Sona Medspas: Part 1: Why I bought a Sona Medspa franchise?

Part 1: Why I bought a Sona Medspa franchise?

Long ago, in a galaxy far, far away, a friend of mine opened one of the original six Sona operations in a suburb of Minneapolis. This was during Sona’s “pre-franchise” period. Sona owned and operated a couple corporate centers in the east (the headquarters was in Virginia Beach) and a number of individuals (all non-physicians) opened centers in various parts of the country. I believe the initial operations began in late 1999 and 2000. The original owners were called “affiliates” and operated under a licensing agreement. Sona required that they use the “Sona approved” Cynosure Apogee 9300 alexandrite lasers, and the operations were limited to strictly laser hair removal.

The founder is an individual named Dennis Jones.

My friend and his daughter operated their laser center in Edina, Minnesota as a Sona affiliate from the fall of 1999 through early 2003 when they “converted” to a franchise under Sona’s new franchise offering which was rolled out late in 2002. I had taken up my friend’s offer to have his staff remove some of the unwanted hair on my back some time prior to this.

Even though I knew my friend and his daughter were still pretty much just “breaking even” financially at this time, I was very intrigued by the operation, the lasers, and the fact that this seemed like pretty much a “ground floor” opportunity at the time (circa early 2002). I had been working as an employee in the spa industry for some period of time and I knew first hand about the dawning of the “medical spa” throughout the U.S. Having been “working for the man” most of my career, I was also looking for an opportunity to own my own business– to finally take my own shot at achieving “the American dream”. For these reasons, I casually mentioned to my friend that “the Twin Cities is a big place” and it would seem to make sense to operate more than one center in MSP to take advantage of shared advertising and other synergies. “When you are ready to open a center in St. Paul”, I told my friend, “please give me a call.”

Some months later, my telephone rang and my friend and I discussed the prospects of forming a partnership and opening a second Sona Center in one of St. Paul’s premier suburbs. Sona was on the verge of switching from its original affiliate program to a franchise program, he said, and since he was one of the original six he claimed that he had been promised “special treatment”. Whereas everyone else would have to pay over $400,000 to own a Sona franchise, my friend had been led to believe that he would be allowed to open additional centers on a “cost of merchandise” basis only. Needless to say, this sounded intriguing to me, so my partner and I decided to move forward with the opportunity. The first step was to get more information about Sona and the new Sona franchise program, so I scheduled an appointment and booked a flight to Virginia Beach in the early fall of 2002.

These posts on Sona Medspas were originally written for Medical Spa MD. After publication, Sona pressured Medical Spa MD to have these posts removed from that site. This blog was created in case they were successful.

Inside Sona Medspas Part 2: Sona’s Promises

List of Sona Representations:

The following Sona representations were contained in either (or both) the Sona ads, brocures, web site, franchise sites, the franchise agreement, the UFOC and/or given verbally. Many of the promises and reps were made in each of the above places. All the Sona docs were pretty consistent– kept repeating pretty much the same crap throughout. Three big ones I recall being made verbally are–

1. the expectation that a franchisee will see a 20% profit provided revenues exceed $60,000 per month;
2. the statement by Dennis Jones that “all you have to do is follow the plan and you were guaranteed to succeed” (he always claimed the failures were due to people failing to follow his “plan”)
3. When I told Jones and Noon that I was scared to death about telling all these people they can expect 93% to 97% permanent reduction after 5 treatments when I myself did not get nearly that good a result from my five treatments at the Edina, MN affiliate center, they both told me it was due to the fact that “the Edina center wasn’t followiong the patented Sona concept and the proprietary Sona treatment schedules”. Once again, this turned out to be total bull.

The complete list. Sona represented that:

