Acquisitions Anonymous - #1 for business buying, selling and operating - NYC Boutique Wellness Franchise: $2.6M Deal Review

Episode Date: July 8, 2025

Connor and Heather break down a $2.6M Manhattan boutique stretching franchise, debating its “passive” claims, premium valuation, and if the trendy concept will stand the test of time.Business Listing – https://www.bizbuysell.com/business-opportunity/network-of-3-passive-boutique-wellness-centers-in-nyc/2308977/Welcome to Acquisitions Anonymous – the #1 podcast for small business M&A. Every week, we break down businesses for sale and talk about buying, operating, and growing them.💰 Sponsored by Capital PadLooking to buy a small business or back someone who is? Capital Pad is a game-changing marketplace that connects acquisition entrepreneurs with capital. With standardized terms and governance, it makes investing in small businesses simple and transparent. Visit 👉 https://www.capitalpad.com and tell them Acquisitions Anonymous sent you!In this episode, Connor Groce and Heather Endresen take over the podcast to dive into a unique franchise resale: a network of three boutique assisted stretching studios in Manhattan, listed for $2.6 million. With gross revenues of $3.6M and cash flow of $536K, the business boasts an executive management model, minimal COGS, and strong recurring membership revenue — all packed into under 1,500 sq ft per location.Key Highlights:- Asking price of $2.6M on $536K cash flow, with $3.6M in revenue- Three boutique stretching studios across Manhattan with heavy foot traffic- Less than 1% COGS, but dependent on 1:1 labor model and younger staff- Established in 2022 under a fast-growing wellness franchise brand- Potential SBA financing hurdles for wealthy buyers due to liquidity rules- Connor admits he underestimated the business model back in 2019- Both hosts worry about concept longevity vs. paying a premium multipleSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, everybody. Welcome to this episode of Acquisitions Anonymous, just me, Connor and Heather today. And so we talked about a great deal, quote unquote, in a wellness franchise concept, three units in the New York area. They say that it's passive. It's priced at a premium. So there was a lot that we didn't like about it, but it led to an interesting conversation about not only the landscape of wellness businesses in general, but also the SBA lending landscape and different profiles of buyers where you may think that it's easy to get an SBA loan, but it actually isn't in reality. So stay tuned for the episode. We had some really interesting thoughts on it, and we hope you enjoy. Hey, everyone, it's Bill. And I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called CapitalPad. And it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So CapitalPad is a marketplace for acquisition entrepreneurs that is people who want to buy a business and need capital to

list their deals and solicit capital from other people who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is a place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing, too, from the investor side is that CapitalPad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions all up front in black and white. Basically, CapitalPad professionalizes investing in small businesses.

And the returns can be really, really good. I'm so stoked that they exist. It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out Capitalpad. and tell them that Acquisitions Anonymous sent you. Connor, good to see you again. Again.

Welcome back. Yeah, thank you. Thank you. We're taking over the podcast, Connor and I. Bill and Mills. Maybe. I mean, if they don't come back, we can. We'll see if that happens.

Yeah, we'll see if that happens. Let's dive into a franchise resale, if that sounds good. Yes, it does. What have you got? Well, so this is a network. of three passive, this is a quote, this is not me, but because that's my least favorite word when talking about a small business, but network of three passive boutique wellness centers in NYC. All right. So asking price here is 2.6 million. Gross revenue is just under 3.6. Cash flow is

$536K. And the description, it says executive management business model with strong team in place. So network of three locations across 60 blocks in a great residential area of Manhattan. This boutique fitness, wellness model is part of a franchise with over 400 open locations. This is a very simple business model and it all happens in less than 1,500 square feet per location. Recurring revenue, less than 1% cost to get sold and a few employees to make this a great quality of life business. This is a network of wellness centers. This network of wellness centers has growing sales and layers of management in place to help make this an executive management business model. Many franchisees have full-time jobs and for many franchise owners running three units is their full-time job.

