Highlights of Farrell’s Extreme Bodyshaping’s Item 19 Financial Performance Representations (2013 FDD) – Part 2
Limitations of the Representations
- Your results are likely to differ from the results described, and for a number of reasons, these results should not be considered as the actual or probable results that your center will realize. For example:
- The franchisor’s affiliate, FUSMA, and its owners have operated Farrell’s Centers in the Des Moines, Iowa metropolitan area since 1989, while franchisees have operated Farrell’s Centers in other areas of Iowa and in other states only since 2007. Therefore, the Farrell’s brand is more established in Iowa than in some other states where Farrell’s Centers have been operating for a shorter period of time.
- The Farrell’s brand is still emerging in the markets in which most of the Covered Centers operate and the franchisor works with its franchisees on an ongoing basis to develop and implement effective marketing and advertising campaigns in these markets.
- If you open your Farrell’s Center in a new market, the Center will typically not benefit from an established trade identity in the market or from marketing activities that other Farrell’s Centers conduct. This might result in lower Service Gross Sales and higher advertising costs than Farrell’s Centers opening in an established market could expect.
- 100% of the Covered Centers’ franchisees were Course instructors at other Farrell’s Centers (whether company-owned or franchised) before they acquired their own franchises. These franchisees’ previous experience as Course instructors and/or franchise owners likely have provided them with practical knowledge in operating Farrell’s Centers that might have increased Service Gross Sales at their Covered Centers more quickly than new franchisees would.
- Farrell’s Center franchisees and their personnel typically engage heavily in local advertising, marketing, and promotional efforts to drive initial Course enrollment and brand awareness in new markets. A franchisee’s brand-building efforts in their local area are instrumental in establishing a core customer base who will convert from first-time students to ongoing Course membership.
- Most Farrell’s Centers also have experienced organic growth in Course sales through word-of-mouth referrals from existing students to new prospective members. Your efforts to promote Courses in your area, and your and your personnel’s relationships with existing students, will significantly impact future Course enrollment.
- Farrell’s Centers typically offer Courses at various times during the day (typically between 3 and 6 class times) to cater to their members’ wide-ranging schedules. Your willingness to run multiple Courses per day, and your flexibility in scheduling Course times outside of normal retail business hours, including in the early mornings (for example, before 7 a.m.) and later evenings (for example, after 7 p.m.) are critical to growing and sustaining Course enrollment.
Table 3 – Average Conversion Rate of First-Time Students to Ongoing Courses for Fiscal Year Ended December 31, 2012