Hi, everyone. Good afternoon. I'm Simeon Gutman, Morgan Stanley's hardline, broadline, and food retail analyst. It's my pleasure to welcome European Wax Center, represented by David Willis, CEO and Director; Stacie Shirley, CFO; and Andrea Wasserman, Chief Commercial Officer. I'm gonna read a quick disclosure, make an even quicker intro, and then we'll get right at the questions. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures.
If you have any questions, please reach out to your Morgan Stanley sales representative. For those not familiar, this is the largest out-of-home waxing franchise chain in the entire United States. You always like to describe it as this is the business that has the best mousetrap in their space. The story is doing quite well. It's evolving. We're talking about lasering to some degree and continuing franchise growth.
One of the best margin profiles actually across our coverage universe, and a pretty decent growth profile. So I will sit down, and we'll get right at it. Thanks for being here.
Thanks for hosting, Simeon.
You were here last year, so thanks for being a regular. If we look at 2023 and the way in which you thought it would play out, what surprised you to the good? What surprised you to the less than good?
Well, I guess I'll first start with our guests. As you had referenced, our Wax Pass and our routine guests are continuing to spend with the same frequency, spend just as much money, so that's largely played out as we had expected. For those that are newer to the story, Wax Pass is a loyalty vehicle where guests pre-purchase a certain amount of services. They pay for nine services; they get 11 services or two free in a non-promotional period. During our customary promotional periods, they buy nine, get three. We found that these guests really visit with the same frequency they view waxing as a non-discretionary service. So they present a very predictable and recurring revenue stream from the brand, which is good.
Another thing that's really played out as expected is the strength of our new center opening pipeline. Our franchisees have continued to generate strong returns that justify reinvesting into the brand to expand their footprint. So we've been really, really pleased that that demand for new licenses and new center openings has remained robust, even in this environment. You can't get away from the fact that the challenging macro has had an impact on at least part of our guest file. And our less frequent guests, who have not made the commitment to a Wax Pass or to a regular monthly routine visit, they've been a little bit less predictable in this environment. So what are we doing about it?
Well, Andrea, here in a minute, can talk about some of the CRM initiatives, leveraging the power of our data warehouse so we can try to reengage with some part of this guest. We reached out to them in the Q2 with different initiatives, and we saw that they were responsive to that. What else we can do about it outside the macro, which is not directly within our control, obviously, is, I think, lean in and help our franchisees better drive results within their centers. The teams have been working on a number of initiatives, a bit more discipline in our new center opening playbook to ensure that each center that opens, the franchisees have done all those things they can do to ensure that they open with the right number of new guests.
They're staffed with properly trained aestheticians when they open, so they can really launch with that very predictable AUV ramp that we've seen over the history of the brand. Andrea, maybe you want to double-click on some of the things we're doing with respect to media and our new agency.
Yeah, sure. So I think it's, you know, there are a couple of pieces to it. There is the guest acquisition piece, where we're going out and we're looking for new guests and getting any guest, even existing guests, who is anywhere online, to book a reservation with us. So we have, like David said, brought on a new media agency, just onboarded them last month, and so seeing that ramp really in effect now. And part of that is approaching things with a much, much more of an analytical rigor. We're using mixed media modeling on a regular basis to make sure that we understand where reservations are coming from, where incremental reservations are coming from, and being able to go out and get more reservations like that.
We're also using that to help drive a creative targeting strategy to make sure that the right guest is seeing the right type of ad, or the right prospect is seeing the right type of ad in the right places with enough frequency that they really, really resonate. And then we're using our vast data warehouse to build new audience segments, so that we're able to go out and be very targeted to make sure that we're reaching guests who are most likely to be of the greatest value to us as a brand. And then, so that's the acquisition piece of it. On the retention piece of it, we're using that same data warehouse that we built within the past couple of years to make sure that we're reaching guests in the most relevant and timely ways.
So that, for example, if we want to run a promotion, we don't need to do it to every guest on file. We're able to target guests who have lapsed or who, based on our predictive churn modeling, we think might lapse and target them with specific human communications using email, using SMS, and more recently, using both app push notifications as well as a direct mail push.
We talk about... I wanna get to a lot of that stuff and talk about the episodic customer. Let's maybe set up the macro and think about, I guess, the competitive landscape first.... Is it changing the-- can that describe some of the episodic customers, no pun intended, or is it competition entering the market? How do you think about that?
