The Economics Behind The Joint Chiropractic: How They Dominate the Market

Over the past 10 years, the joint chiropractic has flourished. Today, over 600 franchises are spread throughout the world. That's more locations than the other top ten chiropractic franchises combined. On average, a new joint opens every 48 hours, which is wild. And collectively, chiropractic is a $16 billion industry in the United States, yet it's fragmented. Over 95% of chiropractic practices are independent and the top three chains make up only less than 3% of the total market. Now, after an explosive 28% revenue boost in the last year, Joint now has an annual revenue projected to be over $70 million. You might be wondering how the joint makes money. Well, the margins at the joint are famously good. Their average profit margin is equivalent to huge companies like Target and Walmart, well over 25%. They achieve these margins through a slick combination of limiting expenses, maximizing patient flow and proprietary managed. The joint keeps its prices low and has built an entire ecosystem of operations and marketing to help drive patients into their practices. How many patients? Well, last year alone, the joint franchises adjusted over 1 million people by offering walk in services. They don't deal with an estimated 20 to 30% loss on missed appointments. So imagine, for example, that your practice had zero missed appointments next year. Additionally, they market specifically to people without complex medical and health conditions. Some say this model hurts chiropractic as a whole, while others welcome the convenience and establishment of the first scalable chiropractic brand. Well, the average cost to get a joint chiropractic franchise up and running is a cool $250,000. And while at first glance it might seem like a lot more than many chiropractors spend opening their first practice, this sum is far less than nearly any other franchise out there. The layout, square footage and locations of the joint are all carefully monitored to ensure the highest chance of profitability. Joint is betting on a future with price conscious patients looking to stay healthy as long as it doesn't cost them too much money. Now, the odds of success may be in their favor. The executive leadership team at the joint has worked at places like McDonald's, AMCO, UPS Store, CVS, Walgreens and United Airlines. This isn't their first rodeo. This team not only helped them get an IPO in 2014, but it's also helped them have the connections to continue to scale. Just last year, JP Morgan put over $7.5 million in capital as post IPO debt post into the joint. So they are ready to move. Now. If you've never heard of what the joint is. And you're curious about that. The joint is a franchise of chiropractic clinics and they're focused on a retail approach to bring convenient and affordable chiropractic care to people all around the globe. All franchises feature a membership driven model that's walk in and cash pay based. And so what's the big deal about a membership model? You might be thinking, well, it's estimated that over 85% of their revenue generated is, is based upon memberships and they're making a lot of money. The joint also takes a unique approach to its marketing, focusing less on medicine and more on lifestyle. They're positioned on the continuum of wellness rather than medical management. Aspirational messaging and candid photos and stories are typically used to showcase the positive lifestyle benefits of their care. Now, if you want to know the joint by the numbers, what's going on? Let's take a look. Just last year they had over 1.1 million unique patients. They delivered over 8.3 million adjustments. They saw over half a million new patients. And again, 85% of their sales came from monthly memberships. With chiropractic positioned as a $16 billion market, the joint is counting on taking advantage of the statistics that show 50% of Americans don't know what the word chiropractic means and 30% are scared to see a chiropractor. Right now, chiropractic chains make up only 3% of the total spending within chiropractic. Now if we compare that to other industries in the dental world, that's about 12%. So it's clear that the joint feel they have a significant opportunity to grow and potentially 4x over the next few years. Now you might be thinking that sounds interesting, but how many clinics does the joint have? Now let's break down their year by year growth since they started in 2010. 2010, they had 12 clinics. 2011, they jumped to 26. 2012, 82 practices. In 2013, they were coming in at 175. In 2014, they grew to 246. In 2015, they hit 312 total practices. In 2016, they hit 370. In 2017, they hit that magic number of 420. 18, they were nearly at 450. In 2019, they broke the 500 clinic marker. And in 2020 they have achieved over 600 clinics. Their goal is a 1000 clinics by 2023. And they see their total market size being over 1800 clinics eventually. Now the joint has over 250 clinics in active development right now. And with their recent influx of capital and profitability, it's unlikely their growth is slowing down anytime soon. Roughly 10% of their clinic portfolio is corporately owned and managed, and the remaining 90% are structured as franchise so if you're curious on how much it costs to start a chiropractic franchise, here you go. The initial investment to start a franchise at the joint is over $250,000. It's estimated that the initial build out cost is around 180k and the franchisee pays a license fee of 40k that first year. That transitions to a 7% royalty plus 2% for marketing