Letter of Intent Template for Acquiring a Spa & Wellness Center

Parties and Business Identification

Clearly identify the buyer entity (individual, LLC, or acquisition vehicle), the seller, and the legal name and operating name of the spa or wellness center being acquired. Specify whether the transaction is structured as an asset purchase or stock purchase, which is critical for spas where asset purchases allow buyers to avoid inheriting undisclosed liabilities related to worker classification disputes or licensing violations.

💡 Insist on an asset purchase structure in nearly all spa acquisitions to avoid inheriting liabilities tied to independent contractor misclassification, unpaid payroll taxes on tip income, or prior licensing violations. If the seller insists on a stock sale for tax reasons, require comprehensive representations and warranties and consider a representations and warranties insurance policy.

Purchase Price and Valuation Basis

State the proposed purchase price and explain the valuation methodology. For spa and wellness centers, purchase price is typically expressed as a multiple of Seller's Discretionary Earnings (SDE), ranging from 2.5x to 4.5x depending on membership penetration, staff stability, and lease quality. Reference the specific SDE figure you are basing the offer on and note that it is subject to confirmation during due diligence.

💡 Anchor your multiple to verified recurring membership revenue, not gross revenue. A spa generating $1.5M in revenue with 60% coming from active memberships commands a materially higher multiple than one relying on walk-in and Groupon traffic. Push sellers to provide a membership cohort report before signing the LOI. If the owner performs a significant share of revenue-generating services personally, apply a key-person discount of 0.25x–0.75x to the multiple and be explicit about it in the LOI.

Deal Structure and Financing

Outline how the purchase price will be funded, including SBA 7(a) loan proceeds, buyer equity injection, seller carry-back note, and any earnout component. Spa acquisitions frequently use a combination of SBA financing with a seller note to bridge the gap between appraised value and purchase price, and earnouts tied to 12-month post-close membership retention.

💡 SBA lenders require sellers to subordinate their carry-back note to the SBA loan, which many spa sellers do not anticipate. Surface this early to avoid delays at closing. Structure the earnout specifically around active membership retention count rather than total revenue, since sellers can temporarily inflate revenue through promotions. Cap the earnout period at 12 months to maintain buyer motivation and operational control. For seller notes, negotiate a 90-day payment holiday post-close to provide working capital runway during the transition period.

Membership Revenue and Recurring Revenue Verification

Define the specific membership metrics the buyer will verify during due diligence and establish that the purchase price is conditioned on those metrics meeting represented levels. This section is unique to spa acquisitions and is often the most consequential due diligence finding that triggers purchase price renegotiation.

💡 Request raw membership data exports directly from the spa's booking and billing software (Mindbody, Booker, Vagaro, or equivalent) rather than summary spreadsheets prepared by the seller. Look for members who are paused, frozen, or technically active but not visiting — these represent churn risk that will materialize post-close. Churn rates above 5% per month are a red flag in this industry. Negotiate the 90% MRR threshold as a hard condition rather than a price adjustment trigger if you are using SBA financing, since lenders will scrutinize recurring revenue stability.

Staff, Licensing, and Key Person Risk

Address the buyer's right to review all staff employment agreements, independent contractor arrangements, practitioner licenses, and certifications. Identify key revenue-generating staff and the seller's obligations to facilitate retention. This section should also address the owner's transition role post-close.

💡 Identify the top three revenue-generating practitioners by name before signing the LOI and make their willingness to remain post-close a condition of proceeding. If any key therapist accounts for more than 15% of revenue, require a written retention agreement or employment contract as a closing condition. For the owner's transition, negotiate a 6–12 month consulting arrangement with a defined role — ideally client relationship introductions and staff mentorship — with compensation structured to avoid triggering SBA affiliation rules. Independent contractor arrangements for practitioners are a significant audit and liability risk; flag these during due diligence.

