European Wax Center (EWCZ) Q3 2025: Adjusted EBITDA Margin Expands 400bps as Cost Discipline Offsets Franchise Closures

November 12, 2025 | By EarningsIQ Research

European Wax Center’s third quarter showcased significant margin expansion, disciplined cost controls, and operational recalibration amid ongoing franchise network rationalization. Management reaffirmed full-year guidance and signaled confidence in a 2026 return to positive net center growth, but new guest acquisition remains a notable challenge as the brand pivots marketing and operational strategies. Investors should watch for the impact of refined marketing, improved franchisee engagement, and new brand positioning on guest traffic and unit economics as the company transitions toward growth in 2026.

Summary

• Margin Expansion Signals Cost Rigor: Adjusted EBITDA margin widened sharply as management prioritized profitability levers.
• Franchise Network Rationalization Continues: Center closures narrowed but new guest acquisition growth remains elusive.
• 2026 Growth Hinges on Marketing and Brand Overhaul: Full-year guidance reaffirmed, but sustainable growth depends on execution of new strategies.

Performance Analysis

European Wax Center delivered a quarter defined by disciplined cost management and margin expansion, even as system-wide sales contracted modestly due to ongoing franchise network optimization. The company reported system-wide sales of $238.2 million, with same-store sales essentially flat, reflecting a stable but unaccelerated guest base. Total revenue declined slightly, primarily due to lower wholesale product and retail contributions as a percentage of sales.

Adjusted EBITDA grew nearly 10 percent year-over-year, with margin expanding by 400 basis points to 37.2 percent, driven by a combination of higher royalty and marketing fee mix, product margin improvements, and a meaningful reduction in SG&A expenses. The closure count for the quarter was lower than anticipated, with six net closures versus the expected 15 to 16, reflecting both timing shifts and early traction from operational initiatives. The company ended the quarter with 1,053 centers, down 1 percent year-over-year, and maintained a healthy cash position and undrawn revolver, supporting continued investment in transformation efforts.

• SG&A and Advertising Cuts Drive Profitability: Operating expenses declined as management delayed spending and optimized resource allocation, boosting short-term margins.
• Franchisee Engagement and Data Investments: Enhanced reporting and direct franchisee support aimed to improve guest frequency and local execution, laying groundwork for future growth.
• System-Wide Sales Impacted by Closures: Modest sales contraction was attributable to ongoing culling of underperforming units, with management prioritizing network health over near-term expansion.

While the underlying business remains stable, the absence of meaningful new guest growth and the reliance on cost levers for earnings expansion highlight the importance of successful execution of upcoming marketing and brand initiatives.

Executive Commentary

Strategic Positioning

1. Guest Frequency and Engagement as Growth Lever

Management is doubling down on increasing visit frequency among existing guests, leveraging new data analytics and direct franchisee reporting to identify and act on controllable drivers. The company improved contactability from 38 percent to 60 percent of the guest base, enabling more targeted campaigns and personalized outreach. The WAC Pass, a recurring membership program, remains a stable engagement anchor, but the greatest opportunity lies in converting low-frequency visitors into higher-frequency routines.

2. New Guest Acquisition and Brand Revitalization

New guest growth remains the largest challenge, with management citing the need for improved data, marketing tactics, and brand positioning. The overhaul of the influencer strategy and partnership with a new agency yielded a 75 percent improvement in campaign efficiency, while National Eyebrow Day activations drove a 53 percent lift in unique website visitors. The company is also working with a new brand agency to better connect with high-value audiences, with major initiatives set to scale in 2026.

3. Franchisee Profitability and Network Health

Operational excellence at the unit level is a top priority, as the company increases in-center coaching, training, and reporting to drive four-wall profitability. Network rationalization continues, with closures focused on chronically underperforming, low-volume units. Management expects to return to positive net center growth by the end of 2026, as the development pipeline rebuilds and new openings ramp above pre-pandemic levels.