If you are looking for a premier wellness brand and premier locations with great cash flow that is simple to operate and has growing sales call about listing blank. So this is in New York. Real estate is leased. They don't tell us how much the rent is. That includes 600K in FF&E, and this business is an established franchise. I have a strong intuition that this is a stretching concept, and we won't share which one it is. That makes sense. And I do know about those stretching.

places. I have been to them. I've been stretched. It is, it is kind of a unique concept because it's not a gym. You're not getting a workout. Technically, I guess you could go stretch on your own, right? But, but, but it's assisted stretching. The one, you know, that I've done. And it does help to have assisted, you know, someone helping you get into these positions that stretch you further and also assess you like, this is an area where you're tight and these are some things you could do. And also kind of track your progress. So they're kind of interesting. What do you think? Just to set the stage for the consumer experience, I've never been to one of these, but you go in, my understanding is you lay down on a table that's kind of like a massage table. Is that right? And then they have all these bands and

different contraptions that depending on your treatment plan, they basically help you stretch, you know, to improve your mobility, your flexibility, et cetera. Is that correct? That's correct. But it's not like it's an individual room. Like when you go for massage, you have like a private room. This is just like an open space with a bunch of those tables and, you know, different people working on different, you know, clients that are in coming in and out. But yeah, you're mostly just laying on this table and they're moving you around in almost kind of the way a chiropractor does, but not really a little different, you know, more, more stretch oriented. And that's it. I think it's a 45-minute session. And, you know, like any of these fitness packages, they want you to buy, you know,

either a membership or so many sessions and, you know, so they want you to keep coming back, basically. So the first time that I heard about this business was in 2019 while I was still on the boutique fitness world of franchising. And I thought it was very dumb. I was like, there's no way that it's going to work because like the advantage of boutique fitness, or part of the advantage is the labor model, you know, because one person teaching a Pilates class or a cycle class or a yoga class, it's one staff member that can serve 10, 20 customers at one time. And I was like, so in this, it's a one-to-one labor model. I'm like, I can't see how it works. And I was colossally wrong on that. Like, they have done, a lot of them have done really well.

And, you know, I think part of it is like the customer retention is very strong because I think that the modality works and it really does produce results, which is. at its core important. And the other thing that I think that I missed was the real estate component of this. I mean, you're talking about 12 to 1,500 square feet. Yeah, it's tiny. Which when you're running a business in Manhattan, that's a big chunk of the P&L. It's just a very efficient use of space.

So yeah, I'm kicking myself over that one. But yeah, it's a solid business. Yeah. I mean, I'll give you my experience. When I went in, it was a lot of young, almost ready to graduate college or just graduated. and they had like degrees in kinesiology and sports medicine. They wanted to get experience in something that was in their field. And a lot of them, if you talk to them, they're also personal trainers on the side.

So I think some of them were actually getting this was their job and also a source of leads. You know, like if you might want a trainer, you might end up meeting them here. It was not really part of the business model, but I think it's just kind of the way that it worked out. And it was nice. I mean, I think they did a great job. I am curious about the one to one though, like you point out, that's really. that's kind of an important point. They're saying less than 1% cost a good sold and few employees. So how does that work if it is, you know, every client has to spend 45 minutes with one employee?

Well, I mean, it depends on how many people they're serving at one time. And, you know, one thing I was going to ask, do you remember how much it cost? Yeah, it was a little overpriced. Like what I felt at the end of the day was I don't remember exactly what it cost, but I felt like, well, that's, I don't know that that's worth it. Yeah. Yeah, the one to one model, I mean, what's, what's concerning about that is just the labor rate in general. But as a numerator and a denominator and a denominator to that equation, so if they're charging quite a premium and they can afford to pay somebody, you know,

a premium, then there's a chance that their labor rate is still somewhat strong. But yeah, I don't know how many people they're able to churn. I mean, I guess it depends on, yeah, just how big the space is,

