Announced Wednesday, Heyday has raised $12 million as a follow-on investment from existing investor Level 5 Capital Partners.
Heyday, the facial service provider founded in 2015, has now raised $40 million in outside capital. In 2021, the company announced it would add hundreds of brick-and-mortar locations over the next five years through franchising, in locations including Virginia, Texas and Michigan. It currently has 13 locations across the U.S. Also in 2021, it raised an additional $20 million in Series B funding, which was also led by Level 5 Capital Partners.
Like many other businesses, Heyday locations experienced a number of temporary closures in 2020 due to Covid-10. In cities like New York, LA, and Philadelphia, Heyday locations closed in 2020 for seven to 16 months. Because Heyday could not operate its physical services, the team chose to devote its time to improving some supporting technologies, such as the company’s online booking platform. It also added new brands to its merchandising.
“No one has a crystal ball, but smaller countries will be in survival mode over the next 12 months,” said Adam Ross, co-founder and CEO of Heyday. “[We’re positioned] to cross over, hard, flag to the ground, saying, ‘Hey, we’re the market leader and a national brand.'”
Ross said his justification for this expectation is the overhead costs that smaller boutiques and individual spa locations must incur. On the other hand, those countries have to pay higher costs, while Heyday’s proposition has always been a more accessible price point. Heyday’s 50-minute facials start at $140, plus it offers a monthly membership for $109 a month. Members receive one facial per month, plus discounts on additional facials, service add-ons and products.
Ross said Heyday’s current revenue is in line with its pre-Covid levels on a per-store basis, but the number of treatment bookings is “slightly below” 2019. He expects Heyday to return to pre-Covid booking levels until the end of the second half of 2023.
According to Chris Kenny, managing partner of L5 Capital, Heyday is on track to reach $100 million in gross sales by the end of 2023. According to Heyday’s franchise brochure, the estimated total start-up cost for its franchises is about $574,000, which covers everything from a $50,000 franchise fee to a $500 security deposit. Average first-year revenue for a location is $1.6 million, with $80,360 in EBITDA.
“We’re seeing the consumer speak loudly,” Kenny said. “One [of the reasons] it’s an accessible face unlock, more widely available across the country and on your street corner. [Reason] two is the acceleration of some macro trends by the pandemic. It’s not a New York and LA thing to want an accessible, high-value face.”
The additional funding will be directed towards the operation of the franchise, including marketing investments and support processes. Heyday is also investing in its first-ever branded products, which will be used exclusively within Heyday services until the second quarter of 2023. These products will be used exclusively in services and not available for home use. Ross described using the 10 Heyday-owned locations as innovation labs to develop more personalized products for different skin types. Since Heyday’s launch in 2015, Ross said around 650,000 facials have been performed, providing deep insight into different skin types and needs. Additionally, between 25-30% of Heyday’s new clients have never had a facial done before, showing its potential to grow the industry.
L5 has also committed to developing and owning 60 Heyday franchise locations over the next five years. Ross said it was attractive to have an investor who has “skin on both sides of the game,” regarding the L5 franchise.
“We wanted a thoughtful investment partner who could help refine it [our approach] and hold us accountable, to make sure we do things the right way,” Ross said.
