd weigh in on this business and marketing plan issue.

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California Medical Board: Use Of Mid-Level Providers for Lasers, IPLs, Botox, & Other Treatments

The State Medical Board of California has addressed the Use Of Mid-Level Providers for Lasers, IPLs, Botox, & Other Treatments. (Links to PDF) It's a common question that is often brought up over in the discussion areas.

You should read this information carefully. Although it's specific to California, the information is substantially similar to many states.
Read also: Medical Spa Legal: How to... Medspa Legal Discussion Area  l  Building a Medispa inside your practice  l  Medical Spa Franchises

From the Medical Board of California:

Due to an influx of calls to the board regarding who may perform what type of medical / cosmetic procedure and where, the following frequently asked questions and responses are provided for informational purposes and as a reminder. This is a reprint and update to an article published in the October 2002 Action Report.

Who may use Lasers or Intense Pulsed Light devices to remove hair, spider veins, and tatoos?

Physicians may use Lasers or Intense Pulsed Light devices. In addition, Physician Assistants and Registered Nurses (not Licensed Vocational Nurses) may perform these treatments under a physician's supervision. Unlicensed Medical Assistants, Licensed Vocational Nurses, Cosmetologists, Electrologists, or Estheticians may not legally perform these treatments under any circumstance, nor may Registered Nurses or Physician Assistants perform them independently, without supervision.

Who may inject Botox?

Physicians may inject Botox, or they may direct Registered Nurses, Licensed Vocational Nurses, or Physicians Assistants to perform the injection under their supervision. No unlicensed persons, such as Medical Assistants, may inject Botox.

I've been approached by a nurse to be her 'sponsoring physician' for her laser and Botox practice; would that be legal?

No. There is no such thing as a 'sponsoring physician'. Nurses may not, under California law, employ or contract with a physician for supervision. A  nurse may not have a private practice with no actual supervision. While the laws governing nursing recognize "the existence of overlapping functions between physicians and registered nurses" and permit "additional sharing of functions within organized health care systems that provide for collaboration between physicians and registered nurses" (Business and Professions Code section 2725), nurses may only perform medical functions under "standardized procedures." The board does not believe this allows a nurse to have a private medical cosmetic practice without physician supervision.

I've been asked by a layperson to serve as a "Medical Director" for a "medi-spa" that provides laser and other cosmetic medical services; would that be legal?

No. No one who cannot legally practice medicine can offer or provide medical services (Business and Professions Code section 2052). A physician contracting with or acting as an employee of a lay-owned business would be aiding and abetting the unlicensed practice of medicine (Business and Professions Code sections 2264, 2286, and 2400). To offer or provide these services, the business must be a physician-owned medical practice or a professional medical corporation with a physician being the majority shareholder.

I see these ads for "Botox Parties" and think that it has to be illegal. Is it?

The law does not restrict where Botox treatments may be performed, as long as they are performed by a physician or by a registered nurse, licensed vocational nurse, or physicians assistant under a physician's supervision.

Who may perform microdermabrasion?

It depends. If it's a cosmetic treatment, that is to say it only affects the outermost layer of the skin or the stratum corneum, then a licensed cosmetician or esthetician may perform the treatment. If it's a medical treatment, that is to say it penetrates to deeper levels of the epidermis, then it must be performed by a physician, or by a registered nurse or physicians assistant under supervision. Treatments to remove scarring, blemishes, or wrinkles would be considered a medical treatment. Unlicensed personnel, including medical assistants, may not perform any type of microdermabrasion.

I would like to provide non-medical dermabrasion, and hire an esthetician to perform that and also cosmetic facial and skin treatments. What do I need to do?

It is legal for physicians to hire licensed cosmetologists or estheticians to perform cosmetology services, if they have obtained a facility permit from the Bureau of Barbering & Cosmetoloty. All licensed cosmetologists, including estheticians, must perform their services in a facility with a permit.

Why can't I use a medical assistant instead of a nurse?

Medical assistants are not licensed professionals. While doctors have become accustomed to their assistance in medical office practices, medical assistants are not required to have any degree, nor do they have to pass an examination or be licensed. For that reason, the law only allows them to perform technical supportive services as described in sections 2069-2071 of the Business and Professions Code, and Title 16, California Code of Regulations, sections 1366-1366.4.

What is the penalty if I get caught using or helping an unlicensed person to perform medical treatments?

The law provides a number of sanctions, ranging from license discipline to criminal prosecution, for aiding and abetting the unlicensed practice of medicine. Physicians could be charged with aiding and abetting unlicensed practice, and the employee could be charged with the unlicensed practice of medicine. 

I understand that all of these practices may be illegal, but I see advertisements all the time for these kinds of illegal practices. What should I do?

You may file a complaint with the Medical Board. To do so, please send the advertisement, the publication name and date, and your address and telephone number where you may be reached,  to our Central Complaint Unit at 1426 Howe Avenue, Suite 54, Sacramento, CA 95825. The board will contact the business, inform them of the law, and direct them to cease any illegal practice. If it is simply the advertisement that is misleading, they will be directed to change or clarify the ad.

It is impossible to cover all of the relevant legal issues in a short article, and these questions and answers are not a substitute for professional legal advice. Physicians may want to consult with their attorneys of malpractice carriers about the use of their office personnel. In addition, the board has a number of written materials with more thorough information on this subject. There are legal opinions on the use of lasers and dermabrasion, materials outlining the legal limitations on use of medical assistants, as well as the actual statutes and regulations. To request any of these documents, please contact the Medical Board of California, 1426 Howe Ave., Suite 92, Sacramento, CA 95825, or call (916) 263-2389.