Announced on Wednesday, Heyday has raised $12 million as a follow-on investment by 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 will add hundreds of brick-and-mortar locations in the next five years via 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 series of temporary closures in 2020 due to Covid-10. In cities like New York, L.A. and Philadelphia, Heyday locations were closed in 2020 for seven to 16 months. Because Heyday could not operate its physical services, the team opted to dedicate their time to improving some backend 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 places over the next 12 months are going to be in survival mode,” said Adam Ross, co-founder and CEO of Heyday. “[We’re positioned] to come through the other side, firmly, flag in 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 boutique and individual spa locations must incur. In turn, those locations need to charge 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 additions and products.
Ross said Heyday’s current revenue is in line with its pre-Covid levels on a per-shop basis, but its number of treatment bookings is “a little below” 2019. He expects Heyday will be back to pre-Covid booking levels by 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 end of 2023. According to Heyday’s franchise brochure, the total estimated startup cost for its franchisees is around $574,000, which covers everything from the $50,000 franchise fee to a $500 insurance deposit. The average first-year revenue for a location is $1.6 million, with $80,360 EBITDA.
“We’re seeing the consumer speak pretty loudly,” said Kenny. “One [of the reasons] is the unlock of an accessible facial, available more broadly 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 L.A. thing to want an accessible, high-value facial.”
The additional funding will be directed toward franchise operating, including marketing investments and backend processes. Heyday is also investing in its first-ever own branded products, which will be used exclusively within Heyday services by the second quarter of 2023. These products will be exclusively used in services and not available for at-home use. Ross described using Heyday’s 10 owned locations as innovation labs to develop more personalized products for different skin types. Since Heyday’s launch in 2015, Ross said there have been around 650,000 facials performed, providing deep insight into different skin needs and types. Additionally, between 25-30% of new customers to Heyday have never had a facial before, indicating 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 that has “skin in both sides of the game,” in regard to L5’s franchising.
“We wanted a thoughtful investment partner that could help refine [our approach] and hold us accountable, to make sure we do things the right way,” said Ross.