Franchise Costs 2013: Detailed Estimates of Kosama Complete Body Transformation Franchise Costs (2013 FDD)

Detailed Estimates of Kosama Franchise Costs Based on Item 7 (Estimated Initial Investment) of Kosama’s 2013 Franchise Disclosure Document

• All payments are non-refundable unless otherwise permitted by a third party supplier.

• The expenses below are estimates of your initial investment for one Club prior to commencing operations and for the first three months thereafter. The franchisor cannot guarantee that you will not have additional expenses starting the business.

• If you develop 3 Clubs under the franchisor’s Market Accelerator Program, you will incur these expenses for each of the 3 Clubs.

1.  Initial Franchise Fee:  $27,500

• If you acquire three franchises under the Market Accelerator Program, the initial franchise fee for all three franchises will be $75,000, representing a total, combined discount of $7,500.

• If you qualify for the VetFran discount, your initial franchise fee will be $22,500 (instead of $27,500) for a single franchise, or $70,000 (instead of $75,000) for three franchises under the Market Accelerator Program.

2.  Kosama Start-Up Kit:  $21,610 to $31,110

3.  Mirrors:  $370 to $765

4.  Exterior Signage:  $765 to $2,290

5.  Flooring and Installation:  $3,050 to $4,125

• The ranges in the chart for the Start-Up Kit, mirrors, exterior signage, and flooring assume you will lease the recommended equipment for a standard sized Club (2,500 to 3,000 square feet) and are based on the lease costs before opening and the first three months (including a 20% down payment, the non-financeable initial inventory, and the equivalent of four monthly payments).

• If you have a larger Club or choose to purchase additional equipment, your costs may be higher.

• If you elect to purchase rather than lease your equipment, the initial investment for the following items will increase to:

• Start-Up Kit:  $60,500 to $70,000
• Mirrors:  $1,200 to $2,500
• Exterior Signage:  $2,500 to $7,500
• Flooring:  $10,000 to $13,500

6.  Leasehold Improvements (not including flooring):  $0 to $100,000

• The costs of construction and leasehold improvements depend upon the size and condition of the Club premises, the nature and extent of required leasehold improvements, the local cost of contract work, and the location of your Club.

• In some cases, your landlord may agree to pay for some or all of the leasehold improvements as part of your lease negotiations.

• The flooring (including installation) must be installed by the approved vendor.

7.  Rent:  $0 to $18,000

• The figures in the chart represent estimated three months’ rent, exclusive of monthly operating expenses. The rental expense may vary widely based on geographic location, size of the Club, local rental rates, and other factors.

• The franchisor recommends leasing  2,500 to 3,000 square feet of commercial space.

• The low end of the range assumes you negotiate 3 months’ free rent with your landlord.

8.  Lease and Utility Security Deposits:  $1,500 to $6,000

• Landlords may require a security deposit, and utility companies may require that you place a deposit prior to installing telephone, gas, electricity, and related utility services.

• A typical utility security deposit is one month’s expense. A typical lease deposit will be an amount equal to one month’s rent.

• These deposits may be refundable according to the agreements made with the utility companies and landlord.

9.  Insurance:  $750 to $900

• This estimate includes premium for three months of the franchisor’s SAPP insurance plan (includes property, crime, general liability, and hired and owned auto written by Mt. Hawley Insurance Company; and commercial umbrella liability written Great American E&S Company). If you need additional insurance for your Club (for example, state workers’ compensation or a surety bond), you may have additional costs.

• A surety bond may range from $100 to $500, depending on the state. Workers’ compensation coverage may range from $450 to $1,000, but may be more depending on the number of employees and your state requirements.

10.  Training Expenses:  $500 to $2,000

• There is no separate training fee payable to the franchisor for the initial franchisee training program for up to two people, as it is included in the initial franchise fee.

• You must make arrangements and pay the expenses for you and your General Manager to attend the training program, including transportation, lodging, meals, and wages.

• The high figure represents the estimated cost of airfare for travel to and from the training locale, lodging expenses (assuming double occupancy for 3 nights), and dining expenses for two people attending four days of training.

• The low figure assumes the two individuals will drive from home to the training locale in the same vehicle, and includes fuel costs, lodging expenses (assuming double occupancy for 3 nights), and dining expenses.

11.  Professional Fees:  $1,000 to $4,000

• The franchisor recommends you hire your own attorney to help you evaluate the franchise offering, to identify the laws and regulations that may apply to your Club, to help you set up a business entity, to review and negotiate your lease, to assist you in adapting the Membership Agreement to laws and regulations in your state or locality, and for whatever other purpose you deem appropriate.

12.  Licenses:  $200 to $2,500

• The figure in the chart is an estimate of various licensing fees you may pay in your first three months of operation, which may include licensing, software licenses, state health club registrations, and local business licenses.

13.  Additional Funds (3-month period):  $10,000 to $30,000

• The figures in the chart represent the estimated amount of working capital you will need to cover other initial operating expenses for a period of 3 months. Expenses not included are hourly labor costs and rent (beyond the rent estimate noted in no. 7 above). Some states may have staffing requirements that may increase this number significantly.

14.  Total:  $67,245 to $229,190