how many employees they have it at one time. But they have three or four people working at one time and, you know, three or four people are circling on an hourly basis. That's, that's still strong. revenue on a daily basis. Right. And they had a good reservation system. So it was, it was always crowded. You know, there was always hard to get the appointment exactly when you wanted it. So they were

busy. And so yeah, I think that's what it comes down to is it works. People like anything that's good for them. Right. And this is maybe one of the easier things to sort of sign up for because it's not a workout. And you can walk out of there feeling like you did something positive for your health and you didn't really have to try too hard, I guess. So they put passive in the heading there. And, you know, I, again, no small business is passive. But I do think that if you're somebody that is working a full-time job and wants to own a business, like these people did it the right way. And, you know, the people that get into some sweaty, complex, small home service business and try to, you know, keep their nine to five. That is is not the right way, despite what, you know, some franchisors would tell you. So, you know, they're asking, we'll talk about, you know, the valuation and everything. But, you know, they're asking a premium valuation relative to the size of this. And, you know, They have a pretty strong case to make there if their level of involvement checks. That's exactly right. If it checks out.

Right. And I guess this is, I don't know, I kind of feel like businesses like this, it's a lot of marketing. Right. So what are you getting? What is the marketing system that the seller's been using? Is it effective? Have they had to change their marketing, you know, methods a lot? Are you going to have to be on your toes in that same way to keep these centers or these locations at their full capacity?

there's a lot to consider as to what, you know, how much, how hard are you really working? Frankly, if I'm getting $536,000 of cash flow and I'm not really having, and I can go to my job and relax when I get home, I don't know if that I would sell it. So I'm, that's where I always think, well, how passive is it really? Yes, maybe someone at the right age and energy level is able to pull it off, but maybe they're getting tired. You know, maybe it is, you know, a bit of a hassle to try to do both. And it's not big enough maybe for them to quit their time. job. Maybe so. And the other interesting thing about this is if this is the brand that I think that it is, I think that their basis in this is under a million dollars. Like, I think that they have, they have created

a lot of enterprise value. I may be off on that since it is New York. Yeah. But that's just something for a buyer to keep in mind is that this is. This is not something where they're, you know, they're up against what their basis is and, you know, their expectations are going to be anchored in that way. They probably will have some flexibility to come down if, you know, they don't get demand. a five and a half or whatever that is. And you taught me the term basis bias. Basis bias. That is a, that is a problem. Yeah. And what you're saying is there's not much of basis bias in this particular situation. So that's correct. Right. That's correct. Okay. So, you know, yeah, one percent cost of good soul. That that's, you know, I don't know what they're including in

that, but it's clearly not very much. Your major line items in this business are it's rent, it's labor and it's marketing. Anything else you think? That's probably it. That's probably it. And labor, I guess I would be really interested to know, like, how well, how much turnover they've had, you know, how much work it is to keep your labor full, because that's the tough part in some of these businesses as well is the labor doesn't want to stick around very long. Like the folks that I described, I can't imagine if that's your type of labor, I don't know if it's the case in this particular one, but in the one that I went to it was that they probably don't stick around very long. Those are, you know, young people coming out of college figures. out what they're going to do long term and they're not going to keep a job like this long term. So you're always turning over. You're always having to find new employees. So I would be curious about that as well. I don't know why I had this in my head, but I had in my head that there was some kind of, not licensing, but some kind of a certification. And there may be that they have to go through here. But I'm just like if you're, you know, you get, that's a pretty sensitive thing to

take somebody's leg and put it behind their ear or whatever they're doing. Like I wouldn't, I wouldn't want somebody who didn't know what they're doing. I don't remember. I don't remember here reading that. There might be a certification. And certainly the employees in the one that I went to, they were all the types that would know what they were doing because of what they studied in school, the fact that some of them were personal trainers and certified in that.

