After early growing pains, back support specialist Relax the Back Corp. has been straightened out and is on course to ramp up store openings.
Richard Palfreyman, chief executive of the company, said the goal is to add 30 franchisee-owned stores this year, up from 16 last year. The company now has 108 stores, but believes North America can sustain 250 to 300 units.
In recent years, the La Palma-based company has experienced 30 percent year-over-year store growth, and Palfreyman doesn’t expect things to slow down. “We are very optimistic about our outlook,” he said.
The reason: Aging baby boomers are aching. Relax the Back’s target demographic is 30-year-olds to 60-year-olds who are overstressed and demanding products to relieve their body ailments. Among those products: executive work stations, mattresses, exercise equipment and therapy devices.
For franchisees, selling to the baby boomers can mean substantial pocket change. Relax the Back stores typically rack up $900,000 yearly, Palfreyman said. Franchisees pay 4 percent of revenues to the franchisor, in addition to other costs.
The relationship between Relax the Back franchisees and the corporate parent used to be strained before Palfreyman entered the picture in 2001. At the time, the company operated its own stores that competed with franchisees and offered lukewarm support to those franchisees.
“I had to get out and meet all the franchisees and let them know that I understood how franchising works, and the only way I was going to be successful was if they were being successful,” said Palfreyman, who worked at personal computer retailer ComputerLand before jumping to Relax the Back.
From 1996 to 2001, Relax the Back was owned by one-time franchisee and back-pain sufferer Dairl Johnson, but was bought out by San Francisco-based venture capital firm Dominion Ventures Inc. The company is now owned by Dominion and Emeryville-based investment firm Pacific Mezzanine Fund. Relax the Back was originally started by an osteopath in 1984.
After the 2001 ownership transition, the company had a period of instability, going through five chief executives in a year until Palfreyman took the helm. With Palfreyman in place, Relax the Back decided to shut down the company-owned units and concentrate on the franchising model.
Today, all of the company’s locations are owned by franchisees with most in strip malls and often across the street from major shopping malls with regional draw. The strip malls work for Relax the Back because Palfreyman said vehicle traffic drives customers into the stores.
“If you get out once from your vehicle and tweak your back, you might go into the store,” he said. “We do a very good job with repeat business, and you will probably be a customer for the rest of your life.”
Toy Talk
Children’s product maker Small World Kids Inc. has run into trouble acquiring the Bead Shop, a Milwaukee-based company known for its Fashion Angel dolls.
Small World, based in Culver City and traded over the counter, had planned to buy Bead Shop for $15 million in cash and $5 million in restricted shares of Small World common stock, plus contingent earnouts. But Small World chief executive Debra Fine couldn’t wrap up enough public capital market funding to get the purchase done at the end of last year.
“The public capital markets were difficult in December and January to raise $25 million,” Fine said in a statement. “Neither of us has the door closed on a future relationship.”
But Small World is moving forward and has gained funding for future acquisitions. The company recently secured a $16.5 million revolving credit facility and a $2 million term loan from Laurus Master Fund Ltd., a private equity fund.
In Small World’s sights are profitable small to mid-market companies in the $10 million to $75 million revenue range. In Securities and Exchange Commission filings, the company speculates it will be able to purchase these companies at five to seven times earnings.
Parlor Games
Booty Parlor Inc. is all about bedrooms even hotel bedrooms.
The Los Angeles-based sex essentials company has put its “midnight cravings” kits in rooms at the Strip’s Mondrian Hotel and is working out plans to bring them to hotels in Las Vegas, New York and Miami. The kits, which contain massage oil among other items, are placed near drinks and snacks at the mini-bar. Booty Parlor goods also can be bought at hotel gift shops.
“It is the perfect environment for people to feel comfortable being sexy. That is something that most hotels are interested in, particular the less stuffy hotels,” said Charlie Myers, who heads Booty Parlor with his wife, Dana Braverman.
Booty Parlor’s hotel presence helps build brand recognition for the new company, which was just established last June. Booty Parlor’s key demographic 18- to 34-year-old women and their husbands or boyfriends are frequent guests at the hip hotels where Myers said his company’s products have the most appeal.
But hotels are only one part of the company’s business strategy. Recently, Booty Parlor’s body treats became available at Victoria’s Secret Stores Inc., where they start at $10, but the biggest slice of its business is done on the Internet.
Myers speculated Booty Parlor has been well received by customers, especially women, who want to buy sex essentials without having to visit seedy shops. He said there is a big demand for such products sold “where there is no sleaze or shame, where everything is high quality, sexy and appealing.”
*Staff reporter Rachel Brown can be reached at (323) 549-5225, ext. 224, or at
[email protected]
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