Franchise Costs: Detailed Estimates of Barre3 Franchise Costs (2014 FDD)

Detailed Estimates of Barre3 Franchise Costs Based on Item 7 (Estimated Initial Investment) of Barre3’s 2014 Franchise Disclosure Document

• The low and high ranges in the table are based on an average size Franchised Location, and does not include optional upgrades to equipment or facility design.

• The estimates provided assume that you will rent the Franchised Location from a third party landlord. It does not include costs associated with the acquisition of real estate if you decide to operate from a building you purchase.

1.  Initial Franchise Fee:  $30,000 to $40,000

• The Initial Franchise Fee for your first Studio is $40,000. Barre3 will discount its then-current Initial Franchise Fee for any additional Studios you purchase after your initial Studio franchise. The discounted fee is currently $30,000.

2.  Initial Marketing Fee:  $2,500

3.  Financing Fees:  $0 to $2,000

• Neither Barre3, nor its affiliate, offers any financing for your initial investment. Financing fees include amounts that may be payable for items like closing costs and SBA loans, financial broker fees, contingency amounts required by the SBA, and interim interest.

4.  Insurance:  $200 to $1,000

5.  Travel and Room and Board While Attending the Initial Training Program and Instructor Training Program:  $1,000 to $8,000

• Included in your Initial Franchise Fee, Barre3 provides (i) an initial Training Program for you or your Designated Owner, and approved operations manager (if applicable) and (ii) an Instructor Training Program for you or your Designated Owner, and up to six of your employees in the Portland, Oregon area, or at another location designated by Barre3.

• You must pay for airfare, lodging, ground transportation, salaries and benefits, and any other personal expenses attendees might incur while taking the training programs.

• Portions of the training programs may be provided via webinar.

6.  Lease, Utility, and Security Deposit:  $3,000 to $12,000

• The typical size of a Franchised Location is approximately 1,400 to 2,800 square feet. Most Studios will be located in a retail shopping center or on a street with high visibility, moderate pedestrian traffic, and easy parking or public transportation.

• Generally, you will be required to pay first and last month’s rent, plus a security deposit, at the time you sign the lease.

7.  Lawyers, Architects, Engineers, and Designers:  $8,500 to $16,000

• This estimate includes the cost related to professional (i) legal services you will need for the review of the Disclosure Document and its Exhibits, as well as entity formation and lease negotiation, and (ii) architectural, engineering, and design services for the development of your Franchised Location such as plans, permits, and zoning approvals.

8.  Leasehold Improvements:  $0 to $175,000

• This figure includes estimates related to demolition, concrete repair, insulation, doors and hardware, partition walls, acoustical ceilings, flooring, painting, installation of fixtures, cabinets, plumbing, HVAC, electrical, fire alarm, security system, decorating, signage, and similar costs.

• Some landlords will pay some or all of your tenant improvements as part of your lease negotiations.

9.  Building and Use Permits:  $100 to $500

• The estimated amount includes utility deposits, fees for city, state, and local business licenses, business entity organization expenses, and other prepaid expenses.

10.  Equipment:  $18,000 to $37,000

• This includes equipment necessary to begin operations of the Studio like the costs of all mats, FitBalls, weights, straps, office equipment, a computer, related supplies, a sound system, furniture, and fixtures. You are required to purchase a telephone system, copier/printer/fax/scan machine, computer hardware and software, headsets, amplifier, mixer, speakers, and wireless microphone system.

11.  Software:  $500 to $1,500

• You must subscribe to and use the MindBody software program, or other program that Barre3 designates, for the computer management operations of your Studio. You must also purchase routers with Broadband or DSL access to the Internet.

12.  Opening Inventory:  $500 to $1,100

• You are required to purchase a variety of Barre3-branded products, such as Barre3 fitness apparel, towels, books, mats, DVDs and CDs, and other products for sale through your studio from Barre3 and third party suppliers.

13.  Grand Opening Advertising:  $1,000 to $2,000

• You must spend between $1,000 and $2,000 on your grand opening event, which will take place at a time you choose that is between one month before and four months after you begin operations. This amount covers food, beverages, decorations, staff, marketing materials, and a disc jockey.

14.  Additional Funds for First 6 Months:  $5,000 to $35,000

• Additional Funds include additional operating expenses after the date you first begin operations during the first 6 months of operations. This amount includes estimated operating expenses during this time, including payroll costs (but not a draw or salary for the managing owner or for other owners of the franchise), less any revenue generated by your Studio.

• Barre3 recommends that you have at least an additional 6 months of Additional Funds.

15.  Total:  $69,600 to $342,600

• All figures are estimates only and are based on Barre3’s affiliate’s experiences and Barre3’s experience opening and franchising Studios. Barre3 cannot guarantee that you will not have additional expenses to start the Studio.

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