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Considering a Sky Zone Indoor Trampoline Parks Franchise? Don’t Overlook These 27 Important Franchise Fees

by Franchise Chatter on November 7, 2016

in Child-Related Franchises, Franchise Fees



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Sky Zone Indoor Trampoline Park by nymetroparents.com

If you are considering a Sky Zone Indoor Trampoline Parks 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 Sky Zone Indoor Trampoline Parks’ 2016 FDD).

1.  Initial Franchise Fee:  $60,000

  • When you sign a Letter of Intent with Sky Zone for the operation of a Park under the Single Unit Franchise Program, you must pay Sky Zone an initial franchise fee of $60,000 (the “Initial Franchise Fee”).
  • The Initial Franchise Fee is nonrefundable, except that, and in Sky Zone’s discretion, it may refund a portion of the Initial Franchise Fee to you under the LOI if, prior to signing the Franchise Agreement, you demonstrate to it that you have made a good faith effort to obtain the financing or obtain possession of an approved location for the Park.
  • The Initial Franchise Fee helps to cover the expenses Sky Zone incurs to support the franchise partner’s efforts to find a site, get a lease for the site signed, design the park, plan the opening, and training efforts, etc.
  • The Initial Franchise Fee is fully earned by Sky Zone and is non-refundable.
  • In addition to the Initial Franchise Fee, you must pay Sky Zone or its affiliates for the Playing Fields equipment and installation, all on-court sports equipment (e.g. balls), jump stickers, SkySocks, Epic Suite proprietary software, SkyBands (equipped with radio-frequency identification or RFID), website development, mobile device applications (SkyApp), and other proprietary brand assets.
  • Sky Zone and its affiliates are the only approved suppliers for these products and services.  The costs of all of these items will range from $315,000 to $875,000 payable to Sky Zone’s affiliate, and $18,000 to $35,000 (not including the Initial Franchise Fee) payable to Sky Zone. You must also pay Skyzone for the Website Development which will range from $400 to $600. These costs are nonrefundable.

2.  Area Development Agreement:  $40,000 to $60,000 per Unit

  • Sky Zone may grant to you the right to develop multiple Units in the Development Area, for which you must pay to it the total sum of the Initial Franchise Fees for the Units you commit to develop (the “Development Fee”).
  • The Initial Franchise Fee for your first Unit is $60,000, and the Initial Franchise Fee for each additional Unit is $40,000. For example, if you commit to develop four Units, the total Development Fee you will pay to Sky Zone when you sign the Letter of Intent is $180,000.
  • When you sign each Franchise Agreement, Sky Zone will apply a pro rata portion of the Development Fee you paid to it in full satisfaction of the Initial Franchise Fee payable under that Franchise Agreement.
  • You must sign the Franchise Agreement for your first Unit at the same time you sign the ADA.
  • The Development Fee is payable on execution of the Letter of Intent and is fully earned when paid. In no event is the Development Fee refundable.

3.  Royalty Fee:  6% of Gross Sales

  • When payable:  Payable twice per month on the 16th and first day after month ends.
  • Payments must be made via electronic funds transfer (EFT).
  • “Gross Sales” means the total amount of all sales of products, services, programs, and merchandise sold from, through, or in connection with the Park, whether for cash, on credit, barter or otherwise, but not including applicable sales, use, or service taxes.

4.  Advertising Fee:  currently, 2% of Gross Sales

  • When payable:  Payable twice per month on the 16th and first day after month ends.
  • Payments must be made via electronic funds transfer (EFT).
  • Sky Zone reserves the right to increase or decrease the Advertising Fee annually as needed up to a maximum of 2.5%.

5.  Bluewater On-line Marketing Tool Advertising Fee:  $100 per month

  • When payable:  Monthly.
  • Bluewater, an advertising firm headquartered in Minnesota, is the mandatory marketing platform for all approved marketing resources. This monthly fee is for the Bluewater Online Marketing Tool which is used to host Sky Zone marketing and advertising collateral such as brochures, flyers, direct mail, and print advertising pieces.
  • This fee is per Park.

6.  Grand Opening Advertising:  minimum of $25,000

  • When payable:  1/2 of this Grand Opening Advertising Amount to be spent before you open your Park and the remainder in the first month your Park is in operation.

7.  Local Advertising:  minimum of $12,000 per month during the second, third, and fourth months of operation; after your fourth month of operation, minimum of 4% of Gross Sales

  • When payable:  Monthly during your second, third, and fourth months of operation; quarterly after your fourth month of operation.
  • Payable to local advertising suppliers.
  • Any advertising materials you want to use must first be approved by Sky Zone.

8.  Transfer Fee Under Franchise Agreement:  50% of the then-current Initial Franchise Fee

  • When payable:  Prior to transfer.
  • Payable by transferee when you transfer your Franchise Agreement, the assets of your Park, or your ownership.

9.  Transfer Fee Under Area Development Agreement:  $25,000 per undeveloped Unit

  • When payable:  Prior to transfer.
  • Payable by you when you sell your area development rights.

10.  Renewal Fee Under Franchise Agreement:  25% of the then-current Initial Franchise Fee

  • When payable:  At the time of execution of the then-current franchise agreement.
  • Payable when you renew the Franchise Agreement.

11.  Additional Training:  currently, $500 per day; subject to Sky Zone’s determination of a reasonable charge

  • When payable:  Upon request or as Sky Zone requires.
  • This is for additional training Sky Zone may periodically provide or require.

12.  Additional Assistance Fee:  currently, $500 per day; subject to Sky Zone’s determination of a reasonable charge

  • When payable:  Upon request or as Sky Zone requires.
  • This is for additional assistance that you need or request.

