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Franchise Costs: Detailed Estimates of Orangetheory Fitness Franchise Costs (2017 FDD)

by Franchise Chatter on December 22, 2014

in Fitness Franchises, Franchise Costs

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This post was updated on June 5, 2017 to reflect information from Orangetheory Fitness’s 2017 FDD (Item 7).

Detailed Estimates of Orangetheory Fitness Franchise Costs Based on Item 7 (Estimated Initial Investment) of Orangetheory Fitness’s 2017 Franchise Disclosure Document

  • Orangetheory Fitness does not offer direct or indirect financing for your initial investment for an Orangetheory Fitness Studio.

1.  Initial Fee:  $42,500 to $49,500

  • Orangetheory Fitness will refund 50% of the initial fee if it terminates the Franchise Agreement (for your first franchise) based on your failure to satisfactorily complete the initial training program.
  • You and your owners must sign a general release in order to receive a refund. Otherwise, the initial franchise fee is not refundable under any circumstances.

2.  Travel and Living Expenses During Training (for all attendees):  $1,200 to $4,800

  • Orangetheory Fitness provides initial training at no charge to all individual owners that it requires to sign your Franchise Agreement.
  • If there is room and all of the signatories on your Franchise Agreement have been trained, Orangetheory Fitness may allow up to 2 additional persons, such as a studio manager and/or your head trainer, to attend training for portions of the initial training program related to Studio management.
  • Costs vary depending on the distance traveled and the type of lodging. This estimate does not include the cost of transportation.

3.  Deposit for Leasehold:  $12,000 to $30,000

4.  3 Months’ Rent:  $18,000 to $45,000

  • If you do not already own suitable commercial space, the premises must be purchased or leased. Orangetheory Fitness anticipates that most franchisees will lease the premises.
  • Orangetheory Fitness requires a commercial space of 2,600 to 3,600 square feet of interior space. The cost of leasing or purchasing space will vary, depending on location and other market factors, and cannot be accurately projected by Orangetheory Fitness; as a result, the costs shown above may be low or high.
  • The initial investment assumes you will rent. If you purchase the premises, your initial investment will increase dramatically.

5.  Leasehold Improvements and Construction Costs:  $200,000 to $560,000

  • You will need to adapt Orangetheory’s prototype designs and plans for the building in which you will locate your Studio in accordance with state and local building codes. Construction costs vary depending upon numerous factors, including the size and configuration of the premises and the cost of materials and labor for construction.
  • The cost shown does not include the cost to purchase the building or site for the Studio.
  • The range shown includes costs for end-cap, free-standing, and in-line Studios. The cost of leasehold improvements depends on the condition and size of the site, the local cost of contract work, and the location of the Studio.
  • The high estimated figures include remodeling walls, ceilings, floors, and other construction, including electrical, plumbing, HVAC, and carpentry work.
  • Depending on the lease terms, your landlord might cover some of these costs. In Orangetheory’s experience, the landlord will typically offer free rent for an initial period. This is not included in the estimate.
  • This estimate also takes into account estimate for permitting.

6.  Reception Desk, Retail Display Wall, and All Interior Logo Signage:  $11,500 to $14,500

7.  Graphics:  $4,000 to $5,000

8.  Fitness Equipment (including installation) and OT Beat Start-Up System:  $93,108 to $111,913

  • This includes selectorized equipment, free weights, cardiovascular equipment, and installation; and the proprietary OT Beat System equipment and start-up kit, which includes pods and straps for presales of memberships for 200 members.
  • Additional pod sets are $25 each and straps are $10 each, and these must be ordered for all members.
  • This estimate does not include monthly Technology Fees that must be paid to OTF Distribution for the OT Beat System.

9.  3 Months Technology – Software Licensing Fee:  $1,197 to $2,247

10.  Fitness Equipment Maintenance:  $900 to $1,500

  • An equipment maintenance contract is required prior to opening your Studio and evidence of such must be provided to Orangetheory Fitness. The current cost of the maintenance contract is $300 to $750 per month. This fee is charged by a third party provider and is subject to change. Neither Orangetheory Fitness nor its affiliates currently provide any equipment maintenance services.
  • The additional estimated $300 to $750 per month, is to accommodate forecasted non-warranty covered equipment repairs, purchasing/refreshing ancillary equipment package items, etc.