Yeah, I don't know that we've seen, Simeon, a dramatic shift in our direct competitors in the waxing space. We're the largest scale player in a highly fragmented category, so we compete, for those not as familiar with the model, we compete with literally thousands of mom-and-pop, kind of single shingle, folks that offer waxing as a service. There's a handful of branded wax competitors that they're all growing. I don't necessarily know at the same rate and pace that we are, but I mean, that, that to me shows that there is demand in this overall market. We've seen some institutional money enter the waxing market, our largest regional competitor is backed by institutional capital, and we've seen a, another player enter the market in terms of a, a smaller regional player. So candidly, I think that bodes well for, for all of us.
I think we get our outsized benefit as, as the leader in this space. Where I think we've seen other forms of hair removal, which we think is accelerating the overall TAM, is lasers. There's been a lot of money invested in laser. There's been a lot of new laser clinics going up around the country. I know we'll talk about that here in a little bit, but we're dabbling in that as well to see if that might be, incremental- drive incremental revenue and EBITDA for, for our franchise system. So all in, haven't seen. You know, we- we've seen the competitive set largely stable in terms of our position relative to everyone else. We remain the largest in terms of our scale and size.
We can go to laser, and it connects to some of the targeting efforts. You know, this business has grown steadily over its timeframe, and it should continue to grow steadily. But you're pivoting, right? Laser, we're doing different things with media. What's causing that? The consumer, you know, they're healthy, they're spending very choosily in different places. But is it, you know, the consumer doing something else? It could be lasering or, you know, in theory, I talk about the competition in this space being invisible because they're hard to track, especially from our side. So where is that customer going, and why the pivot to accelerate these efforts to get that customer back in the door?
Maybe touch on... I'll start on laser, and if you want to-
Sure.
Expand on kind of how we're thinking about media. So for us, Simeon, laser is a bit going on offense. We've said since the day we went public, we think it's a different guest. Candidly, using that theory, we think we can use laser to attract a different demographic to our brand. One of our other hypotheses is, we believe, based on guest surveys, some of our guests that are very loyal to the brand, that are waxing one body part, we think are walking down the street and lasering a different body part at one of the competitive sets. So for us, we view this as an opportunity to go on offense. The litmus test for us, and we're piloting, for those that aren't familiar, literally six centers here in New York, so it's a fairly small pilot.
We're about eight weeks into it, and we're encouraged by the preliminary results. But for us to determine whether this laser truly has a life within European Wax Center beyond these six centers, the litmus test is it's got to be accretive on both the top line and the bottom line for our franchisees. It's an incremental capital investment that we would be asking our franchisees to make, so we want to make sure we've seen enough data to say, "Hey, can they get an efficient return on that capital investment?" One of the things that we're doing in laser is a little bit different approach on pricing. We're very transparent about what the cost of our laser services are within European Wax Center.
We candidly should be agnostic if that guest wants to wax a certain laser, wants to wax a certain body part or laser a certain body part. So we've tried to take a little bit different approach, and we're learning as we go, and I think as we get more data, that will inform kind of whether laser has a home in an extended number of centers. Andrea, I don't know if you want to touch on how we're thinking about maturing our media.
Yeah, I think that, it's less of a pivot and more of a natural, yet very exciting evolution for the business. David has talked in other forums about the creation of my role, which is this Chief Commercial Officer scope, the point which we have not had before as a brand. The point really being to start with data insights and to use that to inform all things media and marketing. And so a little bit of what you're seeing now is really, that, that philosophy, that approach. You know, one of the reasons that we did make a recent shift, you alluded to, with the media agency, is because there was a certain amount of analytical rigor that I mentioned before, that we really wanted.
And so it's bringing that in and using that to be this powerhouse engine that's fueling what we're doing across our marketing efforts. Likewise, with CRM, you know, it's a fairly recent development that we have this data warehouse that we're able to use. And likewise, the CRM team is now more robust, more capable than it was before. So I don't think it's that anything specific happened that said we need to make a pivot or these are brand-new things that we need to be doing, but it was more about the, you know, the building blocks continuing to grow for everything that ideally we always would have wanted to do. But it—we've been on this growth trajectory.
You talk about lasering and the industry work you've done. Are there different, you know, degrees of success or outcomes with the different businesses who do lasering? There's a couple of chains. Is the technology uniform? Is the customer pleased with the service?