13.  Cost of Audit:  Sky Zone’s costs and expenses of the audit, including salaries, professional fees, travel, meals and lodging, plus any understated amount with interest

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

14.  Interest on Late Payments:  lesser of 18% annually or maximum legal rate Sky Zone is able to charge (e.g. based on where the Park is located) subject to applicable laws

  • When payable:  On all overdue payments.
  • Payable on all overdue amounts. Interest accrues from the original due date until payment is received in full.

15.  Late Report Fee:  $100, plus $100 for each day the report is late

  • When payable:  Upon demand.
  • Payable on your failure to timely send Sky Zone financial reports when due.
  • Sky Zone reserves the right to waive this fee if the report is late due to technical or communications errors.

16.  Testing for Alternate Supplier Approval:  not more than the actual cost of the test

  • When payable:  Upon demand.
  • Only if you propose a supplier to Sky Zone for its approval.

17.  Product Purchases and Installation of Playing Fields:  varies based on the products ordered (e.g. Playing Fields, including installation; balls; stickers; wristbands; and SkySocks)

  • When payable:  As incurred and as set forth in the applicable RPSZ Purchase Order (a form of which is attached to the Disclosure Document as an Exhibit).
  • Payment must include cost of goods, taxes, shipping, and handling.
  • Yon must purchase certain items such as the Playing Fields (including the nets, padding, and installation), halls, stickers, wristbands, party/event supplies, SkySocks, SkyBands, and other Sky Zone branded items from SkyZone Franchise Group or its affiliates.
  • You may decide to purchase certain other products (such as promotional materials and merchandise) from Sky Zone or its affiliates.
  • The prices, terms, and conditions for these purchases are contained on the price list that Sky Zone or its affiliates will periodically supply to you (“Price List”). Sky Zone reserves the right, for itself and its affiliates, to update the Price List and change the terms and conditions for these purchases at any time on 30 days’ notice.
  • All of the individuals who guarantee the Franchise Agreement must also guarantee all of your purchases of products and equipment from Sky Zone or its affiliates.
  • You must pay for all taxes, shipping, and handling costs.
  • If you fail to pay for any products or equipment when payment is due, Sky Zone or its affiliates can require you to pay for future products and/or equipment on a cash on demand basis or withhold shipment of products and/or equipment in addition to requiring you to pay late fees and interest.

18.  Epic Suite:  varies depending on transition to Epic Suite from current POS System

  • When payable:  As incurred.
  • Payable to Sky Zone, as it will be the sole approved supplier for Epic Suite.
  • Sky Zone is planning, in 2016, to introduce a new POS system called the Epic Suite. The Epic Suite will use custom applications and technologies to provide point-of-sale, mobile device applications (e.g. SkyApp), video and photograph cameras (e.g. SkyCam), and an accessible ecommerce site — all of which integrate with the new SkyBand technology (which are fitness bands equipped with radio-frequency identification or RFID).
  • Sky Zone intends for new franchisees, after the Epic Suite is launched, to use the Epic Suite (as opposed to the current POS system). There will be a monthly fee and a fee based on transactional volume for use of the Epic Suite, the exact amount of which is to be determined by Sky Zone.

19.  Taxes:  actual costs

  • When payable:  Upon demand.
  • You must pay Sky Zone the amount of any state or local sales, use, gross receipts, or similar tax that the state or local government authority imposes on fees which you pay to Sky Zone, without offset or deduction of any kind.
  • This does not include income-type taxes which a state or local government imposes on Sky Zone’s income.

20.  Online Ticket Purchases:  3% to 6% of transaction, with maximum per transaction cost of $1.50

  • When payable:  As incurred.
  • Payable to approved supplier.

21.  Online Party Reservation:  1% to 3% of transaction, with maximum per transaction cost of $2.50

  • When payable:  As incurred.
  • Payable to approved supplier.

22.  Annual Convention:  up to $1,000 per person, plus expenses

  • When payable:  15 days before convention begins.
  • If not paid by the required deadline, the fee will be automatically debited from your bank account.
  • At least one representative from each Park must attend the convention.
  • The cost of the convention does not include travel, lodging, meals, or wage expenses for the attendee.

23.  Space Planning Fee:  $350 per floor plan

  • When payable:  Upon delivery of the Space Plan.
  • Sky Zone will provide the first 3 Space Plans at no cost to you.
  • Each additional floor plan after the third, if necessary, will cost you $350 per Space Plan.

24.  International Association of Trampoline Parks (IATP) Membership Fees:  currently, $100 per location, plus $200 per trampoline court in your Park

  • When payable:  Annually.
  • Under the Franchise Agreement, membership in the IATP is required and the fee is payable to IATP.

25.  Insurance:  cost of the premium, plus a reasonable fee for Sky Zone’s services in procuring the
insurance

  • When payable:  Upon demand.
  • Payable to your insurance provider; payable to Sky Zone only if you fail to maintain the minimum insurance it requires and it chooses to procure the required insurance for you.

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

  • When payable:  Upon demand.
  • Payable if Sky Zone incurs losses due to your breach of the Franchise Agreement or any other action or inaction by you or any other person (including employees, agents, officers) relating to your Park.

27.  Attorneys’ Fees for Review of Park Waivers:  actual costs

  • When payable:  As incurred.
  • If applicable to your state, all franchisees located within the particular state will share the costs for the attorney to review the Park waiver for that state.
  • All fees are imposed by and are payable to Sky Zone or its affiliates. All fees are non-refundable. All fees are uniformly imposed.

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




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