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					By Wendy Lewis, Contributing Editor




    O
            ver the past few years, medspa and laser treatment franchises
            have emerged in every city across America. Seduced by the
industry buzz and growth statistics, many physicians see medical spas
as a means to boost their income and eliminate the headaches of
daily practice. MedSpa business models offer individuals the
ability to participate in what has come to be known as, “the
booming medical spa market.” This opportunity sounds
tempting, but further analysis reveals widespread dis-
satisfaction among owners due to increasing over-
head, inconsistent results of marketing programs
and sweeping financial losses.




2   THE Aesthetic Guide January/February 2008 www.miinews.com
THE Aesthetic Guide January/February 2008 www.miinews.com   3
                                                            MedSpa Economic Reality Check
                                                               According to Milana Knowles, vice president of medical and day spas,
                                                            SpaFinder, Inc. (New York, N.Y.), “Medical spas are a major, long-standing
                                                            trend in our industry that shows no sign of slowing down anytime soon. Many
                                                            spa owners are reaching out to dermatologists to enhance their services and
                                                            add a medical dimension to their spa services, providing a consumer friendly
                                                            experience of receiving treatments and injectables from a medical professional
                                                            in a comfortable spa setting. At the same time, more physicians are opening
                                                            their own medical spas, where they primarily offer cosmetic treatments with a
                                                            nurturing spa environment. Sweeping demographic trends are underpinning the
                                                                                                     demand for both models. We are con-
                                                                 “Medical spas are a                 tinuing to see huge numbers of baby
                                                                                                     boomers with expendable income
                                                             major, long-standing trend seeking ways to maintain a youthful
                                                              in our industry that shows appearance, but now they’re being
                                                                                                     joined by a younger demographic
                                                                   no sign of slowing                that’s come of age in an environment
                                                                 down anytime soon.”                 where preventing the appearance of
                                                                                                     aging is an important concern.”

                                                               MedSpas represent a want, rather than a need for consumers, unlike general med-
                                                            ical practices where people need to visit for health reasons. The popular adage, “If
                                                            you build it, they will come” does not apply in the medspa market. When a medspa
                                                            opens its doors, customers are not going to just flock to sign up for laser hair removal
                                                            and injectable treatments. It takes time, money and perseverance to develop a loyal
                                                            clientele. However, medspa franchises make it sound so appealing to practicioners
                                                            and investors that it may be hard to cut through all the hype.

                                                            FAULTY MEDSPA BUSINESS MODELS
                                                               “A very strong sub-trend within the medical spa trend is medical spa chains and
                                                            franchises, including Solana MedSpas® (Irvine, Calif.), Sona® MedSpa (Franklin,
                                                            Tenn.), Radiance (Scottsdale, Ariz.) and Pure (U.S. and Canada), to name a few.
                                                            Usually, doctors or aestheticians open medspas, but operating a successful spa
                                                            requires business and marketing skills as well. Franchises and chains are a great
                                                            solution, enabling physicians and aestheticians to focus on patients and leave mar-
                                                            keting to full-time internal departments,” noted Ms. Knowles.

                                                              Groups such as Sona are selling franchises around the country by specializing
                                                            in laser hair removal. According to their website there are 24 locations in the U.S.
                                                            They offer exclusive territories, meaning there will be only one Sona MedSpa cen-
                                                            ter in a specified radius. However, this does not take into account the number of
                                                            other clinics offering the same services within that geographic region. This model
                                                            requires a monthly marketing and advertising spend to build the Sona name.

                                                              In contrast, Solana MedSpas offers partners an opportunity to use their own
                                                            names so they are not functioning as part of national chain. Solana markets a
                                                            turnkey solution with management training as part of its core system.

                                                               However, some of the current franchise medical spas and laser clinics have seri-
                                                            ous flaws for both owners and consumers. The most obvious issue is that franchise
                                                            models are in the business of selling franchises, and not necessarily making ongo-
                                                            ing revenue for their franchisees. For many franchisees the parent company’s
                                                            financial projections vastly overestimate revenue and underestimate the initial
                                                            start-up costs required. As a result, some chains have experienced foreclosures or
                                                            turnovers in multiple cities over the past few years, or have transferred ownership.