... Best diligence that we've done to date, Simeon, would say the quality of the laser machine makes a difference. That it seems the guest seems to truly value the quality of the service, and the technology makes a difference. I think the professionalism with the laser tech makes a difference. So what we're trying to do with this pilot is to see, can we leverage. We started in New York, so regulations, I should step back, vary state by state. The six centers that we're piloting in our corporate-owned center in Merrick, Long Island, we hired three experienced laser techs for the pilot. Our franchise partner, who is piloting in five of their centers, actually cross-trained a number of their wax specialists to be certified to use the machine. We're learning a lot.
We're learning what does it, you know, what does it look like to acquire that guest? It does require consultation. That's a bit different than our core wax service, where we can go out and spend some money in different channels and recruit that guest. Boom, they make a reservation. We know we can service that guest when they show up. Not every hair type or skin type necessarily is applicable for laser, so it's a little bit different sales process. It's a consultative approach, and then we're also measuring, of those consultations, which percentage of those guests are willing to sign up for a laser package. We've found certain examples, as you might not be surprised, that folks came in and their hair types were not really lend themselves to laser, and we were able to convert some of them into purchasing Wax Passes.
We'll continue to learn a lot. We're encouraged about the potential impact on four-wall, but a lot more to measure before I think we're prepared to say, "Here's what we think laser looks like in EWC.
One more go at laser. With the traditional waxing, you hear some of the more experienced aestheticians, the speed at which they do it, the angle, their degrees, you know, the outcome is better. Is there a technique and a skill in lasering, or it's the technology works and it's not about retraining as much as it is the sales process?
You know, I'm not an expert. Actually, I was at our Merrick location yesterday and had a sample of the laser. I think it's a combination of the best as I can tell, a combination of the laser machine and the training of the laser tech itself. What we are finding is, it's quite efficient in terms of the time of delivery. When you think about our core service offering, we've always said we can really only experiment in incremental services, where the brand gives us permission to go and where our guests give us permission. The guest survey suggested they would give us permission with this laser hair removal treatment. But if you think about it through the lens of a franchisee, our core service offering is quite profitable in 15-minute increments.
So the way that most of our core services work is we want to be able to service our guests one or two services in the same 15-minute window. So the gross margin profile that our franchisees can generate in 15 minutes, that matters. So really, to get franchisees excited about this, it's got to economically prove that it can be probably even more accretive in that same 15-minute window. Early learnings, but we're seeing a number of these services can be provided in a handful of minutes, not even the full 15-minute window.
Okay, back to the core. Thinking about industry growth, I want to say 2024, but not about guidance, but you know, there isn't a lot of data on this industry. Is it a discretionary service, non-discretionary? How do you think about, I guess, the industry's growth potential as you look forward and given the consumer backdrop?
Well, I think if we look at our guest file, we can certainly look at the majority of our revenues and say that's coming from a guest that views this service to be non-discretionary. I think our biggest opportunity, in terms of continuing to grow our market share, is to attract more guests to the brand and get them through that guest journey funnel, where we can convert them onto a Wax Pass or at least a routine guest opportunity. We spent a fair amount of time talking about our less frequent guests or this episodic guest, but I think our biggest bang for the buck is continuing to focus our energies on driving more guests to the brand, increasing the conversion of first to brand, ultimately into that Wax Pass bucket.
As demonstrated over the last several quarters, once we can get them into that bucket, they seem to be, I don't want to say on autopilot, but their visit frequency and their spend are very, very predictable and recurring.
Unit growth potential, where is the limit? If you take your best performing markets versus the spread with your least performing markets, how wide is that, and where does that best performing market stand?
So every year, we'll open a center. For those less familiar with our model, we're a relatively modest upfront capital investment, and at maturity, takes four or five years to get to maturity. And our mature centers are averaging just under $1.1 million and historically throwing off 20%-22% cash flows. We see centers every year, Simeon, get to $1 million in year one. That's not typical. I would say that, you know, historical average is kind of $450,000-$500,000 in AUVs in year one, EBITDA breakeven generally in month 14, and then they get to the, you know, very attractive cash on cash returns at maturity. What we're doing now is studying, how did those guys get to $1 million? And not just...
What we have found, Simeon, it's not by geographic market, it's not by lucky location. It's informed with data, meaning for those franchise owners that spent the right amount of money on the right things to open with, an active guest file of several hundred guests, perhaps no surprise, they ramp a little bit more predictably and a little bit more aggressively. For those franchise owners that staff with the right level of experienced waxers in month one, in month three, and month six, no surprises, tend to ramp with a little bit more predictable rate and pace. So we're putting a bit more discipline around our pre-opening playbooks and a bit more discipline, candidly, around our post-opening continued marketing spend, so that we can best support our franchisees in building more new guests into that file as they mature.