over time. The estimated break even is at 25,000 in monthly gross sales and it's expected to take 3.5 years to have a cash on cash return. Now you also need to have 100k liquid and you'll need to have a net worth of $250,000 to qualify for franchisee ownership. And while these franchise requirements aren't extreme, it's not uncommon for the franchise owners to be business people and investors as opposed to practicing chiropractors. Now, if you're curious what's the difference between the joint and other chiropractic clinics, let's break down some of the key points. The joint is different from many other chiropractic practices in a few very distinct ways. First, the joint has an average collection fee of 29 bucks per visit, which is about half of the industry standard. Second, the joint can save a tremendous amount of money on overhead by being cash or private pay and not accepting any insurance. Now, having a cash based business model, the joint never has to wait on accounts receivable, insurance denial or billers. This could account for a 25 to 40% premium on the cash they collect. And it's also saving them the time and hassle of insurance, giving them a strategic advantage to be able to charge less. Additionally, they choose retail based locations instead of medically based to drive more foot traffic and name recognition. Not uncommon to find a joint chiropractic in a strip mall, next to a grocery store in the suburbs, or in a high density location in a city. A typical joint location is about 1200 square feet and with a retail build out, they can save space and cost associated with not having rehab spaces, imaging or the like. And since the joint is focused on overall health and wellness as opposed to rehab and complex conditions, they can also put a significant amount more volume of patients through their practice. For example, the average number of patient visits per month at a chiropractic practice is about 600. Where a joint franchisee can easily exceed 1300 visits a month. The combination of cash payments and volume provide the joint with a significant revenue advantage compared to a typical chiropractic practice. And in healthcare service industry, time is money and the joint has figured out a model that enables incredible patient flow and in a way that maximizes space and revenue per hour of their team. When you add in corporate scaled marketing, proprietary EHR and patient management systems, the joint has a strategic business advantage in nearly every way over a traditional chiropractic practice. By not accepting insurance and using an adjustment by hand process, the joint has a cost of goods sold that's extremely low. And this helps pad their profit margins and allows scale without having to have tremendous amount of capital overlay. So what does an average chiropractor make working there? Well, the joint boasts that they start a chiropractor salary at at least $65,000 plus additional performance based bonuses. Other benefits include ongoing training and support as well as corporate oversight that can make it attractive to chiropractors who don't want to deal with the business of chiropractic. For this reason, the joint tends to attract newer chiropractors who are looking for stable jobs. This type of chiropractor, a caregiver, usually isn't focused on building their own franchise, but rather simply on providing care each day to the patients that come in to see see them. While many chiropractors who seek stability may dream of practicing in a hospital based or multidisciplinary clinic, the truth is those positions are few and far between. And with the historic growth and future productions of the joint, it appears as though far more positions will be available at the joint than many other corporate positions for the foreseeable future. So if you're looking for a stable job in a company with strong financials, it's hard not to consider the joint as one of the better options out there. So the question is, is the joint good for chiropractic? Well, the joint has its fair share of haters as well as those who praise its unique business model and its ability to scale. In my opinion, it's too early to tell whether the joint will have a significant impact on the chiropractic profession. However, we should know more within the next three to five years. With their growing market share. For now, the joint chiropractic is uniquely positioned as a low cost, readily available, membership based chiropractic chain that provides adjustments to those who need a quick crunch. Most chiropractors, especially with specific niches shouldn't be concerned about quote unquote competition from the joint. Most chiropractors their business model, ideal client and operations are so wildly different then worrying about the joint would be like Nobu being concerned about a local PF Changs opening up. Now if you're an investor, is the joint chiropractic a good franchise? Well, this isn't investment advice, but it certainly looks as though the joint has grown and will continue to grow for the foreseeable future. Their marketing target market, operations, playbook and franchise model appear to be performing very well. So I guess you could say roll them if you got them. Hey, what's going on? If you loved that video, be sure to subscribe to this channel. The evidence based chiropractor puts out videos all the time at the intersection of marketing and research, showing you how to grow your practice while also growing your knowledge basically base. So if you liked it, be sure to comment down below or hit subscribe and I'll see you in the next video.