4   THE Aesthetic Guide January/February 2008 www.miinews.com
                                                            MedSpa Economic Reality Check
                                                              “My wife and I went through the training for one of these groups and decided not
                                                            to pursue it. The people running the program seemed very slick. We had the sense
                                                            that they would tell us anything just to get us to sign on, and if we had a problem
                                                            they would be nowhere to be found. We also found them to be less than forthcom-
                                                            ing with information and willing to circumvent business and medical ethics to make
                                                            a sale. That was the final deciding factor,” said one prospective entrepreneur.

                                                                               According to Janice Gronvold, principal of Spectrec (Newport
                                                                             Coast, Calif.) and instructor for the spa and hospitality manage-
                                                                             ment certificate program at the University of California, Irvine,
                                                                             “MedSpa models were influenced by dermatologists and plastic
                                                                             surgeons who expanded upon their core business to offer added
                                                                             value, non-invasive aesthetic services and ongoing skincare pro-
                                                             Janice Grunvold
                                                                             grams. However, many medspa concepts focused on building a
                                                            business based upon added value services such as Botox® (Allergan, Irvine,
                                                            Calif.), dermal fillers and laser services, which were not enough to support a
                                                            long-term viable business model. As a result, many medspas have ended up
                                                            competing over price rather than building a business based upon a true value
                                                            proposition to differentiate themselves from others offering similar services.”

                                                               Attempting to commoditize aesthetic        “Attempting to commodi-
                                                            services, which require a highly cus-
                                                            tomized and personalized approach,              tize aesthetic services,
                                                            “positions franchise models in a high          which require a highly
                                                            risk category with a limited window of
                                                            time before they inevitably falter,” said     customized and personal-
                                                            Ms. Gronvold. “Aesthetics is just one         ized approach, positions
                                                            dimension of the total spa service. There
                                                            is much more to delivering a good qual-          franchise models in a
                                                            ity spa experience to the consumer than           high risk category.”
                                                            just zapping or injecting someone.”

                                                               In some markets, recruiting the right physician to work onsite and instill customer
                                                            confidence is key, but many of the franchise systems promote a model which basical-
                                                            ly utilizes a physician in name only. Stark laws which govern physician self-referrals
                                                            vary from state to state, and in a number of states some of these models cannot work
                                                            in terms of non-physicians employing physicians. On site versus off site medical direc-
                                                            tor models, requiring a licensed practitioner to oversee clinic operations also varies
                                                            by state. In addition, generic manuals that are an integral part of turnkey models are
                                                            not always relevant in the specific state that the medspa is doing business.

                                                              Perhaps the greatest challenge facing the medspa industry is the vast number
                                                            of players jumping into the arena only to find they are not well enough
                                                            equipped with the medical expertise, business or marketing know-how to exe-
                                                            cute their business plan for a successful medspa.

                                                                                The big question remains as to whether medspas are really the
                                                                             right place for non-medical entrepreneurs. According to Rick Frisk,
                                                                             president of Avanti Skin and Wellness Clinics and Belviso Dayspa
                                                                             and Laser Centers (Wash. and Calif.), “The downside to franchis-
                                                                             ing is that they are willing to sell to anyone, and to be successful
                                                                             you must have a business background. Physicians are notoriously
                                                                Rick Frisk   bad businessman. Entrepreneurs are more accustomed to running
                                                                             businesses so they tend to fare better.”

6   THE Aesthetic Guide January/February 2008 www.miinews.com
                                                            MedSpa Economic Reality Check
                                                                                 However, Renato Saltz, M.D., vice president of the American
                                                                               Society for Aesthetic Plastic Surgery (ASAPS) and medspa owner,
                                                                               has experienced the opposite, “In our market, in Salt Lake City,
                                                                               which was just named the ‘Vainest City in America’ by Forbes
                                                                               Magazine (New York, N.Y.), we have seen many medical spa
                                                            Renato Saltz, M.D. models run by non-plastic surgeons come and go.”