Right. And is there some degree to which the franchisee is spending money that's not on your P&L, that they're spending investing in themselves? And is that part of the secret sauce?
It is. It is. And we've seen, and we're willing to support them. Andrea's team is dialing out kind of local match programs, so if they want to spend a bit extra on driving, incremental local marketing efforts, we've come up with a match program that they can take advantage of. So we've found over time that obviously they're giving us 3% in this marketing fund, but a number of folks will continue to invest another 1.5%-2% in local marketing efforts on top of that 3% money they give us.
Right. And as you think about future growth, penetrating markets, the total store number, do you have the markets mapped out, a certain number, opportunity set, number of locations, and even some franchisees earmarked for that growth?
We really do. We get asked quite a bit, Simeon, about this 3,000 target. So as we're, you know, finished the Q3 , we're over 1,000 centers now. We're actually a third of the way to our end target. Why do we feel good about that? Well, we've got data that came up with that number pre-IPO, and it was credible data set. But as a management team, we've got to deliver on that. And so when our development teams can go rebuild to that number on a market-by-market, DMA-by-DMA basis, that gives me much greater confidence that over the long term, we can deliver that. We've seen an evolution in our, a bit of an evolution in our franchisee base.
So the day we went public, a little over two years ago, we had 275 different ownership groups in our system. Fast-forward to today, we're a little over 200. We've seen a bit of consolidation within our network, and we've seen the entrance of private equity and institutional capital money into the franchisee side of our portfolio. Today, we have a little over a dozen, what we refer to as growth partners, Simeon. These could be private equity-backed operators or multi-unit developers. A little over a dozen of these folks. Today, that group represents about 50% of our open centers in the system, but about 70% of licenses yet to be developed. What I'm probably most excited about is we continue to see investment from our smaller operators that are wanting to add one and two more. So the...
While over 90% of our growth is coming from our own franchise system, I'm really pleased it's coming from franchisees of all sizes. It's not just the big guys, it's not just the little guys, but up to this point, we've continued to see demand from folks of all sizes because I think the four-wall economics are so compelling.
Growth of this business will be exclusively through franchising, as opposed to you wanting to own more corporate stores?
By and large, I think that's right. I mean, we get asked, you know, from a capital allocation, we throw off a lot of cash flow, would we ever see, opportunistically, the opportunity to buy franchise locations? I would say, you never say never. You know, if a portfolio became available, on the market and it's something we wanted to look at. But by and large, we like our asset-light, capital-light profile. Really strong preference to point one of our growth partners to those opportunities instead of us leveraging our balance sheet in the same regard.
If a portfolio came available, you'd step in to shepherd it along or actually run it because it can generate good profits for the business?
It's great profits. I think we would be more of a babysitter. I think we would be more of a shepherd.
Right. Okay. Can we talk about pricing? And then it may be related to margin, but thinking about pricing, pricing power, consumer willingness, and then things you've done to prevent taking price up and, you know, how the margins could benefit from actually taking pricing in 2024.
So, pricing has definitely been a tailwind for us. We took price, and we say we took price. We, as EWC, recommended a price increase in Q1 of 2021 and Q1 of 2022. We, of course, cannot dictate pricing to our franchisees, but they generally, you know, will take those recommendations. Now, in addition to that, our franchisees take price, you know, whenever they feel it's appropriate. You know, whenever we're looking at it, when they're looking at it, there's a number of factors that we take into consideration, including, you know, what's going on from a competitive landscape, are our guests giving us, you know, permission to do so? And, of course, looking at our costs, and one of the big drivers for our franchisees is as labor costs are increasing.
For this year, it's also been a tailwind, just as it is kind of annualized. At this point, we haven't made any announcements for 2024 as to whether or not we will take price, but we'll continue to evaluate that on a SKU by SKU and kind of service by service basis. The one thing that we have done, that we've talked about for a few months, is bundling, where we're taking... You know, giving an opportunity to a guest to bundle two services at the same time when they're booking, and then they might get a slight-- they do get a slight discount on that second service.
With that, it's very accretive to the franchisee because for the most part, that wax specialist, as we're talking about being, you know, so efficient, they're able to do a second service within that same time of that 15 minutes booking. Of course, the guest gets a little bit of that discount as well. We'll continue to play that out. We're at about 230 centers today, and see what the opportunity is to roll that out, making sure that we're not just trading - that customer is not just trading down. That's an opportunity there as well.
