Nothing gets growth investors excited more than the idea of a disruptive, fast-moving business in a fragmented market. The Joint Corp (JYNT -1.55%), checks all these boxes and more.
The Joint is a national Chiropractic chain that both franchises locations and operates its own chiropractic clinics. The company has been executing a growth playbook that has helped it capture a growing slice of a large, fragmented pie.
What exactly is The Joint?
The Joint is a franchise company that specializes in chiropractic care. The company as we know it was formed back in 2010 when it was acquired from its predecessors by the current management team.
The Joint boasts a stellar business model and centers itself around being the most affording and most accessible business in the industry. In fact, the average price for a visit is 52% lower than the industry average. This pricing is backed by a private pay model, which means all payments are cash-based, and those without insurance can get care at the same low price.
The proof of The Joint’s success is in the pudding -- in its first decade of operations, the company managed to grow from 8 clinics up to a mind-blowing 579 clinics. Furthermore, the chart below highlights just how incredible The Joint’s market positioning is relative to its competitors.
Image Source: The Joint.
Franchising locations is a capital-light method of fueling growth. This unique approach has enabled the chain to scale up so quickly.
The power of the franchise model
The Joint’s franchise business functions with two key players, the first being franchisees. Franchisees can be entrepreneurial individuals or specialized businesses that focus on building franchise products. Either way, these are the physical builders and operators of the franchise clinics.
The second player is the regional developer. Regional developers pay the joint a signing fee to join the team and are required to open and supervise a minimum number of clinics. In return, they gain exclusive access to certain territories, are allowed to split the franchise singing fee with The Joint, and are entitled to a 3% royalty of gross sales from the clinics regional developers are responsible for. Regional developers are critical to rapid growth and are responsible for the vast majority (~80%) of franchise sales.
This ecosystem of regional developers and franchisees is a capital-light engine for the company’s growth. It creates a flywheel effect and allows for best practices that certain clinics may come across to be quickly transferred to the entire network.
Image Source: Getty Images.
What does the future hold?
Despite the company’s monumental clinic growth, the total addressable market (TAM) remains largely untapped. According to the management, there are over 1,800 potential locations in North America alone. As of June 30th, the company had 633 total clinics in operation, meaning that approximately two-thirds of the TAM remains unaddressed.
In addition to the tremendous franchise clinic opportunity, the company has also been developing corporate-owned clinics. These are locations either acquired or developed by the parent organization, with the main benefit being that net income flows entirely into the company’s coffers.
https://www.bamsec.com/filing/162828021004004?cik=1612630
As the company increases its operating cash flow, management will likely use that cash to grow these corporate-owned clinics, in addition to its main franchise operations.
Looking forward
The Joint has proven itself to be a franchise juggernaut, and it looks like it is just getting started. The company is well-managed as it has executed well on its growth strategy thus far. Furthermore, the business model of franchising chiropractic clinics is proven to be quite profitable. Finally, the company has an opportunity to more than double its store base in the coming years as it fills in geographies where it is currently under-represented. Putting this all together paints an attractive picture for growth-oriented investors.