So maybe it's some kind of personal training certification piece. I don't know. But I would hope so. Yeah, because it would be a little scary if someone doesn't know what they're doing, pushing your leg around. Yeah. The other side of that, though, is even if it is a more transient employee. I don't know. I've seen niches like that where it fits very neatly into, you know, someone

else's role. Like if they're a personal trainer and this is like the perfect bolt on to, you know, make extra money or whatever. It's like there, there may be a way to overcome, you know, that, that transient, the transient nature of that workforce. It just depends on, you know, what the certification looks like. In Pilates, for example, that's a 500-hour process to be certified to teach Pilates. And that's not something that people can just, you know, do because they want a short-term side hustle type thing. Yeah, that's kind of what I saw. A lot of them were personal trainers.

So that may be exactly what your labor pool is, is just sort of a network of folks that are doing something else in fitness and filling out their week and their day coming, working for you. We've talked about churn. We've talked about marketing. I think that's like the LTV to KAC ratio here is something that's really important. Because it's all, I mean, it all plays into, yeah, play with each other. But that would be one of my first questions is when you look at the churn on a monthly basis.

And again, I don't know exactly how much this costs, but we'd want to understand what the monthly spend is. And then, yeah, frequency, how long are they remaining as customers so that we can figure out how much a customer has worked to us? And then we want to look at their marketing to make sure that they're able to acquire customers in a way that allows us to do this profitably. because I've seen, you know, some of these lower ticket recurring revenue businesses, that's something that they run into as digital marketing who's gotten a lot more competitive, is that even if that cact-l-tv ratio is somewhat strong, as their cac has gone up, it's extended the payback period where they're having to prime the pump with a lot of marketing dollars, and it's not as capital of efficient of a business as it used to be.

Yeah, this one, I wonder if they have a little bit of an advantage just because they're in Manhattan. And this, you know, locations in Manhattan can just generate a certain amount of foot traffic, you know, folks coming in, you know, on top of the digital marketing that they would be doing. I would think that would be the case in these locations versus, you know, a suburban type location. I would completely agree. And let's talk about Manhattan. Because there's a, there's a piece of that obviously on the consumer side of things, I think works to their advantage. I also think there's a piece of this on just the cell side of things that works to their advantage. Because when you're in an area, if this is truly passive, which again, it's not passive. But if this is truly something that you can own while having a job, you're in the place with the highest concentration of people who can afford to pay this amount of money for it. So I'm just curious how do you, what kind of an impact do you think that could have on their ability to get 5x for this?

I think it has a great impact on it. Yeah, absolutely. If you can show somebody, look, I've been working this job and I've still been running it and here's how it works. Yes, absolutely, you have more potential buyers to whom that is attractive and attainable for than you would in a lot of other places because, yeah, there's some pretty good salaries in New York, but yet everyone always wants to make more money if they can. So yeah, I think that that's a plus here. I still don't, you know, as a lender, I hate the idea of someone buying a business and keeping a job. Even if the seller has done it, I don't think it's that easy ever, you know, no matter what. And you're a new buyer, so you've got to learn everything while keeping your job.

That's pretty hard to do. So I, you know, if someone is going to do it that way, I would say they should have no debt. if they're going to, you know, run it full time and $536,000 is enough for them, then great, quit your job. If you want to take debt, quit your job. If you're going to try to run it, you know, and keep your job, pay all cash, maybe, or mostly cash in a little seller note. It's interesting that you say that because what I tell people a lot of times when they say

they want to buy a franchise and keep their job is I'm like, the analogy here is you are very, very highly levered on the operation side of things, right? There's financial side of things where you're highly levered. But that is what, just like when you're highly levered financially, you know, every little, you know, blip in the radar on the P&L, it's amplified the impact, positive or negative. The same is true on the operation side of things. So I always say the art of small business operations is turning crises and inconveniences. You are doing the inverse when you own a business and you have a job where little inconveniences become a crisis. because it's a crisis to you based on your commitments.

Yeah, you have no room, no margin for error for anything to go wrong in your day, because your day is already completely packed between job and your, I think that's great. Operational leverage. Yeah, you're highly levered with your time. And that's not a good spot. Just like being highly levered financially is not either. That's exactly right. Yeah.

