Updated August 31, 2020.
If you are considering a CycleBar franchise, don’t get blindsided by these 28 important franchise fees (from the initial franchise fee, to the royalty fee, to 26 other fees found in Items 5 and 6 of CycleBar’s 2020 FDD).
1. Initial Franchise Fee: $60,000
- You must pay to CycleBar a lump sum initial franchise fee of $60,000 (the “Initial Franchise Fee”) to establish a single Studio under a Franchise Agreement (whether a start-up or conversion).
- The Initial Franchise Fee is due upon the signing of the Franchise Agreement. The Initial Franchise Fee shall be fully earned by CycleBar upon payment and is not refundable, in whole or in part, under any circumstance.
2. Initial FFE Package: $56,000
- You must purchase an initial package of furniture, fixtures, and equipment that is designed to provide you certain of the primary items that you will need in connection with outfitting, equipping, and otherwise building out your Studio (the “Initial FFE Package”), and includes the cost of shipping and installation.
- As of the Issue Date of the current Disclosure Document, the Initial FFE Package costs $56,000 and includes fitness equipment (other than the exercise bikes that are leased), as well as certain other furniture, fixtures, and other equipment to be used in the Studio (which may include cabinetry, retail displays, lockers, benches, lighting systems, telephones, and office furniture).
- Currently, you must purchase all or most of the Initial FFE Package from CycleBar, but it reserves the right to designate another supplier that it approves or designates.
3. Retail Inventory Package: $12,000
- You must also pay CycleBar $12,000 to purchase a retail inventory package that will include an initial stock of certain apparel and merchandise that you are authorized and required to offer for sale at your Studio, including t-shirts, yoga pants, and related accessories (the “Retail Inventory Package”).
4. Studio Management System: $26,000
- You must pay CycleBar approximately $26,000 for certain studio management technology, software, and equipment that are necessary to operate the Studio using CycleBar’s System (collectively, the “Studio Management System”), which will include the typical costs of acquiring the hardware, software, technology licenses, other equipment, and network connections that CycleBar specifies in the Manuals necessary to operate the CycleBeats music system and the CycleStats technology platform, along with certain tablet computers, displays, payment processing equipment, brackets and fixtures, and other related hardware and software.
- You must purchase these components from CycleBar and must execute any related software licenses required by designated vendors.
5. Pre-Opening Instructor Training: currently, $5,000 per Master Instructor, plus travel and related expenses
- CycleBar estimates that you will cover the Bootcamp Tuition Fee that CycleBar charges to provide Instructor Bootcamp to your initial instructor(s) (currently, $5,000 per Master Instructor, plus travel and related expenses) so that your initial instructor(s) can become Authorized Instructors that offer and provide the Approved Services at your Franchised Business.
- Prior to opening, CycleBar estimates it will send 1 Master Instructor to your Studio, and you will pay CycleBar that $5,000 Tuition Fee prior to training being conducted.
6. Technology Fee: currently, $900 per month
- You will be required to commence paying CycleBar its then-current Technology Fee monthly, which is currently $900/month, in the calendar month preceding the contemplated or required opening date of your Franchised Studio. As such, CycleBar’s standard franchise offering assumes and expects that you will pay CycleBar your first Technology Fee amounting to $900 prior to the opening of your Franchised Business.
- The fee is deemed fully earned upon payment and it is nonrefundable under any circumstances. CycleBar expects to impose this fee uniformly on new System franchisees that are awarded any franchise rights in connection with the Disclosure Document.
7. Bike Equipment Package: varies
- CycleBar’s standard franchise offering assumes and expects that you will lease the 45 to 55 exercise bikes and certain associated equipment (the “Bike Equipment Package”) from CycleBar’s approved supplier for such leasing services, in which case: (i) you will pay that lessor directly for the right to lease and possess that package of exercise bikes necessary to operate the Studio; and (ii) no disclosure is required in this Item.
- If, however, you determine to outright purchase the Bike Equipment Package, CycleBar may require that you purchase that package from it or its affiliate (with the approximate cost being $115,000 that would be due prior to opening and non-refundable upon payment).
