Considering a CycleBar Franchise? Don’t Overlook These 27 Important Franchise Fees

This post was updated on August 18, 2017 to reflect information from CycleBar’s 2017 FDD.

If you are considering a CycleBar franchise, don’t get blindsided by these 27 important franchise fees (from the initial franchise fee, to the royalty fee, to 25 other fees found in Items 5 and 6 of CycleBar’s 2017 FDD).

1.  Franchise Fee:  $30,000 to $49,500

• The initial franchise fee (the “Franchise Fee”) for a single Studio is $49,500, and is due upon execution of the Franchise Agreement.

• If CycleBar determines that you are financially and operationally qualified to develop multiple Studios, it may offer you the opportunity to enter into a Development Agreement, in which you will commit to develop a certain number of Studios that you and CycleBar determine to be appropriate.

• If you enter into a Development Agreement, the Franchise Fee will vary based on the number of Studios that you commit to develop. If you commit to develop between three and five Studios, the Franchise Fee will be $41,666.67 per Studio. If you commit to develop between six and nine Studios, the Franchise Fee will be $35,000 per Studio. If you commit to develop ten or more Studios, the Franchise Fee will be $30,000 per Studio.

• If you are an honorably discharged veteran of the United States military that purchases a Studio through the VetFran program, CycleBar will discount your Franchise Fee for your first Studio by $1,500.

• If you enter into a Development Agreement, you must pay CycleBar a development fee equal to the sum of the Franchise Fees due for each Studio that you agree to develop (the “Development Fee”).

• The Development Fee will range from $125,000 to $300,000 if you commit to develop between three to 10 Studios. The low range is based on a commitment to develop three Studios (in which case the Franchise Fee under each Franchise Agreement would be $41,666.67 per Studio) and the high range is based on a commitment to develop 10 Studios (in which case the Franchise Fee under each Franchise Agreement would be $30,000 per Studio).

• The Development Fee will be credited towards the initial Franchise Fee for each Studio developed pursuant to the Development Agreement.

2.  Training Fee:  $10,000

• In addition to the Franchise Fee, you must pay CycleBar an initial training fee of $15,000 (the “Training Fee”) upon execution of the Franchise Agreement for the cost of providing its initial training program to you, your Operating Principal, and your Key Manager (“Required Trainees”).

• The Training Fee includes the cost of up to three trainees attending a single session. You are responsible for the travel and living expenses of your trainees and for training fees incurred by subsequent trainees, replacement trainees, or trainees that retake the program.

• If you enter into a Development Agreement, you must pay CycleBar the Training Fee for each Studio that you develop pursuant to the Development Agreement at the time each Franchise Agreement is signed.

• The Franchise Fee, Development Fee, and Training Fee are not refundable under any circumstances.

• Except as described above, the Franchise Fee, Development Fee, and Training Fee are uniform for all franchisees and must be paid in a lump sum.

3.  Royalty Fees:  the greater of (i) 7% of your Gross Revenue for the preceding week or (ii) $250 (subject to increase annually based on a change to the CPI)

• When payable:  Currently due weekly within five business days after the end of each calendar week.

• Gross Revenue means all revenue that you receive or otherwise derive from operating the Studio, whether from cash, check, credit or debit card, gift card or gift certificate, or other credit transactions, and regardless of collection or when you actually provide the products or services in exchange for the revenue.

• If you receive any proceeds from any business interruption insurance applicable to loss of revenue at the Studio, there shall be added to Gross Revenue an amount equal to the imputed gross revenue that the insurer used to calculate those proceeds.

• Gross Revenue does not include (i) promotional allowances or rebates paid to you in connection with your purchase of products or supplies, (ii) any bona fide returns and credits that are actually provided to customers, and (iii) any sales or other taxes that you collect from customers and pay directly to the appropriate taxing authority.

• You may not deduct payment provider fees (i.e., bank or credit card company fees and gift card vendor fees) from your Gross Revenue calculation.

