Jeff Flannery·April 27, 2026

From $1m to $25m in 6 Years | Jeff Flannery Interview

Jeff Flannery spent 18 years running a successful but unsaleable executive recruiting practice before buying his first Hand and Stone massage/facial franchise location in Peoria, Arizona in early 2019 for $150,000 — a spa days from bankruptcy that he turned around to become the fastest-growing location in the system within its first year. Starting with SBA financing and roughly $60-90k out of pocket, he then embarked on an aggressive roll-up of distressed Hand and Stone resales: two California locations acquired near-free during COVID using PPP loan transfers and seller notes, a profitable Phoenix flagship funded by a $500k equity investor, and further acquisitions across Arizona, California, Virginia, Chicago, and Houston — reaching 19 spas in five states by 2023. After a painful pause driven by a divorce, an uncooperative lender, and operational overextension, he sold the California and Virginia locations, streamlined to 17 high-performing units, and grew system revenue from $1m in 2019 to $25m in 2025. A defining competitive edge is proprietary infrastructure built well beyond what the franchisor provides: a Smartsheet operations platform, a 50-person Philippines-based inbound and outbound call center, a structured manager bench and onboarding program, and a superior membership sales process. Jeff is now targeting continued Hand and Stone acquisitions (primarily in Phoenix and Houston) while planning to launch an undisclosed new wellness concept from scratch as a potential future franchisor.

Deal facts

purchase price: First location: $150k (Peoria, AZ); second location: $50k (Glendale, AZ); four Northern California locations acquired ~$0 down (two at $50k each with seller notes, one at $150k, one included PPP transfers); one large profitable Phoenix-area spa financed via $500k equity raise; total portfolio grew to 19 spas in 5 states
multiple: 3-4x cash flow (stated as market rate for Hand and Stone resales)
sde ebitda: EBITDA ~6.5% of ~$25m revenue in 2025 (~$1.6m); four-wall EBITDA ~$4m before overhead; targeting 10%+ EBITDA in 2026
revenue: $25m in 2025 (17 locations after selling California and Virginia); ~$1m in 2019
financing structure: First spa: SBA 7(a) loan, ~10% down (~$15k equity), ~$60-90k all-in; subsequent acquisitions: seller notes (0% down to 60-70% seller carry, 2-5 year terms), then conventional bank financing from ~2021 onward; $500k equity investor (still in) for large Phoenix spa; total personal cash invested ~$400-500k
notes: Sold California and Virginia locations by end of 2025; currently 17 spas (11 in Phoenix metro, 3 in Chicago, 3 in Houston); $6m debt, $2m cash as of interview; average unit volume ~$1.4-1.5m

Why this business

A business school buddy mentioned Hand and Stone and thought Jeff would be great at it. Jeff evaluated the entire massage/spa franchise landscape from a consulting perspective and concluded Hand and Stone was the best brand. He was also drawn to the membership model's recurring revenue and saw an opportunity to buy a deeply distressed existing location cheaply rather than build from scratch, allowing him to get in the system with data advantages unavailable to new franchisees.

What's working

Buying deeply distressed franchise locations at steep discounts (first spa at $150k vs $600-700k to build new) and turning them around rapidly — Peoria went from near-bankruptcy to fastest-growing Hand and Stone in the system within the first year
Rolling up franchise resales within the system through proactive outreach to fellow franchisees and reputation as a reliable closer with financing in place
Building proprietary infrastructure: Smartsheet-based operations platform, inbound call center in the Philippines (~50 staff) to capture missed calls and execute scripted booking, outbound call center for lead nurturing from digital ads — described as 'moats around our business'
DISC personality testing and multi-week structured onboarding for managers; building a 'bench' of managers ready to deploy on acquisition; functional excellence directors for front desk, massage therapists, and aestheticians
Charging enrollment fees (introduced against corporate skepticism) and developing a proprietary membership sales process that outperforms the franchisor playbook
Incentive trip to Cabo San Lucas for all staff — Jeff defends this against PE cost-cutting instinct as high-ROI for recruitment and performance
Two-thirds of revenue is recurring membership revenue; unit economics improve significantly past the break-even membership threshold
Franchise system advantages: instant five-minute deal valuation using BI data, ready-made deal flow within the network, benchmarking against 450+ franchisees, brand and playbook

What's hard

Worked 100-hour weeks for 4-5 years; described as 'absolutely miserable' professionally during prior 18-year recruiting practice, then extremely intense in the spa business early on
California operations were a disaster: Governor Newsom moved the goalposts on reopening criteria, locations closed twice, 80-90% of all losses came from four California spas; PAGA lawsuits continued even after exiting the state
Virginia required a master aesthetician license to do facials, making it nearly impossible to staff; learned state-specific labor law nuances the hard way
Manager quality is the single biggest swing factor: 'A great manager, the spa blossoms. Bad manager, it tanks.' High turnover on inherited managers and front desk after acquisitions
Bank lender cross-collateralized all locations then decided to exit franchise lending, leaving Jeff with financing instability while also going through a divorce — came close to violating bank covenants
Forgot to negotiate away liquidated damages clause with franchisor (royalty clawback on early closure); had to pay when closing a California location
Membership model deferred liabilities (unredeemed gift cards, prepaid memberships) are inherited on acquisition and spook underwriters; true effective multiple is 7-8x when liabilities are included even though the market transacts at 3-4x cash flow
18-year prior 'practice' (recruiting firm) was unsaleable and couldn't be stepped out of — a cautionary tale about owner-dependency and building a job instead of a business
Getting ahead of operations during rapid 2021-2022 expansion; had to pause acquisitions from fall 2023 to summer 2025 to fix margins and rebuild team

Notable quotes

I knew at a very young age I wanted to be an entrepreneur. When I was 4 years old, I have a twin brother, and we had a restaurant with my parents where we had American cheese melted on saltine crackers for like a nickel or something.

I gave myself golden handcuffs. Usually companies give you golden handcuffs. I gave myself golden handcuffs.

When Cortez landed in Mexico, he burnt his ships so he'd be well motivated. I burnt my ships.

80 to 90% of my losses came from my four spas in California. 80, 90%. And I just got out of California, and I've been sued three times since I've been out of California.

I built an infrastructure that's very expensive because I'm building this business not just for today and the 17 spas we have. I'm building a business for 50 spas or other big brands.