• It had developed a “proven business model” for removal of unwanted hair through laser technology that could be utilized by franchisees with no prior experience in the field and with great success.
• It had the “fastest, most powerful laser technology and offered services at much lower fees than competitors.”
• It had a “patent-pending” “revolutionary” concept, that removed 93 to 97 percent of hair in all areas permanently in five treatments.
• Sona would offer clients a sixth treatment at no cost if the first five had not removed all hair, but that this was “extremely rare.”
• Sona also said that this “patent-pending process” resulted in hair removal in “less time with better results” and that ensured that franchisees had “a compelling competitive advantage.”
• It was safe to use Sona’s laser hair removal processes two weeks after sun (or tanning bed) exposure sufficient to tan the skin.
• After treatments our clients could immediately return to tanning.
• It had other “proprietary technologies” that gave it a major competitive advantage, including a topical anesthetic called “Sonacaine” that minimized any discomfort resulting from the laser treatments.
• Whereas our laser hair removal competitors would be unable to successfully treat blonde, red or gray hair, we would have an “exclusive license” for a product called “Meladine”.“Meladine” was proven to be effective in clinical studies, and made light colored hair follicles “visible” to lasers.
• The use of Meladine would “enable all hair colors to be treated”, would make our Sona Laser Center far more competitive than other laser treatment venues, and would increase our revenues substantially.
• Its operations typically resulted in a 55 percent gross profit margin or more.
• We could expect to achieve “break-even” with gross revenues between $44,000 to $50,000 per month.
• Sona’s franchise offering circular showed pro formas reflecting financial results at assumed revenue levels ranging from $50,000 per month to $125,000 per month and earnings ranging from $288 to $36,240 per month. The same offering circular stated that average monthly gross revenues were over $65,000. At this level, it was stated that earnings would be $6,768 per month.
• We could expect to receive an actual profit of 20% of gross revenues each month.
• Their company-owned laser centers in Virginia were profitable.
• It had surveyed, reviewed and tested all lasers on the market, and had selected only the best, state-of-the-art lasers, manufactured by Cynosure, for use by franchisees.
• Sona’s program provided “continuous maintenance and replacements to keep each center a step ahead of the competition.
• Sona had “television, radio and print media materials … unsurpassed in the industry” that were worth “hundreds of thousands of dollars”. These materials would be made available to franchisees, not only for the grand opening, but also for “the ongoing success of the center.”
• It had a “corporate marketing director” and “marketing staff.” A grand opening event would be planned and executed by Sona that would include press releases, media packages, radio and television appearances, and an “all out media blitz.”
• It provided world-class, state-of-the-art training “that goes far beyond standard industry practices”. Even franchisees who had no prior experience with the market would be fully trained and able to run their businesses successfully. “There is no more in-depth training to be found.”
• They had custom-designed “world class” software that would facilitate operation of multiple centers including scheduling appointments and managing cash.
• The franchise was a “turn-key” operation; that is, Sona agreed to deliver a center to the franchisee that was ready to operate, requiring only minimal preparation on the part of franchisees. Moreover, Sona claimed that the center could be operated without direct involvement of the owner and entirely through employees (i.e, that it was suitable for investment by an absentee owner).
• Each franchisee would have a dedicated account executive at headquarters who would be available to assist in resolving any problems or issues.
• Franchisees would enjoy a large tax savings due to deferred revenue in the first year of operation.
• The Sona business was “high margin” and a “proven business model”.

List of Sona Promises:

• To provide hundreds of thousands of dollars in new additional advertising each year as part of the base franchise fee it charged us.
• To provide “world class” training and set-up services, software management systems, advertisements, furniture and fixtures, office equipment and software, medical supplies and other supplies and equipment for opening the center.
• To provide sufficient training for the owner and up to four other individuals that would be adequate for them to open and operate the center, together with a set of manuals that would enable owners to operate the business.
• To provide assistance with site selection and lease negotiation.
• To provide advice on construction, set up and opening, organizing the business.
• To provide assistance with determining and assessing the local demographics and hiring staff and a medical director.
• To provide assistance with the installation of equipment.
• To provide reviews and analyses of the operations of the individual franchisee.
• To provide improvements in administrative bookkeeping, accounting, inventory control, and general operating procedures.
• To provide updates to manuals to incorporate improvements and new developments.
• To provide periodic telephone and electronic mail assistance on daily operations, marketing, advertising, financial management, personnel and other operating issues.

Inside Sona Medspas Part 3: The Medical Spa Franchise Pitch

The Medical Spa Franchise Pitch:

Sona and its officers made numerous representations to prospective franchisees such as my partner and I regarding Sona’s “magic formula” for success. They had to promise a great deal to justify the astronomical price they were charging for admission. Their representations were supplemented by written materials, sales materials, and information provided on their web site and other franchise web sites such as Bison.com.

Sona claimed that it had developed a “proven business model” for removal of unwanted hair through laser technology that could be utilized by franchisees with no prior experience in the field and with great success, because it had the “fastest, most powerful laser technology and offered services at much lower fees than competitors.” My three year hitch with Sona, and the failures of numerous other Sona franchisees, certainly makes this representation look absurd. The only thing “proven” about their business model is that it is proven to drive many followers to bankruptcy. I will go into the “fastest, most powerful laser” statement later in the story.

Sona’s claim to have a patent-pending “revolutionary” concept, that removed 93 to 97 percent of hair in all areas permanently in five treatments also proved to be totally bogus. Dennis Jones specifically said that Sona would offer clients a sixth treatment at no cost if the first five had not removed all hair, but that this was “extremely rare.” Sona also said that this “patent-pending process” resulted in hair removal in “less time with better results” and that ensured that franchisees had “a compelling competitive advantage.” These misrepresentations proved to be an “economic death sentence” for many of us. Our entire business model was premised on the understanding that the treatment packages we sold would be completed- and our clients satisfied- after the five pre-paid treatments were performed. Unfortunately for those of us holding the bag—and whose “necks were on the line”—the overwhelming majority of our clients required significantly more than five treatments to achieve anything even close to 90% hair removal. After over promising thousands of clients during the first 18 months of operation, we found there way no way to get out of the corner we had painted ourselves into.

