Considering an Orangetheory Fitness Franchise? Don’t Overlook These 23 Important Franchise Fees

Updated August 21, 2018.

If you are considering an Orangetheory Fitness franchise, don’t get blindsided by these 23 important franchise fees (from the initial franchise fee, to the royalty fee, to 21 other fees found in Items 5 and 6 of Orangetheory’s 2018 FDD).

1.  Initial Franchise Fee:  $54,950 to $59,950

• You must pay Orangetheory an initial franchise fee equal to $59,950 for a single franchise (the “Initial Franchise Fee”), when you sign the Franchise Agreement. If this is your second or a subsequent franchise for a Studio, the franchisor will reduce the Initial Franchise Fee to $54,950.

• The Initial Franchise Fee is not refundable.

• Orangetheory charges the Initial Franchise Fee uniformly to all franchisees. It has no intention, now or in the future, of reducing the Initial Franchise Fee for any prospective franchisee, although it reserves the right to do so in its sole discretion, on a case-by-case basis, or if it runs a franchise marketing promotion.

• The Initial Franchise Fees paid to Orangetheory during the fiscal year ended December 31, 2017 ranged from $22,500 to $49,500.

2.  Royalty Fee:  8% of Gross Sales

• When payable:  Weekly.

• Orangetheory will debit your bank account for the Royalty due.

• You are responsible for the payment of Royalties to Orangetheory even if your minimum performance levels have not been met.

• Orangetheory requires you to meet the following minimum performance standards during the term of your Franchise Agreement (the “Performance Standards”):

• Gross Sales (non-cumulative)
• Year 1:  $300,000
• Year 2:  $350,000
• Year 3 and thereafter:  $400,000

• Year 1 begins on the date on which the Studio first opens for member workouts of any kind and ends on the day before the first anniversary of such date. Each subsequent year runs for the same 12-month period thereafter.

• If you do not achieve the Performance Standards during any year, then (i) you must pay to Orangetheory the difference between the Royalties actually paid and the amount of Royalties you would have paid if you had met the Performance Standards, within 10 days of Orangetheory’s invoice; and (ii) develop and implement a business plan that Orangetheory must approve in writing to improve performance.

• If you do not achieve the Performance Standards in two consecutive years, Orangetheory may, among and in addition to other possible remedies, (a) terminate your exclusive rights to the Territory; (b) reduce the scope of the geographic area comprising the Territory in which you will have exclusive rights; or (c) terminate the Franchise Agreement.

• “Gross Sales” means the total gross revenue from the provision of all products and services sold or performed in, at, from, or away from the Studio, or through or by means of the Studio’s business, whether from cash, check, credit card, debit card, barter or exchange, or other credit transactions, and irrespective of collection, and including:

• (a) membership fees, initiation fees, enrollment fees, processing fees, paid-in-full dues, renewal fees, corporate/third-party payor fees, monthly dues, and any fees or revenue generated and derived during any presales;

• (b) fees and charges for optional services;

• (c) fees charged to non-members using the Studio’s services;

• (d) revenue derived from merchandise and product sales and other Core Business Operations and any Ancillary Business Operations that you or your affiliates perform; and

• (e) payments (for example, rent and license fees) that contractors make to you relating directly or indirectly to their performance of Ancillary Business Operations.

• The following amounts are deducted from “Gross Sales”:

• (i) sales taxes, use taxes, and other similar taxes added to the sales price and collected from the customer and paid to the appropriate taxing authority; and

• (ii) any bona fide refunds and credits that are actually provided to customers.

3.  Brand Fund Contributions:  currently 2% of Gross Sales; may be increased up to 3% of Gross Sales

• When payable:  Monthly.

• Orangetheory may change the Brand Fund Contribution from time to time.

• Orangetheory will debit your bank account for the Brand Fund contributions due and contribute this amount to the Brand Fund.

4.  Cooperative Advertising:  as determined by Cooperative

• When payable:  As determined by Cooperative.

• Cooperatives will be comprised of all franchised and affiliate-owned Studios located in the designated geographic area covered by each Cooperative. Orangetheory may collect funds on behalf of Cooperatives that it manages.

• If you are part of and contribute to a Cooperative, Orangetheory will credit dollar for dollar the amount you contribute to a Cooperative toward your required local advertising spend.

5.  Successor Franchise Fees:  50% of then-current Initial Franchise Fee for new franchisees

• When payable:  Before renewal.

• Payable when, and if, you renew your Franchise Agreement. There are other conditions to renew.

6.  Transfer/Assignment Fee:  50% of then-current Initial Franchise Fee for new franchisees for a Control Transfer. 25% of the then-current Initial Franchise Fee for all other transfers (other than transfers to an Entity formed to operate the Studio).

• When payable:  Before consummation of the transfer or sale.

• Payable when, and if, you transfer or sell your franchise. There are other conditions to transfer.

• A “Control Transfer” means any transfer of (i) any interest in the Franchise Agreement; (ii) the Studio or all or substantially all of its assets; (iii) a 20% or greater interest in your Entity: or (iv) an ownership interest that results in a change in control over your Entity.

7.  Relocation Fee:  equal to Orangetheory’s costs and expenses reviewing your proposed site

• When payable:  On demand.

• You must reimburse Orangetheory for its out-of-pocket costs and expenses promptly upon receipt of its invoice.

• These amounts are due and payable only if you relocate your Studio, subject to Orangetheory’s approval.

8.  Interest and Late Fees:  lesser of 18% per annum or the highest rate permitted by law, plus $100 per week or portion of a week that the payment or report is overdue

• When payable:  On demand.