... the inputs to cost inflation in the P&L, your P&L, franchise P&L, labor, input cost, product costs. I'm not sure if rents are resetting, but where do we stand on that continuum? We've. It's been very inflationary for every retailer for the last couple of years. Is it cresting? Trying to gauge the need to push further price in 2024.
I mean, there, I think what we've heard, and, and David, please add, but I know a lot on the West Coast, there have been certainly from a wage, you know, pressures there, and so our franchisees have had to react there. I don't know if there's any other major pockets. Can't tell you if it's, if we're at the top or if it's still coming.
Yeah, I would say your two biggest buckets. So labor for the average center, mature center, labor is about 40% of their revenues.
Right.
So it is by a wide margin, the single largest cost settlement on their P&L. For those operating in elevated markets where labor rates are up, those are the folks that continue to take price, and they're not outliers in taking price. Everyone around them is taking a bit of price. In terms of the raw material costs into the system, you know, we've seen... Where we saw it the worst or the most elevated, were the ocean freight lanes from our wax manufacturers in Europe. Those are coming back down into more normalized levels than what we've seen, you know, in the hyperinflationary market. So, once you get past labor and you get past product COGS, then you really start chomping away at its rent, its utilities, its these other things. So labor is by far the biggest element.
Is there a correlation with waxer turnover and productivity of a box?
Very much. Yes. What our teams are focused. So for post-COVID, we spent a lot of time talking about recruitment, recruitment, recruitment, because our franchise centers, particularly those on the West Coast that were closed for quarters on end-
Mm-hmm.
literally had to start all over and go hire 10 or 12 waxers out of the gate. It felt like they were opening a brand-new center. As labor access to labor became better over the next several quarters, we've now said, "Okay, average center feels like they've got enough waxers." Where we still have an opportunity, Jimmy, is to optimize that mix of our more experienced waxers. They're more efficient in the wax suite; you can drive more revenue per wax suite hour. So where I think we while the average center, franchise center would probably tell you, "I got enough waxers," they'd probably say, "I would like more of my waxers to be my more experienced waxers.
Mm-hmm.
so I can optimize revenue," and we still have opportunities there.
How is turnover? Is it something... Is it monthly, weekly, that you're looking at? I guess, I guess tenure will build over a longer period of time.
Yeah. No, our field teams monitor that more monthly than they do weekly.
Mm.
And obviously, we look at trends quarter-over-quarter. This focus on retention and leveling up retention is the biggest driver in the field right now, and-
Yeah
... we can really point to data and say, those that have less turnover, candidly, have better revenue optimization, they're more efficient, and they're making more money.
But I'd say we felt good about where we've been from a staffing perspective, right? For a number of quarters.
Last couple quarters, that's right.
Yeah.
Yep, that's right.
Some of the pivot in marketing, is that, like, zero-based? But meaning, you're just using within the confines of existing budget, or is there a debate of you push more dollars to see how much that can torque for next year?
You want to take that?
Really our, you know, what we've historically done, with one minor exception, we've really operated within the confines of, we get 3%, from of revenue from franchisees. That goes into a dedicated M Fund, we call it, and that's what we spend on marketing. Some portion of that being various marketing services, some portion of it being working media, and so the way that we are planning on a go-forward basis is that same 3%. We think that, you know, we are fortunate to have the balance sheet that we do, and if we wanted to have a conversation about making a play for market share gains in a down market or something like that, and taking money from elsewhere to do that, certainly a conversation we could have.
But really what we plan for is marketing that's based on that 3%.
Got it. Okay. I was gonna ask about Wax Pass holders. Just want to let the audience know, if you'd like to ask a question, feel free. We have about 10 minutes.
Go ahead.
Please, yeah. There's a mic right behind you.
Just with regards, we haven't touched upon it yet, your CPG kind of strategy, and how incented the franchisees are to sell products within your box. I think their margins are relatively low.
Yeah. So within that four-wall center, retail sales have historically been kind of 5%-10%. So by and large, we're much more heavily reliant on the services. And you're exactly right, the gross margins they're making for our core service offerings are higher than what they make on the retail product. Generally speaking, the way we price things to our network on the retail product line, if it costs us $5 in product costs, we sell it to the network in $10, they sell it to the guest for $20 or $21. That's kind of the general formula when you think about our cost profile. We see retail attachment as an opportunity. We ran in the back half of this year, this Buy More, Save More promotion, and we saw our guests resonate in this environment.