Sona stated that it was safe to use Sona’s laser hair removal processes two weeks after sun (or tanning bed) exposure sufficient to tan the skin. Furthermore, they told us that after treatments our clients could immediately return to tanning. Both of these statements proved to be totally false. Tanning proved to be an incredibly dicey aspect of the laser hair removal process, and added an additional wild card to our safety and efficacy problems.

Sona claimed that it had other proprietary technologies that gave it a major competitive advantage, including a topical anesthetic called “Sonacaine” that minimized any discomfort resulting from the laser treatments. As we quickly discovered, there was absolutely nothing proprietary about their 4% lidocaine topical product.

Sona further claimed that whereas our laser hair removal competitors would be unable to successfully treat blonde, red or gray hair, we would have an “exclusive license” for a product called “Meladine” (produced- coincidentally- by another company owned by Dennis Jones). According to Sona, their magical “Meladine”, which they claimed was proven to be effective in clinical studies, would make light colored hair follicles “visible” to lasers. The use of Meladine in our clinics would therefore “enable all hair colors to be treated”, would make our Sona Laser Center far more competitive than other laser treatment venues, and would increase our revenues substantially.” Not surprisingly, those of us who incorporated the use of Meladine in our operations found that it not only did not work as claimed, but that it also set us up for having to give thousands of dollars in refunds to unhappy clients. My experience was that the success rate of Meladine was almost nil. I cannot even imagine how much this fiasco cost us in terms of creating unhappy clients who would do nothing but spread negative goodwill about our business.

Sona claimed that its operations typically resulted in a 55 percent gross profit margin or more. They further claimed that we could expect to achieve “break-even” with gross revenues between $44,000 to $50,000 per month. Sona’s franchise offering circular showed pro formas reflecting financial results at assumed revenue levels ranging from $50,000 per month to $125,000 per month and earnings ranging from $288 to $36,240 per month. The same offering circular stated that average monthly gross revenues were over $65,000. At this level, it was stated that earnings would be $6,768 per month. Sona’s officers privately whispered to many of the franchisees that they could easily expect to receive an actual profit of 20% of gross revenues each month. Unfortunately, in the real world I don’t think any of the Sona franchisees made any true “profit” at all when the ramifications of selling prepaid packages for cash upfront played out. The entire financial projection furnished by Sona proved to be misleading, unsubstantiated and blatantly deceitful. One needs to simply look at the track record of the pioneer affiliates and franchisees who have been falling like dominoes during the past two years to substantiate this conclusion.

Sona claimed that their company-owned laser centers in Virginia were profitable. Sona never furnished profit and loss statements from their corporate-owned centers, but I would wager my first born child that an analysis of their financial statements- or the statements of any Sona center in the entire U.S.- would establish that nobody was actually making a profit.

Sona stated that it surveyed, reviewed and tested all lasers on the market, and had selected only the best, state-of-the-art lasers, manufactured by Cynosure, for use by franchisees. Moreover, Sona’s program provided “continuous maintenance and replacements to keep each center a step ahead of the competition.” Mindful of the very competitive and fast-paced landscape of the medical laser industry, I was very hesitant to handcuff myself to dealing with a single laser manufacturer. At the time, I had heard very little about the Cynosure company, and I would have much preferred to be able to negotiate with any of the dozen or more leading providers of equipment suitable for laser hair removal. The one advantage I did see, however, was that we would not have to purchase (or lease) our lasers as Sona’s franchise agreement incorporated a revenue share agreement for the lasers. Hindsight is always 20/20, and in hindsight I discovered a number of things that made even this aspect of the Sona program a disaster. First, a number of us later discovered in litigation that Sona did not “survey, test and select” the Cynosure lasers at all. In fact, Cynosure was a 40% owner of the Sona corporation. This meant that we had no ability to negotiate freely with other laser companies, and we were essentially a “captive audience” of Cynosure. Second, as will be detailed later, the Apogee 9300 lasers furnished by Cynosure were horrible.

Sona stated that it had “television, radio and print media materials … unsurpassed in the industry” that were worth “hundreds of thousands of dollars”. Sona promised that these materials would be made available to franchisees, not only for the grand opening, but also for “the ongoing success of the center.” Sona further promised to provide hundreds of thousands of dollars in new additional advertising each year as part of the base franchise fee it charged us. Sona also stated that it had a “corporate marketing director” and “marketing staff.” A grand opening event would be planned and executed by Sona that would include press releases, media packages, radio and television appearances, and an “all out media blitz.” Not surprisingly, Sona’s entire marketing program was pathetic, and most of us essentially took on the entire responsibility for advertising and marketing on our own.