• Payable on all overdue amounts and reports.

• Interest begins from the date of non-payment or underpayment.

9.  Audit Expenses Fee:  the cost of the audit, including any charges of independent accountants, travel expenses, and per diem personnel charges

• When payable:  On demand.

• If you understate any payment owed to Orangetheory by more than 2%, you must reimburse it for its actual costs incurred in conducting the audit, including attorneys’ fees, accountants’ fees, travel expenses, and compensation of its employees.

• These fees will not exceed Orangetheory’s actual costs.

10.  Additional Initial Training:  reasonable fee, currently $1,000 per person per session

• When payable:  On demand.

• Orangetheory provides initial training for all owners who sign the Franchise Agreement at no charge. Should space permit, it may allow you to bring up to 2 additional persons for training, normally a studio manager and your head trainer, on an abbreviated basis.

• Orangetheory will train up to three trainees at no charge, but may charge you a fee for all additional replacement or repeat trainees.

• You are responsible for travel and living expenses incurred during training.

11.  Studio Launch Training:  reasonable fee; currently, $1,000 per person per session (for additional, replacement, or repeat trainees)

• When payable:  On demand.

• Orangetheory provides training related to fitness programs (“Studio Launch Training”) at no charge for up to four fitness coaches attending the same initial program, but may charge this fee for all additional, replacement, or repeat trainees participating in Studio Launch Training.

12.  Refresher Training Fees:  reasonable fee; currently, $250 per day per person trained

• When payable:  On demand.

• Orangetheory periodically may require you (or your Managing Owner) and/or, at its option, the Studio’s studio manager to attend and complete to its satisfaction any supplemental or refresher training programs it chooses to provide.

13.  Conference Fees:  reasonable registration fees; varies by program

• When payable:  On demand.

• Orangetheory may require you (or your Managing Owner), your lead trainer, and/or your Studio manager to attend various conferences.

• Currently, Orangetheory requires attendance at its Annual Convention (which it expects will be less than $1,000 per person in 2018) and Annual Training Summit (which it expects will be less than $500 per person in 2018).

• You are responsible for all travel and living expenses incurred by you and your personnel for attendance at any conferences.

14.  On-Site Evaluation Fees:  Orangetheory’s costs and expenses in connection with the on-site evaluation

• When payable:  On demand.

• Payable only if Orangetheory determines that on-site evaluations are or become excessive. In that case, it may require you to reimburse it for its costs and expenses in relation to each evaluation, including the cost of travel, meals, and lodging for its personnel.

15.  Insurance Premiums:  amount of unpaid premiums, plus a reasonable administrative fee

• When payable:  On demand.

• Payable only if you fail to maintain required insurance coverage and Orangetheory elects to obtain coverage for you.

16.  Product Purchases:  varies

• You must buy products that (i) meet Orangetheory’s standards and specifications and (ii) are purchased from suppliers designated or approved by Orangetheory.

• Orangetheory reserves the right to designate itself or its affiliates as the exclusive supplier for certain products. If it does so, then you must purchase them from it.

17.  Technology Fee:  currently, approximately $399 to $749 per month, plus a $575 MBO Software setup fee

• When payable:  As invoiced.

• Currently, this fee includes access to the Required Software that Orangetheory prescribes and requires from time to time for use in the operation of Studios.

• This fee is paid one month in advance and payments will commence upon the opening of your MBO software account for membership presales for your Studio.

• Orangetheory may change this fee and the included products and services from time to time.

18.  OT Beat Fees:  approximately $149 to $449 per month (currently, $149 per month)

• When payable:  As invoiced.

• You must purchase the OT Beat™ System from Orangetheory’s affiliate upon opening your Studio and pay a monthly technology fee to Orangetheory and/or its affiliate for the related software.

• OT Beat Fees may increase and additional technology fees may be incurred from time to time.

19.  Non-Compliance Fee:  up to $1,000 per notice of violation

• When payable:  10 days after notice of violation.

• Orangetheory may assess a non-compliance for violations of the Franchise Agreement and/or the Manuals. It reserves all other rights and remedies.

20.  Product/Supplier Approval Costs:  reasonable cost of inspection or testing, plus actual cost of laboratory fees, professional fees, and travel and living expenses of its personnel

• When payable:  When billed.

• Orangetheory may require you to pay it or an independent laboratory for the cost of inspection or testing if you desire to purchase or lease items to be used in the Studio from sources Orangetheory has not previously approved.

21.  Management Fee:  a fee that Orangetheory specifies, up to 5% of Gross Sales, plus its actual costs and expenses

• When payable:  On demand.

• If you are in default of the Franchise Agreement, fail to maintain the Studio in accordance with Orangetheory’s standards, or fail to have a trained manager on staff, Orangetheory may send in its personnel to manage the Studio until the default is cured or you are able to meet its standards.

• If Orangetheory manages your Facility, after a death or disability, the fee shall be 3% of Gross Sales, plus its actual costs and expenses.

22.  Indemnification:  will vary under circumstances

• When payable:  On demand.

• You must indemnify Orangetheory and its affiliated parties when certain of your actions result in loss to it under the Agreements.

23.  Costs and Attorneys’ Fees:  will vary under circumstances

• When payable:  On demand.

• You will reimburse Orangetheory for all costs in enforcing obligations if it prevails.

If you are looking for information on the estimated initial investment for an Orangetheory Fitness franchise, check out this post:   Franchise Costs:  Detailed Estimates of Orangetheory Fitness Franchise Costs