4. Disciplined Capital Allocation and Balance Sheet Stability

The franchise model’s cash generation and conservative leverage provide strategic flexibility, supporting continued investment in brand, technology, and operational initiatives. The company’s whole business securitization structure and undrawn revolver add further stability in a dynamic macro environment.

Key Considerations

This quarter’s results reflect a business in transition: cost discipline is masking top-line sluggishness, while multi-year transformation initiatives are only beginning to take hold. The balance between near-term margin gains and long-term growth investments remains delicate as the company prepares for a return to net expansion in 2026.

Key Considerations:

• Marketing Engine Rebuild: Early signs of improved efficiency from influencer and referral programs, but new guest acquisition remains below target.
• Franchisee Alignment and Support: Direct engagement and improved reporting are fostering better local execution, but network health is still being stabilized through closures.
• Center Economics and Lease Expirations: Closures are concentrated in persistently low-volume units, with lease expiration timing a key determinant of exit pacing.
• Brand Positioning and Audience Targeting: New agency partnerships and foundational brand work are expected to drive high-value guest growth in 2026.

Risks

The most acute risk remains the lack of momentum in new guest acquisition, which, if not reversed by the 2026 marketing and brand relaunch, could undermine sustainable traffic growth. Regional softness persists in key urban markets such as New York, Philadelphia, and DC, and the pace of center closures and openings remains sensitive to franchisee economics and real estate dynamics. Execution missteps in scaling new marketing strategies or delays in franchisee buy-in could prolong top-line stagnation even as cost levers are maximized.

Forward Outlook

For Q4 2025, European Wax Center guided to:

• System-wide sales of $940 to $950 million for the full year
• Same-store sales flat to up 1 percent for the full year
• Adjusted EBITDA of $69 to $71 million

For full-year 2025, management reaffirmed guidance:

• Revenue of $205 to $209 million
• Adjusted net income of $31 to $33 million
• Net center closures of 23 to 28, with closures concentrated in the first half of 2026 before returning to net positive growth by year-end

Management highlighted:

• Continued cost discipline and operational focus to maintain margin expansion
• Anticipated improvement in guest acquisition and engagement as new marketing and brand initiatives scale in 2026

Takeaways

European Wax Center’s Q3 2025 results underscore a business in the midst of a multi-year operational and marketing transformation, with margin gains outpacing top-line momentum. Strategic groundwork in data, franchisee support, and brand positioning is being laid for a return to growth, but execution risk remains high as the company transitions from cost-driven stabilization to guest-driven expansion.

• Profitability Outpaces Growth: Margin expansion and cost controls are driving earnings, but sustainable growth will require a rebound in guest acquisition and frequency.
• Franchise Network Health is Improving: Rationalization and targeted support are reducing closure risk, but the development pipeline must deliver in 2026 for positive net growth.
• 2026 Will Be a Proving Year: Investors should monitor early traction from new marketing, brand, and operational initiatives as the company seeks to convert stability into scalable growth.

Conclusion

European Wax Center exits Q3 2025 with enhanced profitability and operational discipline, but the true test will come as it seeks to reignite guest acquisition and restore net center growth in 2026. The franchise model’s cash generation and management’s strategic recalibration offer a solid foundation, but execution on new initiatives will determine the long-term trajectory.

Industry Read-Through

The waxing and beauty franchise sector is experiencing a period of consolidation, with network health and franchisee economics taking precedence over rapid unit expansion. Cost discipline and data-driven marketing are emerging as critical levers for both established and challenger brands. Operators with robust analytics, franchisee alignment, and compelling brand positioning are best positioned to weather macro headwinds and capitalize on shifting consumer engagement patterns. The sector’s evolution toward fewer, higher-performing units may serve as a template for other retail and service franchise models navigating similar post-pandemic recalibrations.

EWCZ Consumer Discretionary Personal Services Franchise Brand Transformation Marketing Unit Economics