Shrinking spa chain Planet Beach is suing a Mississippi franchisee who allegedly walked away from her franchise, demanding royalties she would have paid if her tanning salon had stayed open. The company charges in court papers that Marie Porter “abandoned” her Biloxi unit and is demanding she pay royalties for the remaining nine years of her franchise agreement – plus attorney’s fees and “additional sums arising from and related to Defendants’ damage to Plaintiff’s brand and the resulting loss of goodwill.”
Porter is not alone in closing up shop. Although Planet Beach touts itself as “the future of the spa industry,” a wave of closures has hit its franchisees, who have shuttered 85 outlets in the last three years. That represents 30 percent of the chain’s 280 units at the start of 2012, according to the Planet Beach Franchise Disclosure Document.
The Wall Street Journal reported that the Small Business Administration had charged off over $10 million in loans to Planet Beach franchisees over a 10-year period. WeAreMainSt research also shows rising failure rates on SBA loans to franchised businesses. Please let us know what you think about the risks and financial pressures in your franchise system.