Sona further claimed that it provided world-class, state-of-the-art training “that goes far beyond standard industry practices”. Sona stated that even franchisees who had no prior experience with the market would be fully trained and able to run their businesses successfully. “There is no more in-depth training to be found,” Sona claimed. After operating the center for several months, we found that Sona’s “world class” training was so bad that it actually proved to be a negative. Among other things, the clinical training provided to our nurses and Sona’s treatment protocol recommendations were so ultra-conservative that – in the typical case—we later found that most clients were not being treated at an efficacious energy fluence until their fourth or fifth treatment. Many of the clients were just beginning to achieve a percentage of permanent hair reduction at the point in time when they were expecting to be 90% complete! A large part of the blame for this relates to the fact that Sona took a high-volume “McDonalds” approach to laser hair removal and did not allow the time necessary to perform the necessary test spot procedures before actually beginning treatment. I now recommend that anyone doing laser hair removal spend 15 minutes testing several different energy and pulse duration parameters—and observe after 24 to 48 hours for skin and hair response before actually treating a client. Following the Sona program, I found that time and time again my nurses would go ahead and use the Sona ultra conservative treatment protocols to treat- for example-an entire pair of legs. This session might take 90 minutes (at $20 to $35 per hour for the nurse performing the treatment) and consume over 3,000 precious laser pulses to complete. And under the “patent-pending Sona concept” we would not provide a second treatment for the client treating her legs for four months (the longest treatment interval I have ever observed!). The client would typically have received only three of her prepaid treatments after a year, and she was often still being treated at energy levels below what was required for an efficacious result for her. This was a recipe for thousands of unsatisfied clients and hundreds of arguments for additional free treatments.

Sona represented that they had custom-designed “world class” software that would facilitate operation of multiple centers including scheduling appointments and managing cash. Not surprisingly, their software was a “cheapo” merger of off the shelf Quick Books and Goldmine which proved to be totally inadequate and incredibly cumbersome. The invoicing was so difficult and awkward that my “front office coordinator” would typically spend entire days creating invoices which should have been able to be done in seconds with an adequate software system. And the reports? Forget about it! I have since discovered that the basic $799 MedSpa package sold by Orchid is far superior to what we were provided by Sona. $799 vs. $400,000???

Sona stated that the franchise was a “turn-key” operation; that is, Sona agreed to delivere a center to the franchisee that was ready to operate, requiring only minimal preparation on the part of franchisees. Moreover, Sona claimed that the center could be operated without direct involvement of the owner and entirely through employees (i.e, that it was suitable for investment by an absentee owner). This statement is so preposterous that it doesn’t even deserve a response.

Sona further stated that each franchisee would have a dedicated account executive at headquarters who would be available to assist in resolving any problems or issues. The various individuals assigned to our account during my three year stint had one thing in common—not one of them had actually operated a med spa! Unfortunately, what they also had in common is that they were of absolutely of no help whatsoever. The only advice their head marketing guru could give us when we pleaded with him for help in the fall of 2004 as we were sinking like the Titanic was to “spend more on advertising”. Are you kidding me?

Sona also stated that franchisees would enjoy a large tax savings due to deferred revenue in the first year of operation. This proved to be another incredible trap, and the Sona reports generated by their “world class software system” were a mystery to our tax accountants. Sona’s accounting system required that we essentially keep two different set of books. One accounting was on a cash basis and would track the revenues we took in and our monthly expenses. The second accounting was on the accrual basis and tried to account for the treatments performed as we were not required to pay taxes on amounts taken in for pre-paid treatments until the services were actually performed. Trying to do a standard tax return with this convoluted system was beyond pulling teeth! And with a confusing accounting system and financial statements such s these, can you even imagine how difficult it was to try to produce financial statements in an effort to sell the business?

Finally, it was stated that the Sona business was “high margin” and a “proven business model”. Right! And I’ll see you in bankruptcy court, too!

Unfortunately for me, virtually each and every one of the aforementioned representations proved to be untrue, false, and flat out wrong! As if this wasn’t bad enough, Sona also made a number of promises that were to be delivered “up front” in consideration of its franchisees forking over from $125,000 to $400,000+ including the following:

To provide “world class” training and set-up services, software management systems, advertisements, furniture and fixtures, office equipment and software, medical supplies and other supplies and equipment for opening the center. Sorry. Once again all untrue.

Sufficient training for the owner and up to four other individuals that would be adequate for them to open and operate the center, together with a set of manuals that would enable owners to operate the business. The manuals were Ok for allowing someone to get started with a medspa. Other than that, training was totally inadequate and very amateur.

Assistance with site selection and lease negotiation. My partner and I selected our own site. I had a hard time believing that a real estate “expert” from Virginia could do a better job of selecting a good site than two businessmen who liven in the Twin Cities their entire lives and had retained a local commercial real estate agent.

Advice on construction, set up and opening, organizing the business. Surprise! This was one—perhaps the only- aspect of the transaction in which Sona was quite helpful.

Assistance with determining and assessing the local demographics and hiring staff and a medical director. Their “assistance” consisted of providing us with one sentence recommended help wanted “ads” for the local newspaper! Then again- what do you expect for $400,000!

Assistance with the installation of equipment. What laser company does not do that!