                                                               Whenever an industry is exploding the way medspas are, many players vye
                                                            for market share and superiority. It would seem that many of the smaller solo spa
                                                            owners that have been struggling are in danger of going bankrupt in the near
                                                            future due to increasing competition and price gauging. But, in some cases,
                                                            prospective medspa owners may do better on their own rather than signing on
                                                            with a national chain. The franchise model is not always the key to success.

                                                              According to Dr. Saltz, who opened his own medical spa six years ago in Salt
                                                            Lake City, Utah, “To be successful, medical spas work best when they support a
                                                            busy aesthetic practice. We use our
                                                            spa for facial and body contouring            “We use our spa for
                                                            services to enhance surgical results,
                                                            rather than as a self-supporting profit
                                                                                                       facial and body contour-
                                                            center. My advice to other surgeons is      ing services to enhance
                                                            not to build a spa to make money, but
                                                            rather to add a spa onto your existing
                                                                                                         surgical results, rather
                                                            practice as a service to your patients.    than as a self-supporting
                                                            The business needs to have a solid cus-
                                                            tomer base to survive.”
                                                                                                              profit center.”

                                                              Physicians who own and operate their clinics may have a distinct advantage
                                                            because they can market directly and more economically to their existing
                                                            patient population. Most practitioners already have at least several thousand
                                                            patients in their database from day one, whereas franchised medspa models
                                                            start with zero customers and essentially need to secure repeat visits with every
                                                            new client in order to sustain a successful practice.

                                                              The most common medspa model requires an ongoing program of creative
                                                            cross-promotions and guerrilla marketing tactics. Saturation marketing has been
                                                            the source of hundreds of appointments set up before a medspa opens its doors.
                                                            “We believe in outbound marketing, open houses, direct mail and forming part-
                                                            nerships with other local businesses. We have showings at women’s expos,
                                                            health fairs and wedding shows to generate viable leads. We also do some
                                                            radio and devote a large part of our budget to web marketing,” noted Mr. Frisk.

                                                              Many medspa owners offer multi-treatment packages and “Buy One Get
                                                            One” promotions where the client pays up front for a series of treatments and
                                                            gets an additional number of treatments at no charge or at a discounted rate.
                                                            By aggressively signing up clients for these packages, sales are captured thus
                                                            driving future service obligations forward. However, the disadvantage of this
                                                            tactic is the medspa faces mounting liability for performing treatments already
                                                            paid for. If the owner tries to close the business, there may be a large amount
                                                            of clients who have prepaid and are legally entitled to the treatments they have
                                                            paid for. Understandably, this tactic can also make a medspa tricky to sell
                                                            because prospective buyers will be concerned with the prospects of encounter-
                                                            ing a huge liability.


8   THE Aesthetic Guide January/February 2008 www.miinews.com
                                                             MedSpa Economic Reality Check
                                                                 Another dilemma in the industry is that medspa models tend to encourage the
                                                             concept of over promising results to get customers in the door. Inconsistent results
                                                             with some procedures lead to unpredictable client satisfaction. Efficacy has pre-
                                                             sented a stumbling block, which is often cited as a problem of the technology
                                                             itself. When patients complain of hair regrowth or dissatisfaction with their pho-
                                                             torejuvenation outcomes, demands for additional free treatments and/or refunds
                                                             can create an adversarial atmosphere that poisons the facility’s reputation in the
                                                             local community. More focus should be on achieving tried and true methods to
                                                             attract new clients and enlist existing clients for repeat and referral business.

                                                                  According to Janice Carrera Worth, president of Anushka Spa, Salon and
                                                                                                      Cosmedical Centre (West Palm
                                                                  “The ability to sustain a           Beach, Fla.), “The industry is ripe with
                                                                                                      casualties. I predict a big shakeout as
                                                                    profitable delivery of            more medspa owners end up with liti-
                                                                 aesthetic medical services gation and financial woes. The ability
                                                                                                      to sustain a profitable delivery of aes-
                                                                     is a challenge that              thetic medical services is a challenge
                                                                 requires a unique combi- that requires a unique combination of
                                                                                                      business and marketing acumen with
                                                                   nation of business and             medical skills. The fall out is not only
                                                                  marketing acumen with               economic with these failed ventures,
                                                                                                      but patient confidence and general
                                                                        medical skills.”              perception of the market place is
                                                                                                      being eroded.”