- Rather than purchase this package outright, CycleBar’s standard offering assumes and expects that you will lease the equipment comprising this package to increase or facilitate cash flow during early operations.
8. Development Agreement: depends on the number of Franchised Businesses CycleBar grants you the right to open within the Development Area
- If CycleBar awards you the right to develop 3 or more Franchised Businesses within a given Development Area, you must pay CycleBar a one-time Development Fee upon execution of your Development Agreement.
- Your Development Fee will depend on the number of Franchised Businesses CycleBar grants you the right to open within the Development Area, and is calculated as follows: (i) $45,000 per Franchised Business if you agree to open and operate between three and five Franchised Businesses; (ii) $40,000 per Franchised Business if you agree to open and operate between six and nine Franchised Businesses; and (iii) $35,000 per Franchised Business if you agree to open and operate 10 or more Franchised Businesses.
- You will be required to enter into CycleBar’s then-current form of Franchise Agreement for each Franchised Business you wish to open under your Development Agreement, but you will not be required to pay any additional Initial Franchise Fee at the time you execute each of these Franchise Agreements.
- If you enter into a Development Agreement, you must execute CycleBar’s current form of Franchise Agreement for the first Studio CycleBar grants you the right to open within your Development Area concurrently with the Development Agreement.
9. Royalty: the greater of (i) 7% of your Gross Sales of your franchised Studio, or (ii) $1,000 per month (subject to increase annually based on a change to the CPI)
- Due Date: As determined by CycleBar’s Approved Supplier for payment processing provider.
10. Brand Development Fund (or “Fund”) Contributions: currently, your contribution to the Fund shall be an amount equal to 2% of the Gross Sales of your franchised Studio (your “Fund Contribution”)
- Due Date: Payable weekly at the same time and in the same manner as the Royalty.
- CycleBar has established a brand development Fund for purposes of marketing, promoting, and otherwise developing the CycleBar brand, System, Approved Services, and Proprietary Marks generally, as CycleBar determines appropriate in its discretion.
11. Renewal Fee: $10,000
- Due Date: At time of renewal.
- You must renovate and reimage the Studio at your expense at the time of Renewal to conform to CycleBar’s then-current standards and image.
12. Relocation Fee: $5,000
- Due Date: At time of relocation request.
- You will not be permitted to relocate your Studio without CycleBar’s prior written approval, which may be withheld in its discretion.
- Generally, CycleBar does not approve requests to relocate your Studio after a site selection has been made and you have opened for business unless (a) it is due to extreme or unusual events beyond your control, and (b) you are not in default of your Franchise Agreement.
13. Authorized Instructor Video Review Fee: then-current fee. Currently, $50 per hour, and each prospective Authorized Instructor will require approximately 30 hours of video review.
- Due Date: At time of request.
- A prospective Subsequent Trainer may become an Authorized Instructor without completing Bootcamp if he or she provides CycleBar with certain videos demonstrating his or her ability to provide the Approved Services in accordance with System standards, and pays the Authorized Instructor Video Review Fee.
- You may, if you choose, pay the Authorized Instructor Video Review Fee for a prospective Subsequent Instructor, but you are under no obligation to do so.
14. Technology Fee: then-current fee. Currently, $900 per month, but subject to change upon written notice to you.
- Due Date: Payable monthly in the same manner as the Royalty.
- The Technology Fee currently includes fees related to your access to and usage of CycleStats, CycleBeats, CycleBar’s reservation system, CycleBar’s intranet, CycleBar’s reservation and business management software, any mobile applications CycleBar develops, and the System Website (“Technology Fee”).
15. Instructor Bootcamp Tuition (for prospective Authorized Instructors): then-current tuition fee. Currently, $5,000 per day per session, including the costs and expenses CycleBar’s Master Trainer incurs in connection with providing all such training.
- Due Date: Prior to the scheduled session.
- Bootcamp Tuition is payable to CycleBar in connection with each session that one of CycleBar’s Master Trainers provides (whether at your Studio or at a corporate location).