Finally, Sona agreed, during the operation of the businesses, to provide:

Reviews and analyses of the operations of the individual franchisee. Once again, their help was a joke.

Improvements in administrative bookkeeping, accounting, inventory control, and general operating procedures. Are you kidding?

Updates to manuals to incorporate improvements and new developments. Big deal.

Periodic telephone and electronic mail assistance on daily operations, marketing, advertising, financial management, personnel and other operating issues. The real reason Sona took a continuing interest in these matters was to insure that they got their hefty “cut” right off the top. Their “laser placement fee” cut ranged from as high as 27% of gross revenues to 15% based on sliding scale. It was beyond painful to cut them a check for an average of $22,000 each month. After paying an average of $20,000 for advertising, over $20,000 for payroll (average), rent, insurance, supplies, etc. it became impossible to pay ourselves anything after a short while.

Review of proposed equipment, supplies and service contracts to see if they met the specifications of the Sona system. Sona’s one-sided documents gave it absolute control every aspect of the business, so when the business started to fail we were utterly helpless to do anything about it. They even hassled me about trying to sell a sun block as they didn’t offer one during the first 18 months of our stint.

Administration of a system-wide advertising and promotional fund. Sona actually spoke early on about “national advertising” campaigns and had delusions of grandeur about having 100 centers operating by the end of the first year, etc. It was preposterous.

Assistance with laser equipment, servicing, maintenance and repairs. This was such a nightmare I need to dedicate an entire chapter to it—I will get to it down the road.

Ron Berglund

Inside Sona Medspas Part 4: Legal Structure & Revenue Sharing

Who owned what?

My partner and I set up an LLC to own and operate our laser center. Since our intention was to “dominate the market” in the Twin Cities, he and his daughter executed both Sona franchise agreements and “area development agreements” for the greater Minneapolis metropolitan area and he and I did the same for the St. Paul area. The agreements were rather vague as to the number of centers required to maintain “exclusivity” for the Twin Cities, but these concerns soon became semantics due to the inability of the business model to generate real profits.

How was the money divided?

My partner and I were 50/50 owners of our LLC. Sona had no ownership interest in the LLC, but shared in revenues generated each month by virtue of the “revenue sharing” provisions contained in the franchise agreement.

The standard franchise agreements contained a sliding scale ranging from a 27% share of gross revenues at the $60,000 monthly revenue level which percentage dropped to under 20% when monthly revenue exceeded $100,000.

My partner and I received a slightly reduced revenue share percentage which started at 22% of gross revenues due to the fact that my partner was one of the original Sona affiliates. The revenue share payment encompassed the franchise royalty, laser lease and laser maintenance and service.

What did we have to do?

In accordance with the franchise agreement, we had to follow all the Sona dictates and limitations on our operations– right or wrong– or be faced with an action for violation of the agreement.

During the first year of operations we were limited to performing strictly laser hair removal services utilizing the Sona/Cynosure Alexandrite and Nd:YAG lasers. We could not do anything else– or use any other equipment– during the first year of operations. We were not even allowed to sell any product. I got in trouble for trying to sell SkinCeuticals sun block as Sona didn’t even offer a sun block! We were required to spend a minimum of 15% of gross revenues on advertising and marketing but were encouraged to spend more. At this point we were being told that the “successful” operations such as St. Louis were spending over 20% and were doing gangbuster business. Sona was of course happy to see its franchisees spending enormous amounts on advertising since Sona’s revenue share was based entirely on gross revenues. Whether a franchisee actualy made any real PROFIT or not was not their concern.

During the second year of our tenure Sona introduced a very “half baked” program for skin rejuvenation services including the DiamondTome microdermabrasion system, the VISIA skin analysis system, the Cynosure “Mini V” pulsed dye laser, and several other pieces of equipment.

How much control did Sona have?

Due to Sona’s extremely one-sided franchise agreement, they had pretty much 100% control over our operations. We were free to hire our own employees and medical director and determine how much to spend — and where– for advertising, but that was pretty much the deal. Sona furnished many sample print ads but allowed us to create our own so long as we gave them an opportunity to “approve” them before publication.

Inside Sona Medspas Part 5: Opening A Sona Laser Clinic

Opening a Sona Laser Clinic

How did you hire?

My partner and I hired our first employee several months before our build out was completed, so she had to be very patient. She was a “friend of a friend” and after a couple interviews we decided she would be an excellent choice for the key position of lead sales consultant. She had an extensive operational background based on her experience running a vererinary clinic for her former husband. She had also recently completed cosmetology/estheiology school, and she had an oputstanding personality. The only thing she lacked was actual sales experience, which concerned me a great deal. I hoped that her other qualities would make up for lack of actual sales background.