• Your first Royalty Fee payment is due in the first full week after the date the Studio opens and shall be paid based on all Gross Revenue accrued prior to the opening date and during your first full or partial week of operations.

4.  Marketing Fee:  up to 2% of Gross Revenue; currently, 0% of your Gross Revenue

• When payable:  Currently due weekly within five business days after the end of each calendar week.

• CycleBar may create a Marketing Fund and require you to contribute the Marketing Fee.

5.  Local Marketing Spending Requirement:  a minimum of $500 per month

• When payable:  Payable by the end of each month.

• In addition to your Marketing Fee, beginning in the first full month after the date the Studio opens, you must spend a minimum of $500 per month on local advertising and promotional activities, which shall be payable directly to third party vendors, which may include CycleBar’s affiliate J3T.

• If you fail to pay the required amount in any month, CycleBar may require you to pay it the shortfall as an additional Marketing Fee or to pay it the shortfall for it to spend on local marketing for your Studio.

6.  Technology Fee:   currently, $900 per month, but subject to change annually upon written notice to you

• When payable:  Currently due weekly within five business days after the end of each calendar month. First month will be assessed pro rata from the date on which your Certificate of Occupancy is issued.

• The Technology Fee currently includes fees related to your access to and usage of CycleStats®, CycleBeats™, CycleBar’s reservation system, its intranet, any mobile applications it develops, and the System Website. CycleBar may add, delete, or otherwise modify the products and services that are included in the Technology Fee.

• There is no cap on the amount the Technology Fee may be increased.

7.  Successor Fee:  $10,000

• When payable:  Upon execution of successor franchise agreement.

8.  Transfer Fee:  $10,000 for any transfer resulting in a change of control; $2,500 plus CycleBar’s administrative costs and expenses for non-control transfers and transfers to entities for the convenience of ownership

• When payable:  $3,000 deposit due with written notice of proposed transfer; balance due at closing.

• No Transfer Fee is due for transfers upon death or incapacity.

9.  Late Fee and Interest:  18% per annum or maximum interest rate allowed by law (whichever is less) from due date to date of payment, plus $100 for each week that a payment is paid after the due date for the payment specified

• When payable:  When amount owed becomes past due.

• Required whenever a payment to CycleBar is made after its due date.

10.  Opening Deadline Extension Fee:  $2,500 for each month (or portion of a month) for which the Opening Deadline is extended

• When payable:  Upon CycleBar granting an extension.

• Payable if you request CycleBar’s approval to open your Studio more than 270 days after the effective date of the Franchise Agreement (the “Opening Deadline”) and CycleBar approves your request.

• CycleBar may require you to execute a general release as a condition for CycleBar approving such an extension.

11.  Relocation Fee:  $2,500

• When payable:  Upon demand.

• Payable if you relocate your Studio from the Site to a new location.

12. Initial Training Fee for Additional or Replacement Trainees:  currently, $1,000 per trainee (subject to change without limitation by written notice to you)

• When payable:  Within 10 days of receipt of an invoice.

• CycleBar will provide initial training in the System to three trainees as part of the Training Fee.

• CycleBar reserves the right to charge a reasonable fee for training (i) more than three trainees, even if they attend the same training session, (ii) persons who are repeating the course or replacing a person who did not pass, and (iii) subsequent Operating Principals, Key Managers, or employees who attend the course.

13.  Optional Training Programs:  varies based on program

• When payable:  Within 10 days of receipt of an invoice.

• CycleBar may charge you a reasonable fee for optional training programs that it may provide.

14.  In-Person Consulting Services:  currently, $400 per employee or agent for each full or partial day, plus their travel and living expenses

• When payable:  Within 10 days of receipt of an invoice.

• Payable if CycleBar provides requested consulting services in person at a place other than its offices.

•  CycleBar may change this fee without limitation from time to time upon written notice to you.

15.  Temporary Key Manager:  currently, $400 per employee or agent for each full or partial day, plus their travel and living expenses plus CycleBar’s actual costs and expenses

• When payable:  Within 10 days of receipt of an invoice.

