You’ve heard it before when it comes to real estate; location, location, location. Now that you have firmed up your vision of your ideal spa concept, and carefully fleshed out your business plan the search for the right spot begins. Despite the current attention spas are receiving, they won’t be successful on every street corner. A busy day spa depends on a loyal client base, and even loyal clients won’t go too far out of their daily routine to incorporate spa treatments.
Your Target Client
The first thing to consider is the target client that you identified in your Strategic Vision and Feasibility activities. Where does that client live? Or work? While clients will venture out of their routine for a special occasion spa visit, the regular spa user generally lives or works within 7-10 miles, or 10-15 minutes, of their chosen spa. You’ll want to obtain current demographic and psychographic studies on the available neighborhoods and locations, and review them carefully. Accudata and Claritas are excellent sources, and any real estate agents you are working with should also be able to provide useful data. The business plan you created should have included identification of your potential competitive set, and their locations should also inform your decision-making process. Not that you need to avoid areas where your competitors are; chances are good that at least some of your competition will be targeting your same client, and will have gone through this same site selection process. Nearby is one thing; next door is another.
How Big is Big Enough?
The biggest question at this point will be, how much space are you looking for? It can be difficult to ascertain what size your spa should be, and this decision is often driven by available capital. But even if money is no issue, remember that the larger the spa, the more complex and challenging operations will be. If you have never operated a retail business of any sort, there will be a learning curve to plan around. Your spa should be big enough to perform the treatments and services that will deliver your therapeutic vision, but not so large that the logistics of operations will overwhelm you. For novice spa owners, keeping the facility under 3,000-4,000 square feet is a sensible approach; you can always expand later.
A few “rules of thumb” to consider:
- The spa build-out, whether a new build space, or a renovation of an existing location, will require at least $200/per square foot to get up and running. So, a 3,000 square foot spa will cost at least $600k.
- Your appointment utilization, that is, the number of available appointments that your spa will sell in a given time period, will begin at about 4% and gradually increase, depending on your marketing, topping out at about 65% in three-four years.
- You will need approximately six-eight months of operating capital in addition to the build-out expense, typically another $75-100k.
The right size spa will be able to deliver your core services and ambiance to guests, while generating enough revenue to create profits at reasonable utilization rates.
Front and Center
Now that you know how much space you are interested in, and you’ve narrowed your search region down to an area, maybe even to within a few blocks, your options will be quite clear. Spas are appointment-driven businesses and don’t solely rely on foot traffic for survival, like a retail store does, so ground floor locations in high-traffic areas are not essential. However, it certainly helps when your spa, or your spa signage, is easily visible to passers-by, whether walking or driving. Convenient parking is also desirable.
Since the basic premise of spa business is to create a getaway or retreat for your clients, there are stage-set elements of your choice to consider. For instance, it is very helpful to have a back entrance for the constant stream of delivery trucks, as well as arrival and departure of your staff. Stairs, even one flight, are incredibly problematic from a programming and logistics standpoint; you’ll be much better off in the long run if you can keep your operation all on one floor. The only exception to that would be if you planned to open a salon/spa hybrid; in that case having separate floors for the salon and spa services is not such a bad thing.
The last step to take before signing a lease is to make sure that all of the components of your strategic vision plan will fit into the space you have in mind, before you sign the lease! Enlist the aid of a trained spa designer or architect who can devise quick layouts around existing design features such as windows, doorways, stairways and structural columns. It would be a shame to sign a lease only to discover that you can’t fit all of the pieces that you imagined, or that you need for financial success.
Commercial leases are often written for a five-year initial term with a five-year renewal period, which enables you to more easily recognize ROI from your build-out investment. Once you’ve decided on the perfect spot, it is well worth the expense to engage a real estate attorney to help you wade through the fine print of the lease documentation, avoiding unpleasant, and potentially expensive, surprises down the road.
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