11.  Initial Inventory of Orangetheory Fitness Retail Merchandise:  $4,000 to $6,000

  • This estimate includes an initial mandatory start-up kit of inventory of branded merchandise, which includes items such as shirts, hats, shorts, gym bags, water bottles, towels, and related items as Orangetheory Fitness determines.
  • You should not assume that you can purchase inventory or other supplies on credit.

12.  AED and First Aid Equipment/Training:  $1,000 to $5,000

  • This estimate includes the cost of one automated external defibrillator (“AED”) and training for CPR and AEDs, which every Studio must have.

13.  Exterior Signage:  $5,000 to $7,000

14.  Audio/Video System, Other Equipment, and Supplies:  $20,500 to $25,500

  • This includes all audio equipment for your sound system (including music licensing) and video equipment for your Studio, along with an initial supply of printed materials, office supplies, and other office equipment (but excluding the computer system).

15.  Computer System:  $14,000 to $18,000

  • Presently, Orangetheory Fitness requires you to install and maintain 3 desktop computers capable of running the MindBody and web-based business management software that it requires and that operates on a Windows XP or higher operating system.
  • The computers must have a high speed modem that permits you to connect to the Internet and to transmit and receive email.
  • You must sublicense the MBO software from Orangetheory Fitness. This software is used for both membership management and reporting purposes.
  • You must install 3 to 6 television monitors for the OT Beat System and Studio lobby (number of monitors depends on the size of your Studio) and must also install 2 Apple TVs (or other brand or technology that Orangetheory Fitness prescribes) for the weight room. These monitors are used in connection with the OT Beat System and to display workout videos, advertisements, and other information approved or prescribed by Orangetheory Fitness from time to time.
  • This estimate also includes the cost for a laptop or iPad, which is mandatory and used to run your presale program and various events throughout the year.

16.  Pre-Sale and Grand Opening Advertising:  $30,000 to $40,000

  • You must conduct a pre-sale/grand opening program the franchisor approves, with a minimum cost of $30,000 to $40,000, as determined by Orangetheory Fitness.

17.  Pre-Sales Coordinator Program:  $0 to $3,900

  • Orangetheory Fitness strongly recommends, especially for your initial franchise unit, that you participate in its Presales Coordinator Program, which is designed to assist you in marketing your Orangetheory Studio in the community to create brand awareness and drive traffic, leads, and membership sales during the presale/grand opening period.
  • Orangetheory Fitness is currently the only approved provider of these presale assistance and training services.
  • The program includes 12 weeks of presales assistance, training, monitoring, and ongoing coaching, and 5 days of on-site presales activity, training, and action plan implementation.
  • The fees include a fixed cost of $3,900 (includes all travel costs), depending on where your Studio is located.
  • The low end ($0) of this estimate assumes that you do not participate in this program.

18.  Business Licenses/Miscellaneous Opening Costs:  $1,000 to $4,000

  • This estimate is subject to any state and local requirements for licenses and permits.

19.  Insurance:  $3,500 to $5,000

  • Insurance must be obtained to meet the minimum requirements established by the System Standards.

20.  Other Initial Fees:  $0 to $5,500

  • At your reasonable request, Orangetheory Fitness may, in its sole discretion and subject to the availability of its personnel, furnish you with additional site selection and/or development guidance and assistance which is beyond the nature and scope of the services it is then providing to new Orangetheory Fitness franchisees as part of the Initial Franchise Fee.
  • Orangetheory Fitness estimates that the fee will range from $2,500 to $5,500. The low end ($0) of this estimate assumes that you do not request additional assistance.

21.  Additional Funds – 3 Months:  $25,000 to $50,000

  • These amounts are minimum recommended levels to cover operating expenses, including employee salaries, for three months. Orangetheory Fitness cannot guarantee that this amount is sufficient. You may require additional working capital if your sales are low or if your fixed costs are high.

22.  Total Estimated Initial Investment (excluding real estate purchase costs):  $488,405 to $994,360

  • The amounts shown are estimates only and may vary for many reasons.
  • The estimated initial investments shown are based primarily on the costs Orantheory’s affiliates have incurred in constructing and operating similar Studios, encompassing approximately 2,600 to 3,600 square feet. Your Studio may be larger or smaller, and your actual costs will vary depending on the size and location of your Studio.
  • The total actual cost to construct and operate each Studio owned by Orangetheory’s affiliates has varied from the estimated costs shown above, and no particular Studio has experienced the low or the high estimate for every category shown above.

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