• Payable if CycleBar provides a Key Manager to work at your Studio, after the departure of your previous manager, until a new Key Manager is hired and trained.

16.  Temporary CycleStar Instructor:  currently, $400 per CycleStar instructor for each full or partial day, plus their travel and living expenses

• When payable:  Within 10 days of receipt of an invoice.

• Payable if CycleBar provides a temporary CycleStar instructor to teach your classes.

17.  Temporary Management:  3% of the Studio’s Gross Revenue during the period of management, plus any direct out-of-pocket costs and expenses

• When payable:  Within 10 days of receipt of an invoice.

• Payable if CycleBar exercises its right to manage your Studio after a default.

18.  Conference Fee:  reasonable registration fee

• When payable:  Prior to attending the conference.

• CycleBar will charge a reasonable registration fee for you and your employees who attend any conferences or meetings that it hosts, the amount of which may vary from conference to conference based on the costs and expenses CycleBar expects to incur, the vendor contributions it expects to collect, and the number of franchisees it expects to attend.

• You are responsible for the travel and living expenses of you and your employees.

19.  Product, Service, Supplier, and Service Provider Review:  CycleBar’s reasonable cost of the inspection and its actual cost of testing the proposed product or evaluating the proposed service or service provider, including personnel and travel costs

• When payable:  Upon demand.

• Payable if you wish to offer products or use any supplies, equipment, or services that CycleBar has not approved, or wish to purchase from a supplier or service provider that CycleBar has not approved, whether or not it approves the item, service, supplier, or service provider.

20.  Insurance:  cost of the premium plus a reasonable fee for CycleBar’s services in procuring the insurance

• When payable:  Upon demand.

• Payable only if you fail to maintain the minimum insurance CycleBar requires and it chooses to procure the required insurance for you.

21.  Grand Opening Advertising:  a minimum of $2,000 for grand opening advertising and promotion

• When payable:  Between the four weeks prior to opening the Studio and the four weeks after opening the Studio.

• In connection with the opening of the Studio, you must submit a grand opening plan to CycleBar for its approval. It has the right to modify your grand opening plan, in its sole discretion, and may require you to use a public relations firm to assist with your grand opening.

22.  Mystery Shopper Program:  a reasonable fee as defined in the Manuals

• When payable:  Upon demand.

• CycleBar has the right to establish a mystery shopper type program and to set reasonable fees associated with such program.

• Details of any program and fees will be included in the Manuals.

23.  Audit:  CycleBar’s costs and expenses, including costs for an independent accountant and attorneys’ fees and related travel and living expenses

• When payable:  Within 10 days of demand.

• Payable if audit or review shows an understatement of Gross Sales for the audited or reviewed period of 2% or more.

24.  Inspection:  CycleBar’s reasonable expenses incurred in inspecting your business (itself, through its employees, Area Representatives, or agents), including travel and living expenses, wages, and other expenses for its employees, Area Representatives, or agents

• When payable:  Upon demand.

• Payable if inspection is necessitated by your repeated or continuing failure to comply with any provision of the Franchise Agreement.

25.  Remedial Expenses:  CycleBar’s reasonable expenses incurred in correcting your operational deficiencies

• When payable:  Upon demand.

• Payable if CycleBar corrects deficiencies that it has identified during a Site inspection and that you failed to correct within a reasonable time after notice from CycleBar.

26.  Indemnification:  amount of CycleBar’s liabilities, fines, losses, damages, costs, and expenses (including reasonable attorneys’ fees)

• When payable:  Upon demand.

• Payable if CycleBar incurs losses due to your breach of the Franchise Agreement or any other action or inaction by you or any other person relating to your Studio.

27.  Enforcement Expenses:  CycleBar’s reasonable cost of de-identifying your Studio

• When payable:  Upon demand.

• Payable if your Franchise Agreement expires or is terminated, you fail to de-identify your Studio, and CycleBar take steps to do so.

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

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