Sola Salon Studios: an Expensive Franchise Costing $1.4M

One of the largest beauty salon franchise in the US with more than 620 salons today, Sola Salon Studios is an obvious choice for many franchisees who want to get into the beauty salon industry.

But is this really a profitable business? The question is a valid one indeed: as the franchisee you would have to fund the initial investment of $1,471,000 on average, much higher than salon franchises in general ($450,000).

In comparison, one salon makes $411,000 in revenue per year, what does it mean for your profits?

In this article we are diving into Sola Salon Studios and its Franchise Disclosure Document to find out whether it’s a good franchise investment or not. Let’s find out!

Key stats

Franchise fee	$55,000
Royalty fee	5.5%
Marketing fee	1.5 - 2.0%
Investment (mid-point)	$1,471,000
Revenue per unit	$411,000
Revenue per sq. ft.	$68
Sales to investment ratio	0.3x
Payback period*	25+ years
Minimum net worth	$1,500,000
Minimum liquid capital	$500,000

What is Sola Salon Studios?

Headquartered in Lakewood, Colorado, Sola Salon Studios is an American chain of fully equipped high-end salon studios for beauty professionals.

Sola Salon Studios was founded in 2004 by Stratton Smith and Matt Briger. It creates ready-to-move-in spaces for estheticians, nail technicians, massage therapists and hairdressers.

Its franchising journey began in 2005 and it currently has over 628 locations worldwide, with 564 franchises in the US.

Sola Salon franchises pros and cons

The Pros:

• Flexible build-out options: The brand’s salon designs are flexible and can fit into the available real estate opportunities. Franchisees can offer modern, unique salon build-outs for each beauty professional.
• Minimal staff and equipment maintenance: Sola Salon Studios utilizes a real estate rental model that requires minimal staff and equipment. Franchisees get simple entry requirements and can scale their businesses and improve their profitability.
• No inventory and receivables: The brand offers its franchisee move-in-ready salons all under one roof for salon professionals equipped with amenities like high-end cabinetry, floor-to-ceiling walls with sliding glass doors, Wi-Fi and all utilities. Franchisees can explore and grow their portfolios smoothly.
• Integrated marketing expertise: The franchisor provides its franchisees with tested and proven national brand campaigns to attract beauty professionals to rent studios in their locations. In addition, franchisees get personalized local public relations resources and tools for their salon studios.
• Comprehensive training and education: The brand offers its franchisees a detailed training and education curriculum to help them launch and operate their Sola salon studios successfully. It trains them on the parent company’s business concept, operations, hiring and training staff, as well as giving them growth advice and insights.
• Third-party financing: The franchisor offers its franchisees financing assistance through partnerships with third parties. Franchisees get funding for their franchise fee, inventory, equipment and payroll.
• Market analysis and site selection: The franchisor provides its franchisees with real estate experts to help them identify a competitive market and location. It also helps them access contractors to guide the build-out of their salons.
• Exclusive territory protection: Sola Salon Studios grants its franchisees the right to operate in a protected market. It does not establish any other franchises or operate competing businesses in the development market.

The cons:

• Not a passive investment: The franchise does not allow for absentee ownership. Franchisees must be actively involved in their salons’ day-to-day decision-making and operations.
• Not a home-based opportunity: A Sola Salon Studios franchise is not a mobile business opportunity. Franchisees need to have office space, a retail facility, or a warehouse to operate from.
• Not a part-time business opportunity: The franchise cannot be run part-time or as a side business. It requires franchisees to follow their parent company’s working hours.
• Competition:  Supercuts, TONI&GUY and Sweet & Sassy.

How much does a Sola Salon franchise cost?

You have to invest around $1,471,000 to open a Sola Salon franchise studio.

This is an average. Indeed, it varies based on many factors, such as the location of your studios, their size, and other factors.

Sola Salon Studios startup costs

In addition to the initial franchise fee of $55,000 which you must pay to the franchisor, you would also pay for the leasehold improvements, furniture and fixtures, signage, equipment, insurance, etc.

Here’s the full breakdown of costs:

Type of Expenditure	Amount
Initial franchise fee	$55,000
Leasehold improvements	$504,000 – $1,440,000
Furniture and fixtures	$147,000 – $405,000
Signage	$10,000 – $20,000
Insurance	$5,000 – $10,000
Working capital (3 months)	$20,000 – $50,000
Other	$67,143 – $154,517
Total	$808,143 – $2,134,517

How much revenue does a Sola Salon make?

A Sola Salon Studios franchise makes $410,951 in revenue per year on average.

This is the average sales per franchised studio for 474 of the 555 franchised studios that were open for all of 2021, as disclosed in the Franchise Disclosure Document.

Over 2019 – 2021, average revenue per franchise studio has trended upward, from $373,000 in 2019 to $411,000 in 2021. This is a significant increase vs. 2020 (+38.7%, or $296,000 for 451 franchised studios) as Sola Salon recovered from the COVID-19 pandemic.

Typically 6,000 sq. ft. in size, a Sola Salon makes $68 in revenue per square foot per year on average, lower than the average we found for salon franchises ($270 per square foot instead).

How profitable is a Sola Salon franchise?

On average, we estimate that a franchised Sola Salon Studio makes $34,126 in profits per year. This corresponds to a 8% EBITDA margin.

Whilst an 8% EBITDA margin isn’t necessarily bad for a salon, it’s not the best profit margin across the industry to say the least. Indeed, we found that salon franchises have an EBITDA margin of ~25% on average instead (see our salon franchises benchmark).

Note that we calculated this number using the information available in the Franchise Disclosure Document 2022. Fortunately, Sola Salon Studios provides detailed information on the cost structure of its company-owned stores, which we adjusted for franchises instead (by adding royalties for example).

The reason behind such low margins is because of the rent expense: as per the FDD company-owned salons indeed paid the equivalent of 45% of revenues in rent, which is very expensive and much higher than salon franchises in general (17-20% on average).

It’s very important to note that franchised-owned salons may perform better than company-owned salons: they may spend less in rent and therefore have higher profits margins. Unfortunately, the information provided in the FDD by the franchisor is based on a few company-owned salons only.

Profit and loss	Amount	% revenue	Source
Revenue	$410,951	100%	as per FDD
Utility	$(21,493)	5%	as per FDD
Staff*	$(90,000)	22%	assumption
Royalties	$(22,602)	6%	as per FDD
Rent	$(186,284)	45%	as per FDD
Marketing	$(7,192)	2%	as per FDD
Repair, maintenance	$(24,123)	6%	as per FDD
Other operating costs	$(25,131)	7%	industry average
EBITDA	$34,126	8%

Is Sola Salon Studios a good investment?

Despite the low profit margins, should you still invest in a Sola Salon Studios franchise? Well, this is where it gets complicated.

Even if we were to assume that franchised-owned salons perform better than company-owned salons (let’s say a 15% net profit margin), the initial investment cost is so high vs. the profits that we think buying a Sola Salon Studio is difficult to justify.

Indeed, as we saw earlier it would cost you on average $1,471,000 to open a new salon, yet one salon makes on average $411,000 in turnover per year. So even if we were to assume you manage to reach a 15% net profit margin, the payback would still be around 25 years.

That’s a very long payback: you would wait 25 years to repay creditors (banks) and any investors who invested initially (including yourself). Therefore, we don’t think Sola Salon Studios is a great franchise investment.

That being said, these numbers do not guarantee your salon will perform as such. In addition, profits shouldn’t be the only consideration when choosing a franchise. Instead, things like brand, competition, training, etc. are also very important.

How does it compare vs. other franchises?

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