And particularly if it's your first time owning a business because I do think that there's something once you've owned a business before, I always say like, obviously you learn about business, but you also learn about yourself in business, which is equally as important. So having owned a few businesses, I know that there are set, like, I know that there are boundaries for me that I have to set where once we cross outside of these boundaries, I'm not the best owner in the world. We'll put it like that. And that's something that when you lack that clarity, it's hard to make, you know, this kind of a decision and make it makes sense. So I'm curious on the SBA front because we were talking about New York, a lot of affluent people with a lot of money to invest. I had a situation with my first franchise where tried to get an SBA loan.

I had some other folks on the cap table who had quite a bit of liquidity. And we had a hard time getting that approved. We ended up going the non-SBA route because this was a learning experience for me. But I guess there's something about how if you have a ton of liquidity, the SBA doesn't like that because they're saying this really isn't for you, you should use your own money. This program exists for people who wouldn't otherwise have access to credit. Is that correct? And can you talk us through that? Yeah, I mean, you kind of have to be in the Goldilocks position for an SBA loan.

So you can't have too little because the banks want to get paid back and they want you to have, you'd have skin in the game and your guarantee. And so you can't be too small, but you can't be too big in terms of your balance sheet, can't have too much liquidity, too much in liquid assets. The rule of thumb is basically if you're going to have an equal amount or greater than the loan amount in liquid personal assets after you put your equity in, after we subtract that, amount out, you're probably too wealthy to be getting an SBA loan and you're technically ineligible. But that's just for the personal guarantor because the folks that are below 20%, not, you know,

might just be in the cap table for various reasons, whether they're investors or something else. They are not submitting personal financial statements. So we don't actually know how much they have. So technically they could be higher net worth individuals. And that's who you think would be investors typically anyway. But it's kind of a conundrum because the SBA wants you to be not too poor. You know, the banks don't want you to be anyway. And you can't be too wealthy.

So you kind of have to be right in the middle in order to be eligible. And I see the why behind that. It's still it still confuses me. Because again, it's like if we're actually lending based on merit, the person who has more assets to pledge as collateral is the lower risk borrower, right? And so to me that this is, yeah, I don't know. To me, it just sounds really inefficient, but I, you know, I get the why that, you know, the SBA is just basically saying, hey, this isn't for you. Is that, is that fair?

Yes, it's counterintuitive, exactly to your point. Like, we're telling people who are the most qualified, they can't get this loan. It comes from this notion, though, which is not always true. It comes from the notion that, well, if you're that wealthy, you have credit available elsewhere. That's literally the language. But the reality is when it comes to small businesses, you don't. There are no conventional programs for business. is under two and a half million of EBITDA. They just don't exist. The SBA has become the sole source for those businesses. So it is, I agree with you. It's actually not, I don't think it's a great policy. I really don't. I get it, but I, but I don't at the same time because you're saying

if wealthier people own small businesses, they should just be able to get loans somewhere else and they really can't. Not, not even close to on the right kind of terms that that small business needs. And so, yeah, I don't agree with it. We had a couple of years where that was not part of the rule, but it is back again. And I think it just has to do with a distaste in our Congress. They think that this is a giveaway program, which it is not, is almost always zero subsidy, meaning the program fees pay for itself.

And therefore, because they think of it as a giveaway program, they don't want rich people getting it. And that's kind of where it comes down to. But I agree, I think it's a little bit misguided in terms of a policy. Hey, everyone, it's Bill. And I want to tell you about maybe the most exciting sponsor we've had in a long time. on the pod. It's called CapitalPad, and it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So CapitalPad is a marketplace for acquisition

entrepreneurs that is people who want to buy a business and need capital to list their deals and solicit capital from other people who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is a place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing, too, from the investor side is that CapitalPad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions all up front in black and white. Basically, CapitalPad professionalizes investing in small businesses. And the returns can be really, really good. I'm so stoked they

