Reaching the Next Level
Massage Envy was founded in 2002 to capitalize on the significant unfulfilled demand for professional, affordable, and convenient therapeutic massage services. At the time of our purchase, Massage Envy was a leading franchisor of therapeutic massage services through a network of approximately 600 clinics.
Background
Sentinel was introduced to the opportunity by independent sponsor Princeton Ventures, who had developed a relationship with Massage Envy’s CEO. Princeton approached Sentinel because of our experience in growing franchise brands, proven record of closing transactions, and sizable capital base.
Opportunity
To accelerate the growth of a proven franchise concept by implementing and executing strategies to grow the number of clinics, average clinic volume, and the services offered to customers
Accomplishments
Identified Optimal Locations: Sentinel worked closely with management to make a significant investment in software and management talent to identify real estate locations with a high likelihood of success. This initiative enabled Massage Envy to more than double its annual openings while it maintained its almost-zero new clinic failure rate.
Created Financing Program to Accelerate Unit Growth: Sentinel helped management source and secure a dedicated financing program to accelerate new unit growth. The program enabled more than 36 units to open during a period when franchisee access to debt markets was seriously curtailed.
Introduced New Service Offerings: During Sentinel’s watch, Massage Envy introduced facial treatments to augment core massage therapy services. The number of clinics offering facial treatments grew from 11% in 2009 to 67% by 2012, which meaningfully improved unit-level economics for franchisees and improved retail sales.
Optimized Clinic Operations: During our ownership, we assisted management in analyzing how to enhance member retention, increase capacity utilization, and improve therapist retention. These initiatives materially enhanced unit-level economics and franchisee profitability and positioned the Massage Envy brand for long-term success.
Outcome
During Sentinel’s approximately three-year ownership, Massage Envy grew from about 600 to nearly 850 operating clinics with a backlog of more than 270 clinics waiting to open. Systemwide sales nearly doubled, and the average unit volume increased 42.5%. This drove strong financial performance at Massage Envy, with revenue and EBITDA more than doubling. In 2012, Massage Envy was sold in a management buyout to another private equity firm.
Case studies have been selected for illustrative purposes for management teams of midmarket companies considering a partnership with Sentinel and should not be considered an offer or solicitation of services or an actual or implied endorsement of Sentinel or any security, investment, or portfolio company. The portfolio companies highlighted are not representative of all current and prior investments of Sentinel. A list and description of investments since Sentinel’s inception is available on this website.