Lease Assignment and Real Estate Terms

Confirm the buyer's right to review and negotiate the assignment of the existing lease or negotiate a new lease directly with the landlord. Lease quality is a primary value driver for spa businesses, and unfavorable lease terms or short remaining terms are among the most common deal-killers in this sector.

💡 Require a minimum of 5 years of remaining lease term (including exercisable options) as a condition of closing — SBA lenders will require this as well. Review the permitted use clause carefully to ensure it covers all services the spa currently offers, including any medical or aesthetics treatments if relevant. CAM charges in wellness center locations can be substantial and are frequently underreported in seller financials. Request 24 months of actual CAM charge statements. If the lease has a co-tenancy clause tied to anchor tenants in a retail center, assess the risk of that anchor vacating.

Due Diligence Period and Access

Define the length of the due diligence period, the access the buyer will have to records, staff, and the physical premises, and the process for submitting due diligence requests. For spa businesses, due diligence should cover financial records, membership data, staff files, equipment, licensing, and lease documents.

💡 45–60 days is standard for spa acquisitions of this size; push for 60 days if the business has a significant membership base or medical spa services requiring deeper regulatory review. Negotiate access to the booking software data directly rather than relying on seller-prepared reports. Schedule the physical equipment inspection early in the due diligence period — deferred capex on massage tables, facial equipment, and HVAC systems can be substantial and should inform your price. Keep staff interviews confidential and schedule them thoughtfully to avoid triggering premature resignation anxiety.

Exclusivity and No-Shop Provision

Establish that the seller will not solicit, entertain, or accept competing offers during the due diligence and negotiation period. Exclusivity is standard in LOIs of this type and protects the buyer's investment of time and due diligence costs.

💡 60 days of exclusivity is reasonable and aligns with the due diligence period. Sellers who resist exclusivity entirely are a red flag — it typically means they are running a competitive process or have concerns about the business that they expect will surface. If the seller insists on a shorter exclusivity window, negotiate a right of first refusal on any competing offer received after the exclusivity period expires. Do not waive exclusivity in exchange for price reductions; the protection is worth more than a modest discount.

Confidentiality

Confirm that both parties are bound by a confidentiality agreement, either as a standalone NDA executed prior to the LOI or incorporated directly into the LOI. Staff awareness of a pending sale is one of the most significant operational risks in spa acquisitions and must be managed carefully.

💡 Staff confidentiality is paramount in spa transactions. A therapist who learns the business is for sale may immediately begin soliciting their client book to a competitor or planning to open independently. Establish a clear mutual agreement on when and how staff will be notified — typically at or immediately prior to closing, with a retention bonus structure ready to deploy. Coordinate the landlord notification carefully as well, since a lease assignment request will alert the landlord to the sale and they may use it as leverage to renegotiate terms.

Conditions to Closing

List the specific conditions that must be satisfied before the transaction can close, including SBA loan approval, satisfactory due diligence, lease assignment, key staff retention, and regulatory approvals. This section creates a clear checklist that both parties can track throughout the transaction process.

💡 Do not allow sellers to characterize conditions to closing as mere formalities. Each condition represents a real risk that has caused spa transactions to fail. Prioritize the lease assignment condition — landlords in desirable wellness retail locations have significant leverage and sometimes use the assignment process to demand personal guarantees from buyers or rent increases. Engage your SBA lender early, ideally before LOI execution, so that loan approval is not a surprise delay at the back end of the process.

Binding and Non-Binding Provisions

Clearly distinguish which sections of the LOI are legally binding on both parties and which are non-binding expressions of intent. This is a standard but frequently misunderstood element of LOIs that can create liability if not drafted precisely.

💡 Sellers sometimes argue that the purchase price in an LOI is binding. It is not, and it should not be — due diligence will almost always produce findings that warrant price adjustment. Be explicit about which provisions are binding and which are not. The confidentiality and exclusivity provisions must be binding to have any protective value. Governing law should match the state in which the business operates to avoid jurisdictional complications.