What we typically want to do, if we're going to run a retail promotion, is support our network. So we offered our network 10% case discount, trying to protect our four-wall margins while we ran that promotion. So, Andrea, I don't know if you want to expand on other, you know, retail promotions we will look at on an ongoing basis, but we do see an opportunity. While it's a relatively small part of the four-wall P&L, we think there's upside opportunity there. Our best franchise retailers are driving 15%-20% of their top line in terms of retail product sales.
... Back to Wax Pass holders. Just to clarify, the media that should help target non-customers, episodic, or is it also both to the Wax Pass? Could be a Wax Pass conversion.
Yeah. Media, media is targeting everybody. Certainly, there is a portion of it that we want to make sure we're spending to go out and look for new guests. But we're able to target existing guests, last guests, Wax Pass holders, and make sure that we're bringing them back in as well.
Yep. The frequency of the Wax Pass holder, is that, is that an indication of, of their own economic health? Meaning pushing out, spreading out visits, et cetera.
It is, but we're not seeing it. We're seeing them stick to their same frequency, so they're really not spreading. While they continue to make commitments to the Wax Pass, they're sticking to those routine, and for us, that really feels good that over 75% of our revenues are, to some degree, on autopilot. At least to date, that guest has not shown a change in her behavior. She's coming with the same frequency and spending a little bit more with us. Candidly, the greater spend is probably more from a price increase than necessarily adding a second or third service, but we're very pleased. That seems to be a very predictable, recurring revenue stream, and she hasn't changed her behavior in this environment.
Not sure there is a defined algorithmic comp growth. Heard mid-single digits at some point. Is there a timeframe in which the business should get back to there?
Yeah, I don't think we have that crystal ball, though. So, I mean, I think it's a very fair question. Throughout today's meetings, we were asked several times. You know, I'm very confident that second half of 2023 is not the new baseline for European Wax Center. I think we can control growth beyond the trends that we're seeing right now. What I don't have the crystal ball is to say how much of that we can deliver on our own versus how much of that we might need a little help from the macro. It is impacting a small part of our guest file. I hope, as we, you know, report year-end results in March, to give you a bit more clarity on how we're viewing things. But we feel really good about our business.
You know, one of the things, Simeon, we're doing to try to control our own destiny here a bit, beyond the new center openings, is lean in a little bit more for our mature centers. We're working on a pilot program with a group in the Midwest that's candidly been lagging tickets all year, and there's been very little development in this particular state. He's a great operator, and he's been historically a great operator, so we're leaning in a little bit more to say, "Hey, if we deployed our field trainers, spend a little bit more time in the center..." Our field business consultants give great business reviews, and they have been super helpful with this franchisee.
But we thought if we leaned in, supported a little bit more with in-center coaching with the center managers and the waxers, those are the absolute frontline with our guests. Might we see an impact, an improvement in these centers? And so encouraged by preliminary results of this pilot, but I, I firmly believe that, we have an opportunity to influence some upside versus the trends that we're seeing. But how much of that we need the economy to bounce back is kind of a TBD.
That would have been good to close on because it kind of rolled perfect. I do want to ask one more question, and then if the audience has any more. This spreading out future growth among franchisees of different sizes, does the size of franchisee correlate their ability to get financing? Meaning, does this environment preclude any of that expansion?
We haven't seen it yet. It's a very good question. Our large guys kind of have... The largest groups seem to have kind of their own network of folks they brought into the system that have probably financed them in other concepts previously. The smallest folks tend to have a local bank they continue to work with, so thus far, we really haven't seen this, you know, elevated interest rates or whatever we want to call this macro environment, negatively impact our franchisees' ability to get access to capital for those that want it.
Good. Any final-- Oh, please.
I'm trying to understand how the episodic customer works. Just a little more insight into the episodic customer. Are there periods of the year where they're more likely to come and not skip, relative to periods which are more discretionary in terms of, you know, they might come for sure in the spring, they might come for sure before a vacation, but back to school is more discretionary, less an indicator, or are all the periods, you know, equally important to that episodic customer?
Want to take any of them?
I would say that it's less about one season or another and more about the occasions, the events that are happening within their lives. So we don't overall, in our business, see the seasonality that many consumer companies do. But we do know that for a portion of our guests who are not coming as regularly, they're coming because they're going to a party or an event, or they're about to go on vacation, things like that. And so that's more of any unevenness that's driving that guest, as well as some amount of price sensitivity that we see more there than we do with what we understand to be our higher household income Wax Pass and routine guest.
On that note, thank you, David, Stacie, Andrea, appreciate you being here.
Thank you.
Good luck in the next fiscal year.