How do med spa franchises work? Fees, royalties and territory
The short answer. A franchise is a licence, a system and a set of obligations, granted for a term. Money moves in three directions: what you pay once, what you pay continuously, and what you pay at the edges — renewal, transfer, and training for people you hire later.
We publish no figures. What we can set out is how each mechanism works, and the questions that determine what any particular arrangement will actually cost you over a decade.
Most people evaluating a franchise compare initial fees, because that is the number everyone quotes. The initial fee is the smallest and least consequential of the three flows. What follows is the rest.
What you are licensing, and what stays yours
| The franchisor supplies | You still own |
|---|---|
| The brand and the right to trade under it in a defined area | The lease, and every obligation in it |
| An operating system: protocols, menu, pricing structure, software | Your employees, and everything that comes with employing them |
| Supplier relationships and negotiated terms | The profit and loss, and the risk of it |
| Training, at opening and often ongoing | The working capital, and the consequences of running short |
| Marketing at the network level | Whether your particular clinic fills its calendar |
That right-hand column is the part people underestimate. A franchise supplies a system; it does not operate your clinic. The six patterns behind closures remain available to a franchisee — a good system makes each less likely and none impossible.
The three money flows
1. Paid once
The initial franchise fee, whatever it includes. Ask precisely what it buys: territory, term, training for how many people, launch support for how long, and what is explicitly excluded. It is generally not financeable as an asset, so plan for it to come from your own capital — see financing a clinic.
2. Paid continuously
Royalty, marketing fund contribution, technology or software fees, and anything you are required to buy through the system. These run for the whole term and dominate the ten-year picture.
3. Paid at the edges
Renewal, transfer if you sell, training for later hires, and any fees triggered by relocating or refurbishing. These are invisible at signing and decisive later.
How royalties are actually calculated
A royalty is usually a percentage of revenue, sometimes a fixed periodic amount, occasionally a hybrid with a minimum. The percentage matters less than the definition underneath it, and that definition is where two apparently similar agreements diverge.
Ask each of these in writing:
- What counts as gross revenue? Are retail product sales included? Memberships? Training or room rental income?
- When are prepaid sales royalty-bearing — when the package is sold, or when each session is redeemed? This one matters more than it sounds, because it decides whether you pay royalty on cash you have received or on work you have delivered. It interacts directly with the obligation described in prepaid packages.
- Are taxes excluded from the revenue base?
- What happens on refunds, chargebacks and unredeemed packages?
- Is there a minimum, and does it apply during the opening ramp?
- How and when is it reported and collected, and what audit rights does the franchisor have?
The marketing fund is a separate question
A contribution to a network marketing fund is not the same as your own local marketing budget, and many agreements require both. Establish: what the fund pays for, who decides, whether spending is reported to franchisees, whether unspent contributions carry forward, and whether you are separately obliged to spend a minimum locally.
Territory
Territory is defined in a specific way — a radius, a set of postal codes, a population count, or a named municipality — and the definition determines what you actually have. Beyond the boundary, ask what the grant means inside it:
- Is it exclusive, or merely a first right on further locations?
- What rights does the franchisor reserve — online sales, corporate or institutional accounts, non-traditional locations?
- Can the territory be redefined, and on what basis?
- Are there performance conditions attached to keeping it?
A territory that can be redefined unilaterally is not a territory. That belongs on the red-flag list in what a franchise costs.
Term, renewal and transfer
The term is how long you have the right. Renewal is what happens after, and it is rarely automatic: it typically requires being in good standing, signing whatever the then-current agreement says, paying a renewal fee, and often refurbishing to the current standard. That last obligation is a real capital event and it belongs in your long-range plan, not in a footnote.
Transfer governs whether you can sell. Expect an approval process, a transfer fee, a requirement that the buyer be trained and approved, and possibly a right of first refusal for the franchisor. If building something saleable is part of your reason for doing this, read these clauses before the fee schedule — they decide whether the thing you build can be sold at all, and to whom.
Year one is not a steady-state year
The ramp changes the arithmetic in a way the fee schedule does not show. Royalties are charged on revenue, so they start small — but the initial fee, the build-out and the working capital all land before revenue exists, and fixed costs run at full price from the day the doors open.
So ask whether the agreement recognises this: is there a reduced royalty period, a deferred start, or a minimum that bites before the calendar has filled? Systems differ, and the answer changes what year one costs you. Model it against your own break-even calculation rather than against a standard-year assumption.
Obligations that run the other way
The agreement binds the franchisor too, and this is the half applicants read least carefully. “Support” means nothing unless it is specified. Ask what is committed, in what timeframe, and what happens if it is not delivered:
- Pre-opening: site approval, design, equipment specification, training, launch marketing.
- Ongoing: protocol updates, new treatments, supplier negotiation, field visits, and how often.
- Systems: software, booking, reporting, and who pays when it changes.
- The network: how franchisees are consulted, and what happens when they disagree.
Where the actual numbers come from
Several Canadian provinces require a disclosure document before money changes hands, and reading one province’s statute — Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 — is the quickest way to see what a serious disclosure package contains. Quebec has no franchise-specific disclosure statute, which means the diligence a statute would have compelled falls to you.
The Canadian Franchise Association is a reasonable orientation point, though membership is not a substitute for a lawyer reviewing your specific agreement. And whichever system you are considering, the figures come from them in writing — not from an article, ours included.
If you want ours, it starts with a conversation: the application form is here.
Frequently asked
How do med spa franchises work?
You license a brand and an operating system for a defined term and territory, and pay in three ways: once at the start, continuously through royalties and marketing contributions, and at the edges through renewal, transfer and later training. The lease, the staff and the profit and loss remain yours.
How is a franchise royalty calculated?
Usually as a percentage of revenue, sometimes a fixed amount or a hybrid with a minimum. The percentage matters less than the definition of revenue underneath it — whether retail and memberships count, whether taxes are excluded, and whether prepaid packages are charged when sold or when redeemed.
What does franchise territory actually protect?
It depends entirely on the definition. Establish whether it is exclusive or a first right, what rights the franchisor reserves inside it (online sales and corporate accounts especially), whether it can be redefined, and whether performance conditions attach to keeping it.
What happens at renewal?
Renewal is rarely automatic. It typically requires good standing, signing the then-current agreement, a renewal fee, and often refurbishing to the current standard — which is a capital event that belongs in your long-range plan.
Do royalties start immediately?
Royalties are charged on revenue, so they begin as revenue does, but the initial fee, build-out and working capital all precede it. Ask whether the agreement provides a reduced or deferred royalty during the ramp, and whether any minimum applies before the calendar has filled.
Next in this series
Sources
- Government of Ontario, Arthur Wishart Act (Franchise Disclosure), 2000. Checked 30 August 2026.
- Canadian Franchise Association. Checked 30 August 2026.
- Innovation, Science and Economic Development Canada, Canada Small Business Financing Program guidelines. Checked 30 August 2026.
General information for people considering a franchise in Canada — not legal, tax, accounting or financial advice, and not a substitute for a lawyer who practises franchise law. Franchise legislation differs by province and changes; confirm current requirements with counsel. This page publishes no fee, royalty, revenue or margin figures, makes no earnings claim, and nothing here is a representation of the financial performance of any New Age Spa location or franchise. It is not an offer to sell a franchise; where the law requires one, an offer is made only by disclosure document.