exist. It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out Capitalpad.com and tell them that Acquisitions Anonymous sent you. So if the buyer that we're thinking about here, you know, somebody who's in New York has $10 million in the bank and they want to buy this for 2.6, if you went to, if they came to you and you looked at their balance sheet and we're like, hey, you're not going to get approved for an SBA loan, would one of the SBA lenders jump all over that and be like, hey, this doesn't

make any sense why you couldn't get an SBA loan. You're a great borrower. You have a great profile. We're going to do this. We're going to circumvent the SBA and do this loan separately. They can't. They literally cannot do that because they would be violating the black and white rules of the program. and the SBA would come along and not only take away the guarantee at the end of the day, but they would also kind of punish the lender for having gone around the rules. So they don't have an option. What they do have an option to do, and by the way, I am working on this with a couple of banks, is creating an SBA look-alike program for wealthier people.

It doesn't exist, like I already said, it doesn't exist for a lot of reasons, trying to work with a couple of banks to see if they would have an appetite for it. You know, keep the same kind of terms, but set the limits, you know, for high, net worth individuals. So maybe we'll see. But what's funny is the SBA thinks it already exists and it does not. So I guess where I was going with my question is like would not that they would run it through the SBA. Oh, I see. Just do it on their own. Right. Yeah. Like that to me that seems like a like a good borrow. Sounds easy, but it is not because they want they will then all they'll not, they'll change the terms. And they'll say we want a lot more equity. Even though you're wealthy,

we want, you know, all these things that makes it less less attractive once again to make the, you know, far greater equity investment, far shorter amortization schedule, all the terms will be much tighter. That's the way it exists today. So is there anything else that like looking at this business you would really want to dig into from a diligence standpoint? Like provided that the financials check out, you know, we've talked about churn, incredibly important, understanding the marketing, understanding the owner's actual level of involvement. What am I missing here? Established in 2022. I know it's a, you know, the brand hasn't maybe been around that much before that. It is still kind of a newer concept in general.

But I think that would be probably my biggest concern with paying this kind of multiple is that, you know, how, how, what's the longevity of this brand of this idea of, you know, going to, you know, not to a gym, but for stretching. So I think that would be the outlier for me is that it's probably just too short a time horizon for me to feel that comfortable with investing this high a multiple. Completely agree. And if this is the brand that I think that it is, I mean, they've only been around for, yeah, a few years. longer than that. So they're all going to be on the earlier side of things. All things considered, though, I like the, I like the concept. I mean, I think that from the retention numbers I've seen, it seems to produce, like I mentioned, great results. And so I think it's well positioned, but yeah, still pretty early. So me thinking about this deal, I would be a no, mainly because I think I would

get out competed by, again, rich New Yorkers and people that are attracted to the quote-unquote passive nature of this. I think that somebody, who takes that more literally than I would, would be inclined to pay more of a premium than I'm willing to pay given what I believe to be the case, if that's fair. I 100% agree with you. I would be out for the exact same reasons. It's just, and the fact that I don't feel that's long enough to prove that this concept will last. And, you know, I need to, if I'm going to pay this kind of multiple, I need to believe that it's going to last for at least 10 more years. One thing that I'll mention just about the landscape of fitness and wellness in general is it is, there are a lot of fundamentals about fitness and wellness that are to like. But the curriculum, the modality, like all of that, that is the equivalent of like the recipe in a food business.

Like if people don't buy in to the modality or to, you know, the concept, the fitness curriculum, whatever, whatever it is, it does not matter how operationally savvy you are. It doesn't matter how scrappy you are. It doesn't matter how good you're at marketing. I mean, you are. are completely skiing uphill. So it's just for anybody listening that's interested in this space, be sure before you get into a wellness franchise, a wellness fitness, that you have validated that, that it is something that is sticky because otherwise, there are more of these that have failed,

or not even failed, but just that have not done well in general than those that have outperformed. But if you can find that sliver at the top, again, there's a lot to like about the industry of all. Very much great. All right. Cool.

This was fine. Let's do it again. Yeah, let's do it again. Thanks, Connor. Thanks, Heather.