Structuring Health and Wellness Businesses for Scalable, Compliant Growth

For companies and investors in the fast-growing health and wellness sector, building a lasting business takes more than meeting consumer demand. In this Q&A, Loeb partner Matt Friedman explains how the right entity structure, regulatory strategy, investment trends and growth planning help wellness companies and investors scale with confidence.

Tell us about your practice and the types of matters you generally handle.

I advise private equity funds, independent sponsors, family offices, high net worth individuals and closely held companies on middle-market transactions, including acquisitions, divestitures, recapitalizations, minority investments, financings, joint ventures and commercial arrangements. I also serve as outside counsel to founder-led and closely held businesses, advising on corporate governance, commercial contracts, partnership arrangements, owner buyouts and succession planning across sectors including health and wellness, consumer products, manufacturing, financial services, and technology.

What are the key corporate considerations for companies entering or expanding in the health and wellness sector?

Companies entering or expanding in the health and wellness sector should start with a corporate structure that fits the services they offer, the markets they operate in and the way they plan to grow. Liability exposure, tax efficiency and regulatory requirements all matter, but the structure should ultimately help the business operate, scale and adapt without requiring costly changes later.

One common approach is to use a holding company with separate subsidiaries for different locations or business lines. This can help isolate liability in a sector where personal injury and regulatory exposure may be meaningful, while also creating cleaner units for future fundraising, strategic transactions or a potential sale.

For businesses offering medical or quasi-medical services (such as medical spas, IV therapy, hormone treatments or physical therapy), corporate practice of medicine rules may be a threshold issue. In many states, those rules affect whether a nonphysician entity can own or control a clinical practice. Companies in this area often need to consider a professional entity or management services organization structure early in the process.

The growth model should also be evaluated early. Company-owned locations preserve control and margin but require more capital and operational bandwidth. Franchising can support faster growth with lower capital expenditure, but it brings franchise disclosure and registration requirements, as well as less control over service quality and brand consistency. Many companies use a hybrid strategy, such as owning flagship locations while franchising in secondary markets. Area development agreements, strategic partnerships and joint ventures can also support expansion, but those arrangements require careful attention to governance, profit-sharing, intellectual property ownership, restrictive covenants and exit rights.

Finally, companies should map the regulatory environment at the formation stage. Depending on the services offered, that may include state health department licensure, HIPAA compliance if health information is collected, and FDA oversight for certain devices, supplements or therapies. Understanding those requirements early helps avoid building a model that later needs to be reworked.

How are investment trends—particularly in longevity and emerging wellness therapies—shaping the types of deals and corporate structures you’re seeing in the market?

The longevity and emerging wellness therapy space has attracted substantial venture capital and private equity interest, driven by favorable demographic trends and growing consumer demand. That interest is shaping not only the types of assets being pursued but also the transaction structures and risk-allocation terms that parties are negotiating.

Private equity sponsors are increasingly pursuing platform-and-rollup strategies in fragmented wellness subsectors, typically by acquiring an initial platform business and then adding smaller operators to consolidate market share and achieve economies of scale. Those rollups require careful attention to integration planning, earnout structures designed to retain founder-operators and the standardization of operations across acquired entities.

Joint ventures between strategic operators and financial sponsors are also prevalent, particularly where the operator contributes brand, intellectual property and operational expertise while the financial partner provides growth capital. These structures require detailed negotiation of governance rights, capital call obligations, distribution waterfalls and drag-along or tagalong provisions.

Risk allocation is especially important because many emerging therapies, including peptide treatments, psychedelic-assisted therapy and cryotherapy, can sit in regulatory gray areas. Investors are increasingly focused on robust regulatory-risk representations, indemnification provisions tied to compliance failures and material adverse change definitions that capture adverse regulatory developments. In some deals, parties may also use milestone-based funding tied to regulatory clearances or licensure achievements.

What unique challenges arise when launching or scaling brick-and-mortar wellness businesses, such as gyms or treatment centers, compared with more traditional corporate ventures?

