Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Crunch Franchise Costs (2016 FDD)

by Franchise Chatter on June 28, 2015

in Fitness Franchises, Franchise Costs

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Crunch Fitness Photo by Crunchers

This post was updated on May 25, 2016 to reflect information from Crunch’s 2016 FDD (Item 7).

Detailed Estimates of Crunch Franchise Costs Based on Item 7 (Estimated Initial Investment) of Crunch’s 2016 Franchise Disclosure Document

  • Your site will have approximately 10,000 to 20,000 square feet.

1.  Initial Franchise Fee:  $25,000

  • If you sign an Area Development Agreement, you will pay a Development Fee of $25,000 for each Franchised Business you will be establishing under your development schedule, and you will not pay the Initial Franchise Fee when you sign the Franchise Agreement.
  • If you sign a Multi-Unit Development Agreement, you will pay a Multi-Unit Fee of $25,000 for each of the agreed upon number of Franchised Businesses you will be developing, and you will not pay the Initial Franchise Fee when you sign the Franchise Agreement.

2.  Training Expenses:  $1,000 to $5,000

  • These are estimated expenses for you (if you are an individual) or one of your Owners (if you are an entity) and your manager to attend 3 to 5 days of training, and includes travel-related items such as hotels, airlines, restaurants, and local transportation.

3.  Real Property, whether purchased or leased:  Amount Not Specified

  • The franchisor cannot estimate your real estate costs in a low-high range.
  • The approximate size of your property and building will be 15,000 to 25,000 square feet and its probable location would be within a strip mall or lifestyle center.
  • The franchisor estimates the cost per square foot per month to be anywhere from $10 to $20. (This figure does not include the cost of security deposits of one or two months’ rent which may be required by the Lessor).

4.  Lease Deposits:  $5,000 to $20,000

  • This is the franchisor’s best estimate of your lease deposits.

5.  Leasehold Improvements:  $150,000 to $1,400,000

  • This is the franchisor’s estimate of the costs you would incur to improve your property to make it suitable for a Crunch health club. You will need to build out the interior and exterior of the location to the franchise specifications.
  • This could cost as much as $15 to $40 per square foot.
  • $150,000 would be for a conversion health club and $800,000 for a new health club.

6.  Construction Consulting Fee:  $1,500

  • If you require a construction consultation, you will have to pay the franchisor a construction consulting fee of $1,500 either at the architectural stage or construction stage before opening.

7.  Deposits/Lease and Other Down Payments for Fitness Equipment, Fixtures, and Other Fixed Assets:  $35,000 to $185,000

  • You will need to lease or purchase fitness equipment and tanning beds through the franchisor. Generally, you will lease this equipment.
  • The estimates provided assume that you will be leasing the equipment and your initial down payments will be between $35,000 and $185,000.

8.  Opening Inventory:  $1,000 to $5,000

  • You will be required to purchase an opening inventory of t-shirts, drinks, and promotional items before opening the franchised unit for business.

9.  Site Selection Travel Expenses:  $500 to $3,000

  • Should you choose to utilize them, you will be assisted with site selection through the professional services of a real estate broker. There will generally be no fees incurred by you for their services, other than reimbursed expenses.
  • The cost estimates cover their travel-related expenses to view your potential sites.

10.  Security Deposits, Utility Deposits, Business Licenses, Bonding (if required), and Pre-Paid Expenses:  $3,000 to $20,000

  • You will need to acquire all the necessary permits, bond, utilities, merchant accounts, and licenses that are required to operate the Franchised Business legally and proficiently, and pay any security deposits that may be required.

11.  Professional Fees:  $5,000 to $25,000

  • You will need, in most cases, the assistance of legal counsel to review any important documents, an architect to plan out your health club, and potentially accountants to maintain your books.

12.  Signs:  $7,500 to $40,000

  • You will need to purchase exterior signs in order to maximize visibility of the facility for consumers.

13.  Office Equipment, Computer System, Furniture, Graphics Package, and Supplies:  $25,000 to $35,000

  • You will be required to purchase several computer systems, monitors, hardware, and office supplies in order to open your health club.

14.  Initial Advertising:  $15,000 to $45,000

  • Before opening your Franchised Business, the advertising you will need to conduct may include mailings, internet, billboards, radio, and TV.

15.  Insurance:  $5,000 to $20,000

  • You will be required to purchase the specified insurance coverage for your health club before operations begin.

16.  Additional Funds – 3 months of operations:  $25,000 to $300,000

  • The estimate given is the amount of additional funds, in excess of revenues, the franchisor estimates you will need to cover your operating expenses during the initial period of 3 months.
  • This estimate is based on Crunch’s directors’, officers’, and owners’ approximately 35 years of experience in the health club business.

17.  Totals:  $304,500 to $2,129,500

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