Is a tanning salon franchise a good investment? What about Planet Beach? At one time tanning salons were one of the riskiest investments you could get into.
If we go back almost a decade ago to 2012 and look at SBA loan failure rates we see that four tanning salons were in the bottom 75 list for failures. Executive tans had an 81% default rate on loans, Image Sun 70% default, Planet beach 57% and Hollywood Tans 37% default rate.
Has that changed? Lets look at the most recent list of SBA loan failure rates we see number tow, number 5 and number 12 spot of highest failure rates is held by tanning concepts. Image Sun franchise loans default at 80%, so 8 of 10 loans were defaulted. Executive tans had 72% default rate and Planet Beach, 68%.
Tanning is one of those busi57%
nesses to which people become emotionally attached. Buyers get visions of beautiful tanned people spending tons of money while the owner sits back and gets rich. Once people get hooked emotionally it’s hard to pull them out. They don’t want to hear anything that bursts that bubble. We’ll look at overall industry trends in a minute, but let’s look at Planet Beach first.
Years back articles become public covering their problems and Planet Beach Responded back in 2016 stating
"The Planet Beach brand began in 1996 as a tanning salon franchise. Since then, we have evolved to an automated spa franchise, filling a niche in the industry for quality spa treatments in less time and at a much lower cost than traditional day spas"
Our franchise system has changed and expanded over the years. But like any franchise system, there are locations that do not follow our tested and proven system in place that is designed to help franchisees succeed once opening a spa. When this happens, there are unfortunate consequences including but not limited to location closures.
So Planet Beach was suggesting it had changed its business model and owners that embraced the new system succeeded and others who did not failed. Time is our friend because we can now look at how that played out since the comment was made in 2016.
2009 - Planet beach had 385 locations. They were closing about 30 locations every single year and by 2011 only 280 Planet beach stores remained open. But between then and now as per Planet beach, they made changes and if those changes worked we should see a stronger franchise system.
Here are the most recent numbers from Planet beach. By 2017 they were down to only 122 stores, despite having almost 400 over a decade ago. About 20 stores closed still closed every single year 2017, 2018, and 2019 leaving a grand total of only 63 franchised locations open. Keep in mind this is a net number, so if one person buys a store and another closes that leaves a net zero number. So the question is how many people bought a Planet Beach and lost their money.
There is a total of 5.5 pages of lawsuits listed in the Planet Beach franchise disclosure. Franchises have the choice to list earnings in their FDD in the item 19 of the disclosure. As a general rule if a franchise has strong numbers, they will list them. Planet Beach does not list any financials.
But what about the tanning industry as a whole? Are other franchises better?
If we look at key trends for then industry we see there are several forces that may hurt the industry. One of those are increasing regulation for UV tanning. Forty-four states currently have regulations prohibiting or limiting the use of tanning beds by minors; 17 of those states and Washington, DC, have banned UV tanning devices by anyone younger than 18. Statewide regulations aimed at reducing adolescent usage are expected to increase in 2021, posing a potential threat to the industry.
Growth may remain slow due to the FDA’s ruling to class sunlamps and UV lamps as moderate-risk devices, which will fuel existing fears regarding the danger of industry services. State regulations preventing consumers younger than 18 from using industry products will shrink the pool of potential customers. As a result, the industry is projected to grow at an annualized 1.5% to $4.0 billion over the five years to 2026.
To counter these issues many salons are switching to spray tanning, or even offering enhanced spa offerings like massage. The obvious question is why buy a tanning business to change it to a day spa, when you can just open a day spa to begin with.
Could Planet Beach be for you? We suggest buyers look at multiple options before investing, For FREE help researching visit Franchise City https://www.franchise.city/our-services
Top 10 worst franchises: https://youtu.be/a7-lQx6mE5M
Are SBA approved franchises franchises good? https://youtu.be/hPeXLFCNGy8