Brick-and-mortar wellness businesses face a layer of operational and legal complexity that distinguishes them from asset-light or technology-driven ventures. The physical footprint of the business affects capital needs, regulatory planning, staffing, customer experience and the pace at which the company can expand.

Real estate is often the most capital-intensive and time-consuming element because wellness facilities may require specialized build-outs, such as plumbing for hydrotherapy, ventilation for saunas or reinforced flooring for heavy equipment. Those needs can increase tenant improvement costs and lengthen the timeline from lease execution to revenue generation. Lease negotiations should account for permitted use clauses, exclusivity provisions, co-tenancy requirements, and assignment or subletting rights that accommodate future expansion or exit.

Licensing and regulatory compliance also vary significantly by jurisdiction and service type. A multistate wellness brand may need to navigate state health department permits, professional licensing boards, controlled substance registrations for certain therapies, cosmetology or esthetics licenses, local zoning approvals, and varying employment and tax obligations. Each new market requires a fresh regulatory assessment, and the patchwork nature of state and local regulation can create meaningful compliance overhead. Those considerations make advance planning especially important before entering new markets.

There are also heightened operational complexities to consider:

• Staffing models must account for licensed professionals whose credentials may not transfer across state lines.
• Supply chain considerations, including medical-grade equipment, pharmaceuticals and proprietary consumables, add procurement and inventory management burdens.
• Multi-unit operators need centralized systems for scheduling, billing, credentialing and quality assurance while still maintaining enough local flexibility to comply with jurisdiction-specific requirements.

As the wellness sector continues to evolve, what should companies and investors prioritize to build a scalable and compliant business for long-term growth?

Companies and investors seeking durable, scalable platforms in the wellness sector should prioritize the legal, operational and governance infrastructure that allows the business to grow without creating avoidable compliance or execution risk. That foundation is especially important in a sector where consumer demand may move faster than the regulatory framework.

Several priorities are especially important for building a scalable and compliant platform, including:

1. Governance and organizational infrastructure. Companies should invest early in a professional board or advisory structure, clear decision-making authority, documented governance policies, independent oversight, conflict-of-interest safeguards and financial controls capable of withstanding diligence scrutiny in a future exit process.
2. Regulatory readiness and adaptability. The regulatory environment for wellness services continues to evolve, with states addressing areas such as telehealth, scope-of-practice expansion and novel therapies. Companies should build compliance infrastructure that can adapt to new requirements, including dedicated compliance personnel, regulatory monitoring processes and relationships with outside counsel in key jurisdictions. Proactive engagement with regulators, such as seeking advisory opinions or participating in rulemaking processes where appropriate, can also be valuable.
3. Operational infrastructure that supports replication. Scalability depends on the ability to repeat the operating model reliably across locations. That means investing in standardized operating procedures, technology platforms such as EHR or EMR systems, CRM, scheduling and analytics tools, training programs, and quality metrics, all aimed at reducing the marginal complexity of each new location.
4. Alignment with investor expectations. Companies should build reporting infrastructure that tracks the metrics investors increasingly evaluate, including unit economics, patient or member retention, lifetime value, and regulatory risk profile. They should also structure their corporate and financial arrangements to facilitate future capital raises or exit transactions, whether through M&A, recapitalization, or public offering. Maintaining clean capitalization tables, organized data rooms, audited financials, and clear corporate records well in advance of a transaction process can reduce friction and support value creation.
5. Intellectual property protection. Intellectual property should be addressed early, including trademark protection for brand names, trade dress for the consumer experience and, where applicable, patent protection for proprietary devices or formulations. Companies should also protect trade secrets through appropriate contractual protections with employees, contractors and partners.
6. Exit planning. Companies should structure with an eye toward exit even at the early stages by building a business that can operate independently of any single founder or employee.

Taken together, these priorities reflect the reality that long-term success in the health and wellness sector requires not only a compelling consumer offering but also disciplined corporate and legal foundations that can support growth without creating latent liabilities.