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Franchise Costs: Detailed Estimates of Koko FitClub Franchise Costs (2013 FDD)

by Franchise Chatter on March 27, 2014

in Fitness Franchises, Franchise Costs

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

1.  Initial Franchise Fee:  $39,000

  • The Initial Franchise Fee for a Koko FitClub is $39,000. If you enter into a Development Agreement, you must pay a Development Fee of $39,000 for the first Koko FitClub that you agree to develop and an additional $10,000 for each additional Koko FitClub that you agree to develop. The Development Fee will be credited against the Initial Franchise Fees due for each Koko FitClub.

2.  Real Estate:  $12,000

  • Koko FitClub of PhoenixThe franchisor anticipates that you will more likely lease a location for the Koko FitClub in a suburban shopping center or elsewhere. The figures in the chart are based on Koko’s estimate of the cost of your lease or sublease for the leasehold premises, assuming an average of 1,800 square feet of retail space.
  • The figures in the chart reflect an estimate for a one month security deposit and the first month’s rent. Depending on the market, the franchisor estimates that rentals will cost approximately $6,000 monthly for 1,800 square feet of retail space, including common area maintenance (CAM).
  • This assumption is based on a Koko FitClub market that charges a $79/month membership fee. Other markets may vary.
  • Some landlords may require additional security deposits or rental payments upon execution of a lease. Many locations require the tenant to pay charges in addition to rent, such as real estate taxes, and a percentage of utilities, maintenance, and insurance. Such additional charges would increase your rental costs.

3.  Renovation and Improvements to Real Estate:  $28,000

  • This estimate assumes your landlord will deliver your premises in a complete, “move-in” condition, meaning that all painting, carpeting, lighting, plumbing, and basic electrical wiring will be done according to Koko standards at the landlord’s expense. The franchisor expects that you may spend an additional $28,000 for other expenses not paid for you by your landlord.
  • If the landlord instead provides the space in “as is” condition, the franchisor expects that you may spend from $51,000 to $95,000 to renovate the space in accordance with the franchisor’s standards and specifications. Your landlord may be willing to rebate to you some or all of these expenses as “tenant improvements” or pay for the expenses at their own cost and agree to be reimbursed by you on a monthly payment schedule incorporated into your monthly rental rate.

4.  Store Furnishings, Interior Signs, and Decorative Items:  $19,147 (if purchased); $1,915 (if financed)

  • You must purchase branded fixtures from KFI (the franchisor’s affiliate). The estimate in the chart also includes the cost of shelving, decorative items, divider wall panels and frame, seating, wide-screen television, and interior and window signage.
  • You may also have to pay freight and installation costs and applicable sales taxes for these items.
  • If you choose to finance any or all of your store fixtures and furnishings, the franchisor assumes you will be required to pay your lending source a 10% down payment towards the total cost of the furnishings.

5.  Supplies:  $575

  • This estimate includes the costs of purchasing basic cleaning supplies and tools, and paper products that you will use at your Koko FitClub.

6.  Initial Equipment, Technology, and Computer Systems:  $133,960 (if purchased); $13,396 (if leased)

  • This estimate includes the cost to purchase the computer hardware and software required by the Franchise Agreement. The estimate also includes the cost to lease or purchase the fitness equipment for your Koko FitClub, which typically consists of 5 Koko Smartrainers, 3 treadmills with Koko SmartCardio electronics, 2 elliptical trainers with Koko SmartCardio electronics, one SmartStation and spare electronics, in addition to 1 Koko FitCheck body assessment system.
  • The franchisor estimates that, based on this amount of fitness equipment, the practical capacity of your Koko FitClub would be approximately 425 members.
  • Additionally, the franchisor has included in this estimate the cost of a retail radio player and an optional electronic door access and video surveillance system, including installation and 150 door access FOBs.
  • The franchisor assumes you will be required to pay your lending source a 10% down payment towards the total cost of the equipment. Your actual costs may be higher (20%) or lower (first payment only) depending on the terms you negotiate with your lender based on your unique financial situation.

7.  Initial Inventory of Koko Keys:  $3,990

  • You must purchase from KFI an initial inventory of Koko Keys that you will sell to your members for use with the fitness equipment at your Koko FitClub. The estimate in the chart includes the cost of 200 Koko Keys.

8.  Initial Inventory of Member Starter Kits:  $1,960

  • You must purchase from the franchisor’s approved vendor an initial inventory of Member Starter Kits that you will sell to your members as a purchase requirement upon joining your Koko FitClub. The Starter Kit consists of, but is not limited to, a branded zippered pouch, door access key fob, headphones for Koko Cardio, and Koko FitClub Member Playbook. The estimate in the chart includes the cost of 200 of these listed items.

9.  Exterior Signage:  $7,000

  • The estimates in the chart reflect the cost of the exterior signage required under Koko’s standards and specifications.

10.  Travel Expenses While Training:  $2,500

  • The figure for training in the chart includes moderately priced lodging accommodations, food costs, and travel expenses for two persons attending Koko’s Owner Orientation and FitCoach Academy at the franchisor’s office in Massachusetts or at another location that it designates.

11.  CPR Training and Heart Defibrillator:  $1,750

  • The estimate in the chart includes the cost for 1-2 people to attend a CPR course offered by a local vendor. The estimate also includes the cost of a required heart defibrillator, a steel wall cabinet for the defibrillator, and a wall sign.

12.  Initial Launch Marketing and Advertising:  $40,000

  • You are required to invest a minimum of $40,000 per club during your initial start-up phase, defined as the three month period preceding your opening through the first four months of commencing operations of your Koko FitClub.

13.  Prepaid Insurance Premiums:  $3,000

  • You must purchase and maintain the insurance coverage required by the Franchise Agreement, including comprehensive general liability insurance, property and casualty insurance, business interruption insurance, employment practices liability insurance, and statutory workers’ compensation insurance. The franchisor estimates the annual insurance premium to be $3,000.

14.  Permits, Licenses, Club Layout, Initial Architectural Plans:  $5,500

  • The figures in the chart include the estimated cost of building and zoning permits, and business operating licenses. Also included in this category are the costs of preparing basic building plans or drawings to modify the club’s layout to accommodate your site’s unique space requirements.

15.  Prepaid Utilities/Expenses:  $700

  • Your landlord or local utility company may require that you prepay your utilities for a certain period in the form of a security deposit.  The estimate in the chart includes the cost of utilities for one month.

16.  Legal and Accounting Services:  $2,000

  • You may wish to have an attorney, accountant, or tax advisor assist in your review of the Disclosure Document and the Franchise Agreement. The estimate includes the cost for these services but not the cost of incorporating the Franchise or creating any other legal entity.

17.  Additional Funds (3 month period):  $40,000

  • The estimate in the chart includes rent and utilities for the first three months of operation, initial inventory of equipment, products, accessories, and spare parts, and other miscellaneous expenses offset by revenues generated during those months. No payroll or owner’s draw amounts are included and the franchisor assumes you will work full-time at your Koko FitClub.
  • The franchisor cannot guarantee that you will not have additional expenses during or beyond the three month period.
  • The figures shown above do not include the fees that are based upon the number of unique Koko FitClub’s Registered Koko Smartraining System Users, such as the advertising fund fees and Smartraining Software Services Fee.

18.  Total:  $341,082 (without financing or leasing); $203,286 (with financing and leasing and 10% down payment)

  • The franchisor relied on the experience of the Koko FitClub owned by KFI, and on the experience of its franchisees, in formulating these estimates.

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