Medispa industry shows continuing growth

But after several franchisee failures, some say a strong physician presence is needed to create a thriving business.

By — Posted March 12, 2007

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Even though the growth rate for medical spa openings is expected to stay strong, some medispa owners are learning merely opening the doors does not guarantee success.

According to Susie Ellis, president of Spa Finder Inc, a New York-based spa trend watcher and consumer resource which started tracking the medical spa industry four years ago, there are approximately 1,250 medical spa businesses in the U.S., up 50% from a year ago.

Ellis said her research indicates an estimated 33% growth rate in the number of medical spas for 2007. Only about five years ago, the medispa industry was essentially nonexistent.

"The baby boomers are fueling it," Ellis said. It started with a growth in the general beauty spa industry, but when medical treatments became available, boomers got really excited, she said.

By definition, medical spas -- medispas or medspas for short -- are cosmetic medical facilities that offer services such as laser hair removal, Botox, derma fillers and microdermabrasion, in a spa-type setting.

Experts say laws require that a physician medical director be on staff, although in many cases the physician is not required to be on site.

Physicians have been attracted to the medispa industry either through investment in a facility, or in a franchise offering to provide everything necessary to open one.

The medical spa industry is often pitched to physicians as a way to supplement their income in the face of declining insurance reimbursements.

However, evidence is growing that a medispa investment comes with some risk. Several former franchisees, in separate cases, have sued Franklin, Tenn.-based Sona Med Spas, claiming they couldn't make it financially under Sona's "flawed" business plan. Sona currently has 28 locations around the country, with some facilities having closed over the last two years. The cases are pending.

Sona attorney Kiran Mehta, of the Charlotte, N.C.-based law firm Kennedy Covington Lobdell & Hickman called the claims "hogwash."

He said that all but one of the lawsuits were filed by franchisees who simply want to break from their affiliation with Sona and go independent. None of the suing franchisees were physicians, Mehta said.

One former Sona franchisee is among those who believe that the physician's direct presence -- as a clinician as well as an investor -- will delineate which medispas survive and thrive, and which fail.

Ron Berglund, a Minneapolis attorney, sold his Sona franchise after, he claims, it wiped him out financially. He is not suing Sona. Berglund said physician-focused practices can have bigger success because they can be built upon existing practices with an already established patient database.

Berglund is now a product manager at a company that manufactures lasers for the medical spa industry. He is so convinced that physicians are the key to a successful business model that he will only sell his products to physicians, he said.

"This is a business for physicians. Entrepreneurs have no business doing it," Berglund said.

Ellis said that spa franchises have had a tougher time generally, compared to individually owned practices having a strong physician involvement beyond part-time work or a silent investment.

She, like Berglund, believes consumers will seek out medispas in which the physician is a strong presence.

"I think the more [consumers] learn about [the procedures offered at med spas], the more they want a doctor to do it," Ellis said.

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