Caci Clinic: your face is their fortune ...

By LIBBY MIDDLEBROOK

It's difficult to find a blemish on the face of the Caci Clinic franchise.

During the past six years, 16 franchise outlets have sprouted up around the country, along with nine in Australia, offering standard beauty therapy treatments such as facials, laser hair-removal and non-surgical facelifts.

For franchise founder David Smith, the success of the chain has been totally unexpected.

Auckland-based Micromode Medical - the company that coordinates and owns the New Zealand franchise - has turnover in excess of $6 million and most Caci Clinics are having trouble meeting demand.

"We didn't set out to open a franchise, we just wanted to have a few clients at our own beauty therapy clinic and have a comfortable living," said Mr Smith.

"It certainly hasn't turned out that way.

It's something to do with our mix of services that's made us so successful."

It all started back in 1994 when Mr Smith left his software management job in England to return to New Zealand with his wife, Jackie, a registered nurse. Before leaving Britain, they heard about a new non-surgical facelift machine called Caci.

The Smiths picked up the sale rights for New Zealand and Australia and opened a tiny clinic in Newmarket, named the Caci Clinic. It offered standard beauty therapy treatments along with the Caci machine's non-surgical facelift.

"We just wanted a little beauty therapy business that my wife and I could run for couple of years and live a relatively trouble-free existence, while selling these machines on the side.

"Riding off the back of the Caci name in the UK, which was becoming really popular, and some magazine publicity, within 12 weeks we had four staff and a waiting list."

The Smiths delved into the franchise industry within months of opening that first clinic. Mr Smith hired a franchise consultant to set up a parent company, Micromode Medical, to expand the business throughout New Zealand. Today it trains and coordinates 16 outlets from Auckland to Dunedin, run by nurses or doctors. The company also owns a large proportion of the beauty therapy equipment used by the Caci Clinic, which has expanded into areas such as the removal of tattoos and hair.

"It really caught us off guard, we never planned to go into the franchise thing, but it's been really successful. The growth in this market is just huge, but we are limited because of the capital-intensive nature of the business."

More than $300,000 is needed to set up a Caci Clinic franchise, owing to the high cost of the treatment machines. Laser and body tone machines can cost more than $100,000 each, making it difficult for the "average nurse" to start a franchise, along with paying for setup and royalty fees.

"You've got to do an awful lot of bikini line [waxes] to fund that," said Mr Smith.

Micromode was able to solve the problem and grow the franchise by borrowing to buy the more costly beauty therapy machines. Franchise holders pay an annual fee to cover insurance, rental, maintenance and advertising.

"Everyone knows the problems with small business - there's never enough cash. That has been our biggest problem because we are so capital intensive. There's no way a clinic in Napier could justify that sort of investment.

"We had to develop a very close relationship with the bank to keep them informed, and to show them how we've been doing. Each time we can get just a little bit more to fund another [franchise]. That's allowed us to grow a bit faster."

Even with the bank's support, Mr Smith said developing the Australia franchise system was difficult because of funding issues. Micromode Medical could not afford to borrow the millions needed to set up a large-scale franchise across the Tasman.

He was also being pressured by the machine's manufacturer to generate more Australian sales.

"We had to be a certain size to even think about getting into Australia, but even after two years there were still problems like control issues in setting up there. To be a good franchise you've got to offer support and training, and we just didn't have the resources to do that from New Zealand at the time."

In 1996, Mr Smith started the Australian franchise by appointing a business partner to set up Micromode there.

The company is enjoying higher returns in Australia because of lower price resistance and more franchises will open there soon.

"In the next couple of years, we should have good market coverage in Australia and we would have learned a lot about managing another country. From there we'll probably move into Asia."