Shortly after hiring her we hired another “friend of a friend” for the extremely important “front desk” position. Once I had a good idea about our projected opening date based on the progress of our 2850 sq. ft.build out I was able to schedule our staff training visit to corporate headquarters in Virginia Beach which took place over a 10 day period in February, 2003. I ran several newspaper “help wanted” ads but was unable to hire a nurse to operate the laser in time for the nurse to accompany the rest of us to Virginia Beach. We had to hire a full time and part time nurse as soom as we got back and arrange for Sona to send a training nurse to Minnesota in late February to train them. We ran several ads in the St. Paul Pioneer Press and were successful in filling the positions but did not give ourselves adequate time to screen a sufficient number of candidates to allow us to find stellar employes for these extremely critical positions.

What support did Sona provide?

Sona provided support for our opening by providing fairly decent operations manuals and clinical manuals, providing OK staff training during our visit to Virginia Beach, and sending an experienced laser nurse to Minnesota to train our full time and part time nurses. Sona also sent several people to St. Paul to assist us with set up and installation of our equipment, furnishings and decor, as well as to participate in and “assist” with our “grand opening” which was held in early March, 2003.

What was Sona good at?

Once again, hind sight is 20/20. Therefore, as I reflect back on the content and delivery of the training and support Sona provided I am able to evaluate whether or not Sona actually delivered what they promised they would, as well as whether or not the guidance and training provided was beneficial or detrimental to the success of the operation. Perhaps more significant than any misleading claim or breached promise Sona made was the fact that it touted having a “proven business model” and a “formula for success” when this in fact proved NOT to be the case. Aesthetic lasers and the services available today have been cleared in the U.S. for these popular indications for less than a decade. The medical spa pioneers of the early 2000s have barely had time to truly figure out how to properly market, sell, and deliver these services properly. Many entrepreneurs had the idea that opening a medspa would be similar to opening a Kinkos– and as many of us have discovered nothing could be further from the truth.

Sona actually did a fairly decent job of helping to train my original staff on the critical components of laser hair removal sales and delivery in accordance with the Sona business model in effect in early 2003. That model has changed significantly since that time as the Sona management team has tried to react to a host of franchisee failures, complaints and litigation. Their help with set up– even including hanging pictures on the walls and showing our nurses how to properly arrange storage cabinets– was excellent. Their assistance with our “grand opening” was, however, worthless. And based on four years of experience trying to profitably operate a med spa I can certainly say that their promised guidance and support along the way was pathetic.

What did they say they would do that they did not do?

Sona’s extensive list of breached promises was previously detailed in an earlier section.

Did I have a business plan?

My partner had financials and an operating budget from his Minneapolis operation which we used as the basis for a “rough” business plan for the new St. Paul center. I was able to easily peg our monthly expenses for the critical elements of the operation including rent, Sona’s “laser placement (revenue share) fee”, insurance, postage, printing, utilities, credit card fees, etc. Payroll expenses would be based on the number of employees needed to run the operation (which would– of course– increase as the number of clients needing treatments increased), and the amount spent each month for advertising was based on Sona’s recommendation of a minimum of $15,000 per month up to $100,000 gross revenues and 15% of revenues thereafter. No matter how “scientific” you try to be with a business plan, however, you really have no idea how many of your advertising dollars are going to result in lead calls, for example. Estimated costs are pretty easy to come up with, but you need a crystal ball to determine what your anticipated income might be. Three very significant things that impacted my operation long-term were the extremely SEASONAL nature of aesthetic services (in Minnesota, June through December can be hell), the low-margins actually experienced when all expenses are accounted for, and the tendency of advertising sources to diminish after a period of time. For example, for our first year of operation the St. Paul Pioneer Press was a very effective and consistent advertising medium for us. However, after about 18 months the costs of leads and sales generated in our primary newspaper vs. the costs of the ads made it a questionable source to continue with. After a period of time, it seems that every resident of the St. Paul metro area who actually reads the paper (and the younger market in increasingly NOT reading newspapers) had seen our ads multiple times. After a while, the ads seem to wear out their effectiveness. Radio ads– on the other hand– almost NEVER cost justified. Direct mail and quarterly newsletters would have probably been our best place to spend money. Unfortunately, Sona never emphasized these avenues so by the time we thought about it it was already to late!

Inside Sona Medspas Part 6: Medical Directors & Physician Oversight

Sona Medspas: Physician Oversight

About medical oversight at Sona?

What did Sona tell us? Sona gave us some rather generic information about the requirements for a medical director as they were aware of the pertinent statutes and regulations.

Sona’s manuals included a generic “Medical Director’s Manual” and “Nurse Manual” which covered some of the relevant concerns. Their franchise documents and verbal statements naturally put the burden on each individual franchisee to get legal counsel in their state to cover all the bases, etc. They provided us with a generic “standing orders and protocols” document for the nurse to provide to the treating nurses (or “laser technicians”) which provided a good start for most.

