Spa West, Inc.

By H. Grousbeck, Andrea Higuera
2002 | Case No. E132

This case begins by providing an overview of the founding and building of Spa West, Inc. In 1998, Christina Clifford, a Stanford business school graduate with years of experience, returned to her hometown of Seattle, Washington and started to develop the Spa West concept. She envisioned building the “Starbucks of the day spa industry” or a national chain of retail Spa West stores for the mass market that would provide basic spa services in a low-keyed, easy-to-understand, and easy-to-use environment. In 1999, Christina opened the first Spa West retail store, and it was an instant success. Soon thereafter, she opened two new stores in the Seattle area. By June 2001, she was ready to develop Spa West outside of Seattle, but to do so, she needed to raise additional funding and to expand her executive team. After recounting Spa West’s early days, the case focuses on two situations that Christina faced as she prepared to expand Spa West. In the first situation, Christina is approached by a leveraged buyout firm (LBO) that offers her $20 million in exchange for a majority stake in Spa West. Christina decides to accept the offer, but as the negotiations progress, Christina starts to have some reservations. The situation ends when Christina receives a phone call from one of the partners who tells her that as part of the deal, the firm would like to replace her in about one year. At this point, Christina has to make a decision – she is not ready to give up control over the future of the company, but she needs the money. In the second situation, the case explains Christina’s efforts to grow her executive team. She hires a new CFO/COO and a new chief marketing officer, and after doing so, her right-hand person starts to feel extremely threatened. She confronts Christina and asks for more money and a new title. Christina decides to give her both, but questions this person’s ability to scale with the organization and is left wondering is she has made the right decision and/or what she should do moving forward.

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