                                                               However, there are some industry veterans who have developed a strategy
                                                             for long-term growth. Mr. Frisk plans to open 30 more units on the west coast
                                                             by the end of 2008. “Part of the challenge with some of the franchises that are
                                                             failing is that they were expecting a turnkey operation, but it’s all about your
                                                             team. Having the right people on the team is critical, and paying them fairly
                                                             and incentivizing them on production will keep them happy.”

                                                               “We buy clinics that are failing and are able to turn them around by adding
                                                             good staff and cutting down on expensive advertising that doesn’t work like it used
                                                             to. I invest the majority of our money into staffing. A lot of centers just add people,
                                                             who are not properly trained, as needed to answer phones and administer treat-
                                                             ments. I look for strong people with good interpersonal skills,” Mr. Frisk added.

                                                             RECRUITMENT & TRAINING
                                                               Staffing is one of the biggest hurdles affecting spa industry growth. Today’s
                                                             consumers are much savvier and ask tougher questions; therefore service offer-
                                                             ings must be consistent. Finding the right people to deliver these services in a
                                                             professional manner is a big concern for smaller businesses. You have to invest
                                                             in education for personnel and you have to be passionately committed.
                                                             According to Mr. Frisk, “The key to success is how good your staff is. If people
                                                             don’t like you, they won’t come back.”

                                                                “Facility owners today need to be extremely committed to an ongoing education
                                                             strategy for every employee who comes in contact with the patient,” noted Ms.
                                                             Worth, whose facility routinely sends medical staff to national conferences for con-
                                                             tinuing education and to stay up to date with new technology and protocols. “This
                                                             needs to be a business priority which is a major investment of time, resources and


10   THE Aesthetic Guide January/February 2008 www.miinews.com
                                                             MedSpa Economic Reality Check
                                                             money to insure a highly professional, informed staff to interact with clients.”
                                                             Medical staff needs to be in an ongoing mode of research and advanced training.
                                                             “The learning curve of aesthetic treatments is unparalleled, yet needs to be bal-
                                                             anced with prudence and safety,” she added.

                                                             MEETING CONSUMER DEMANDS
                                                               Consumers have come to expect an increasingly high standard of profession-
                                                             alism and caring from a medspa environment. “Medical spas are providing seri-
                                                             ous medical services and the safety and efficacy of the procedure needs to be
                                                             paramount. Patients visiting a medspa facility are extremely knowledgeable on
                                                             what is available in the marketplace,” explained Ms. Worth.

                                                                Based on his own patient survey, the most popular procedures at Dr. Saltz’s
                                                             medspa are IPL therapy – pre-operatively combined with microdermabrasion and
                                                             peels – as well as an early regimen of lympathic drainage massage to reduce
                                                             swelling and camouflage mineral makeup. “We have learned from the ASAPS cos-
                                                             metic medicine task force that offering non-invasive services, as a benefit to patients,
                                                             is an integral part of a modern aesthetic surgery practice,” Dr. Saltz added.

                                                               According to Ms. Worth, “The physical environment that a medspa offers –
                                                             when done right – is evolving into a sleek, medically modern palate against a
                                                             backdrop of a soothing spa atmosphere. High-end clientele want a sensate
                                                             experience that permeates clinical purity, infused with cutting edge design tied
                                                             up with a bow of peaceful tranquility. The most successful medspas have a floor
                                                             plan that allows access and medical migration from spa/salon to medical areas
                                                             in a very organic way. Technology allows us to infuse the space with medical
                                                             information and available procedures by a feeling of osmosis.”