I know that in California and a number of other states the standard Sona model did not work and these franchises had to have significantly more creative (and expensive) legal work done to structure the operation properly. In a number of other states the clinics had to be located literally “across the hall” from the medical director- or the clinic had to incur significantly higher expense to have a physician actually “on sight” to comply with that state’s laws and medical board regulations. (Read: Can a non-physician employ a physician.)
In Minnesota we employed the standard off-site “medical director” model which required a licensed physicians to “oversee” clinic operations and protocols. (Read: Physician oversight in medical spas l Mid-level providers in medical spas)
Sona was strict about requiring our docs to review and either sign or initial each patient chart and each entry on every treatment log to double check that proper parameters were being used, etc. We also had a decent system set up requiring “adverse event” reports for every “incident” which was also sent to the corporate office each month. Fortunately, we had very few adverse events over the years–partly because the majority of our treating nurses were primarily interested in CYA and not having any of their patients experience “discomfort” or causing any minor burns or blisters. Due to the very conservative teaching and recommended parameters furnished by Sona our BIGGEST problem through the years was with EFFICACY.

The majority of our treated patients still had significant hair remaining after five treatments– which caused most Sona operations to slowly crumble due to patient dissatisfaction and demands for additional free treatments, etc.

Did your system work for your medical directors?

The main problem encountered by both Minnesota clinics for the first few years of operation was keeping a medical director in place.

We went through a succession of medical directors for a variety of reasons– retirement, relocating, not being comfortable with the procedures or the risk involved (vs the small fee we were willing to pay the medical director which ranged from $1500 to $2000 per month per center).

The most outrageous situation was our young dermatologist who was forced to give up her “moonlighting” job due to an edict issued by her boss– who coincidentally was the head of her department at a major university and also owned a competitive laser center in the same city!.

Medical Oversight Problems?

The centers in Minneapolis and St. Paul actually operated without incident for six and four years respectively without incident until a female police officer treated in St. Paul (Woodbury) experienced a minor burn typical of treating skin with a “base tan” with high parameters required for Alexandrite laser hair removal treatments beyond the third or fourth treatment when high parameters are required for efficacy.

Even though I told this woman that our nurse absolutely followed our established laser parameters, etc. she insisted that the nurse had done something wrong so she lodged a formal complaint with the Minnesota Nursing Board. The nursing board did a preliminary investigation and shipped the case to the Minnesota Attorney General’s office where it is still under investigation. All this attention caused me to take a close look not just at the Minnesota statutes and regulations covering physicians but also the Nursing Board Act.

I was very surprised to see the level of detail required to legally employ nurses to operate lasers in Minnesota. I wrote a separate blog on this topic in another section of the web site where I asked if anyone out there was aware of a college or university that could provide a 30 hour course on the use and operation of lasers required by the nursing board.

They also require a very detailed delegation /prescription document from the physician to the nurse similar to what a nurse would need to legally dispense prescribed medications.

What questions did the staff have about this?

In order to try to avoid getting my staff riled up and worried about these “legal” issues (and the fact that they may have been guilty of “practicing medicine without a license”), where they were potentially at risk of losing their nursing licenses, etc., my usual practice was to say as litle about this as possible.

My nurses were always well trained (especially after we started doing our own in-house training) and always treated patients cautiously. As we became more experienced we began doing more and more test spots– even though these were not encouraged by Sona for the 80% of our patients who were Caucasian.

After our business had collapsed financially in early 2006 we actually operated for several months without a medical director because my partner refused to dig deep enough to pay for one and we were primarily treating existing patients by this time.

During the late spring of 2006 my experienced nurses started to ask directly who the medical director was and they noticed that nobody was reviewing the charts on a weekly basis as had been done the previous three years. At this point I told them that my personal friend (a dermatologist who had been traveling regularly between Florida and Minnesota the past five years and had served as our director for several months previously) had agreed to act as our medical director for the time being. This was a stretch, of course. It is tough to do things right when you are stone cold broke!

Whart were your concerns with the medical aspect of the business?

Once again– hind sight is 20/20. But in the aftermath of my Sona experience I am more convinced than ever that MEDSPAs are not the place for entrepreneurs and non-medical businessmen. Most of the “doc in the box” business models have collapsed— and I believe more will soon follow.

 

I believe the survivors will be the physicians who are actually owning and operating the clinics. This makes sense marketing wise– as docs can market extensively and much more economically to their existing patient population– as well as legally. I would venture a guess that a prospect is five times more likely to respond to a direct mail piece or a newsletter that comes from her physician than a mailer from an unknown operation that– for all she knows –could be operated by any flake out there (maybe even a telephone call center headquartered in Michigan!).

Inside Sona Medspas Part 7: Required IPL’s & Lasers

These posts are written by former Sona Medspa owner Ron Berglund to provide an inside view of the way medical spa franchises recruit, train, and support their owners as well as detailing some of the problems with medspa franchises. Read Part 1: Why I bought a Sona Franchise l Part 2: Sona Promises l Part 3: The Franchise Pitch l Part 4: Legal Structure & Revenue Sharing l Part 5: Opening a laser clinic l Part 6: Medical Directors & Physician Oversight l Part 7: Sona’s Required IPL’s & Lasers.