- In addition to this tuition, you will be responsible for all costs and expenses that (a) the Master Trainer incurs in connection with traveling and providing training at your Studio, and (b) are associated with your trainee(s) attending the training, including wages and/or any travel/lodging expenses.
16. Training Fee (all other Training): then-current training fee (the “Training Fee”). Currently, $500 per day per trainer.
- Due Date: Prior to training.
17. Transfer Fee Under Franchise Agreement: $10,000
- Due Date: Before the transfer.
- Payable when you sell the Studio. No charge if the Studio is transferred to a corporation or other entity that you control.
18. Transfer Fee Under Development Agreement: $10,000
- Due Date: On submitting application for consent to assignment.
- Payable when you want to sell/transfer the rights under your Development Agreement and CycleBar determines to permit you to do so.
19. Alternative Supplier Approval: $500 per day for personnel engaged in evaluating a supplier
- Due Date: At time of request.
- Additionally, you must reimbursement CycleBar for any travel, accommodations, and meal expenses.
20. Insurance Policies – Reimbursement: reimbursement of any premiums or other amounts that CycleBar incurs in connection with acquiring or maintaining required insurance coverage
- Due Date: As agreed.
- Payable only if you fail to maintain the minimum insurance CycleBar requires and it chooses to procure the required insurance for you.
21. Mystery Shopper Program/Other Quality Control Programs: then-current fee charged by CycleBar’s Approved Supplier for such programs. Currently, CycleBar’s Approved Supplier charges a fee amounting to $500 per year.
- Due Date: As arranged.
- Payable only if CycleBar establishes a mystery shopper program or other quality control mechanism/program, in which case it reserves the right to require a franchisee to contribute up to $500/year to help defray the costs of such programs that are designed to preserve the goodwill and brand image.
22. Audit Fees: costs CycleBar incurs in connection with audit. Currently, CycleBar estimates these costs to be between $500 and $2,500.
- Due Date: Within 15 calendar days after receipt of audit report.
- Payable only if audit shows an understatement of Gross Revenue for the audited or reviewed period of 2% or more.
23. Late Fees: the greater of the highest applicable legal rate for open account business credit, or 1.5% per month
- Due Date: Upon demand.
- Applies to all amounts not paid when due, until paid in full. CycleBar may also require you to pay an administrative fee of $50 for each late payment or late report.
24. Penalty Fee: then-current fee charged by CycleBar. Currently, $100 for each day of non-compliance.
- Due Date: Upon demand.
- Payable only in the event you fail to comply with your material obligations under your Franchise Agreement by (a) permitting any instructor at your Studio to provide cycling instruction or other Approved Services before they complete Instructor Bootcamp or is otherwise approved by CycleBar, or (b) offering or selling any unauthorized products or services at your Studio, including provision of Instructor Bootcamp without an approved Master Trainer.
- The Penalty Fee will be incurred during each day of non-compliance.
25. Indemnification: all costs including attorneys’ fees
- Due Date: Upon settlement or conclusion of claim or action.
- You will defend suits at your own cost and hold CycleBar harmless against suits involving damages resulting from your operation of the Studio.
26. Cost of Enforcement or Defense: all costs including attorneys’ fees
- Due Date: Upon settlement or conclusion of claim or action.
- You will reimburse CycleBar for all costs in enforcing its obligations concerning the Franchise Agreement if it prevails.
27. Regional Cooperative: as the Cooperative determines
- Due Date: As the Cooperative determines.
- CycleBar may establish regional cooperatives comprised of Studios that are within a given geographical area (each, a “Cooperative”). If a Cooperative is established where your Studio is located, you will be required to participate in that Cooperative and contribute to that Cooperative in the amounts the Cooperative determines.
- Company-owned or affiliate-owned Studios will have the same voting rights in such Cooperatives as franchisee-owned Studios.
28. Liquidated Damages: $10,000
- Due Date: As incurred.
- If you in any way compromise the secure access to the online version of the Manual, including, but not limited to, allowing unauthorized users access to the Manual and its confidential contents, you will be required to pay CycleBar liquidated damages in the amount of $10,000, to compensate it for the breach and related damage to the System.
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