Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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FDD Talk Daily: Pro Forma Operating Statement for Low Volume Bar Method Exercise Studio

by Franchise Chatter on May 1, 2013

in Fitness Franchises, Franchise Earnings

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Highlights of Bar Method’s Item 19 Financial Performance Representations (2012 FDD) – Part 3

Expense Assumptions (for High, Medium, and Low Volume Bar Method Exercise Studios)

  • All examples assume a 3,000 square foot studio at a rent of $8,000 per month rising to a little more than $11,000 per month over 8 years, including triple net charges. In some markets, rent can be as low as $5,000 per month. In major urban markets, rent can be more than $15,000 per month.
  • Labor costs include both teachers and receptionists but do not include childcare workers, if needed. These examples make no allowance for owner’s compensation apart from the studio’s profit.
  • It is assumed that in the first year, a studio will offer approximately 130 classes a month and that the owner will teach about half of those classes. It is assumed that teachers will be employed to teach about 65 classes per month at a total cost of approximately $2,000 per month, including payroll taxes and benefits, and part-time receptionist staff will cost approximately $3,000 per month.
  • After 8 years, the studio should offer about 300 classes per month and average labor costs per class will increase to approximately $40 per class. The cost of reception staff will also increase as volume increases, as shown in the estimates below.
  • Labor costs in some areas, such as in major urban areas, will be higher while in other areas they may be lower.
  • Credit card fees are estimated at 3% of gross sales and include all incidental credit card processing charges. The estimates may be a little high.
  • Royalties are based on 5% of gross sales.
  • Utilities include the cost of electricity and telephones only. Some studios may have to pay for heating and cooling, and possibly water and sewer usage as well.
  • Workers compensation costs vary with state law.
  • Supplies include bathroom supplies, grooming supplies, cleaning supplies, office supplies, and towels and socks, if provided.
  • Miscellaneous expenses include such items as attorney’s fees and accountant’s fees, maintenance and equipment replacement costs, and local taxes and fees. No allowance has been made for any national or regional advertising association contributions since neither type of organization is in existence (as of the issuance date of Bar Method’s 2012 Franchise Disclosure Document).

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