What IPL’s & lasers did Sona mandate?

When Sona rolled out its original franchise program in late 2002, the only service specifically discussed in the written documents was “laser hair removal”. There were some vague references to other services but there was nothing specified at this point. In addition to a franchise agreement, and possibly an “area development agreement”, Sona required franchisees to execute a “laser placement agreement” (“LPA”). The LPA stated that initially two Cynosure Apogee 9300 (long-pulse alexandrite) lasers with accompanying Smart Cool chillers would be installed for each franchised center. Based on sales revenues over the term of the agreement, additional lasers would be installed as different revenue “benchmarks” were achieved.

This program seemed like a good deal at the outset. We would not be required to lease or purchase this very expensive equipment (each laser + chiller had a retail list of about $90,000) and all payments and service would be taken care of with our monthly revenue share payment.

The standard franchise agreement and LPA provided that Sona’s monthly revenue share– which covered laser placement, service and maintenance in addition to the Sona franchise fee– was based on a sliding scale which initially ranged from about 27% of gross sales for sales under $60,000 per month dropping to about 15% for sales over $100,000. As the franchise evolved over the first sevral years this program changed significantly. By late 2004 Sona switched to a new program whereby franchisees were encouraged to lease or buy their lasers. In addition to Cynosure lasers, Sona also allowed franchisees to purchase Orion/Alma lasers as well as the Harmony IPL (“AFT”) System as the service offerings of Sona had also expanded considerably by this time.

What technology decisions were elective?

Initially, franchisees were not permitted to use any equipment except for Cynosure (we found out later in litigation that Cynosure had a significant ownership interest in Sona– I believe 40%– which was not disclosed to us).

When Sona initially rolled out its new “skin rejuvenation” program a variety of additional equipment– also Sona mandated– was required. During the first wave of this program my partner and I leased a $50,000 equipment package which included a VISIA imaging booth, DiamondTome microdermabrasion system, and ultrasound imaging and treatment systems. We also briefly tried to use the Photogenica “Mini V” pulsed dye laser also sold by Cynosure. Subsequently Sona entered into an agreement with Orion (now Alma) and the Alma lasers and Harmony System became available for lease or purchase.

Did Sona get kick backs” that you know of?

Many of the franchisees engaged in gossip about this. We heard “through the grapevine” that Sona did not allow us to use Lumenis equipment because Lumenis refused to play these games. I clearly recall a statement by one of the Sona officers at their big national meeting in March 2004 that if we purchased the new skin rejuvenation package from Sona we would be able to take advantage of their volume buying discounts, etc. Naturally, I was dismayed when I later received the cost breakdown on the included equipment and saw that all equipment had been sold to us… surprise!, at retail list prices.

Did you interact wth the technology companies directly?

Since I ended up with ten pieces of Cynosure equipment you can imagine that I interacted with Cynosure a great deal. My interactions with the other companies were minimal. We found the Cynosure lasers to be hugely problematic. The treatments– whether with the Alexandrites or Nd:YAG– were extremely uncomfortable for many of our clients. The efficacy was far short of what we had been led to expect from Sona— and from Cynosure’s very limited representations (their web site at the time mentioned that most people are satisfied after four treatments which is ridiculous). Most important, the Apogee 9300s were VERY high maintenance and required extensive service. These lasers are gigantic– and whenever repairs were required– even simple flash lamp replacement– it was necessary to have a Cynosure service technician perform the repairs on site. During part of the time I was operating we had a service technician in the Twin City area but on many other occasions technicians were flown in from all over the U.S. This was not my problem during the term of my Sona franchise, but when I later effected a “divorce” from Sona it became a huge– and expensive– headache.

One of the biggest problems with the Sona program is that the agreements did not provide for the aftermath. As our lasers began to wear out from extensive use, neither Sona or Cynosure had any specific requirement to replace them with new ones– even though we were initially still required to fork over typically about 22% of our gross revenues to Sona in exchange for having our equipment provided. The only “blessing” I received is that after using the lasers heavily (and paying for them heavily) for two years I was allowed to purchase them at their depreciated cost of $7500 each. This “blessing” was significantly tempered by the amount Cynosure required for an ongoing service contract (over $12,000 per year PER LASER !) and the value of used Apogee 9300 lasers on the resale market. Needless to say, I was appalled to find that lasers I had payed almost $100,000 each for just a couple years ago were now virtually worthless.

Two very important lessons:

1. Always find out– and get in writing– the costs of service and maintenance AFTER the product warranty expires, and
2. Check out the values on the current used market of the device you are looking at– there are a number of companies on the Internet hat are doing a lot of this.

Good to know this up front. I could not even GIVE AWAY my used Apogee 9300 lasers because prospective buyers found they could almost get new equipment with warranties for very close to what they would be paying just to service my old lasers!

These posts on Sona Medspas were originally written for Medical Spa MD.  After publication, Sona pressured Medical Spa MD to have these posts removed from that site. This blog was created in case they were successful.