                                                                                Susie Santiago, a spa management consultant in London, U.K.,
                                                                             explained that consumers are looking for results and a track record of
                                                                             success. “Consumers want thorough, honest and realistic consulta-
                                                                             tions from professional practitioners who don’t pressure them into
                                                                             decision making. They are looking for spotlessly clean and well main-
                                                                             tained premises, coupled with style and an attractive interior design.
                                                              Susie Santiago
                                                                             The environment should create a feeling of luxury, comfort and
                                                             warmth. They expect the staff to be wel-
                                                             coming, sensitive and knowledgeable                “Whilst advertising
                                                             and to exude professional efficiency,”
                                                             she explained.
                                                                                                             drives brand awareness
                                                                                                           and recognition, word-of-
                                                               In the end, brands that thrive are the
                                                             ones that can demonstrate a track
                                                                                                           mouth recommendation is
                                                             record of success and maintain credi-             a key driver to the
                                                             bility with clients through a portfolio of
                                                             testimonials that will stand up to scruti-
                                                                                                            longevity of future spa
                                                             ny. “Whilst advertising drives brand           brand leaders as many
                                                             awareness and recognition, word-of-
                                                             mouth recommendation is a key driver
                                                                                                           patients will seek out oth-
                                                             to the longevity of future spa brand           ers with good results to
                                                             leaders as many patients will seek out
                                                             others with good results to help verify
                                                                                                           help verify their decision
                                                             their decision making process,” said              making process.”
                                                             Ms. Santiago.


12   THE Aesthetic Guide January/February 2008 www.miinews.com
                                                                 MedSpa Economic Reality Check
                                                                 THE FUTURE OF MEDSPAS
                                                                    Technology based treatments are becoming the default method of health-
                                                                 care. New technologies – touted as a replacement for a practicioner’s skill
                                                                 and expertise – are being developed at a swift pace. What some of these
                                                                 models do not take into account is the power of trust building and the practi-
                                                                 tioner-patient relationship.

                                                                                     According to Dolev Rafaeli, president and CEO of Radiancy,
                                                                                  Inc. (Orangeburg, N.Y.), “The U.S. medspa market is the new
                                                                                  frontier for device makers. With the huge market expansion, the
                                                                                  future of medspas lies in the successful fusion of solid medical
                                                                                  attention with a pampering and service oriented environment in
                                                                  Dolev Rafaeli   a cost-effective manner.”

                                                                    “MedSpa staff might lack the training and expertise required to operate the
                                                                 high-end complex technologies used in physician offices. Therefore, user-
                                                                 friendly and reliable equipment is key for the success of medspas. Market
                                                                 proven, clinically efficacious technologies that are financially accessible and
                                                                 user-friendly, will drive the market,” explained Mr. Rafaeli.

                                                                    The future of medspas represents some challenges and impressive opportu-
                                                                 nities for entrepreneurs, physicians and their partners. According to Mr. Frisk,
                                                                 “The industry will progress more into anti-aging in the future. We feature neu-
                                                                 traceuticals and bio identical hormones based on comprehensive diagnostics
                                                                 as a natural complement to skin tightening and other aesthetic procedures.
                                                                 We have partnered with Cutera® (Brisbane, Calif.) and Syneron (Irvine,
                                                                 Calif.), and we are featuring several new technologies in the body shaping
                                                                 category. We are interested in warranties and support, how much research
                                                                 and development a company is doing, and what is coming down the
                                                                 pipeline.”

                                                                   Aesthetic medicine is predicted to become more refined in the near future
                                                                 as the industry matures and larger, more sophisticated business owners buy
                                                                 up fledgling units. Greater diversification of medical aesthetics, spa lifestyle
                                                                 programs, wellness and health
                                                                 resorts can be expected.                    “The future will revolve
                                                                    As Ms. Gronvold conveyed, “The             around an integrative
                                                                 future will revolve around an inte-        service model. For exam-
                                                                 grative service model. For example,
                                                                 it is paramount, in my view, to          ple, it is paramount, in my
                                                                 include lifestyle issues such as diet,       view, to include lifestyle
                                                                 exercise and stress in any medical
                                                                 spa program.” The next frontier for         issues such as diet, exer-
                                                                 medspas will be to incorporate a              cise and stress in any
                                                                 variety of traditional and holistic or
                                                                 alternative professionals to enhance         medical spa program.”
                                                                 the client experience. For medspas
                                                                 to remain relevant in the future, they will need a strategy, vision, training and
                                                                 commitment to get it right. Only, well-funded, serious operations, based on
                                                                 sound business principles who deliver a five star customer experience will be
                                                                 the ultimate winners. I



14   THE Aesthetic Guide January/February 2008 www.miinews.com

				
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