Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

  • Anytime Fitness
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Considering a barre3 Franchise? Don’t Overlook These 23 Important Franchise Fees

by Franchise Chatter on November 17, 2016

in Fitness Franchises, Franchise Fees

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Don't Invest in a Franchise Until You Check Out This List

Barre 3 Photo from Ratzrow.wordpress.com

If you are considering a barre3 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 barre3’s 2016 FDD).

1.  Initial Franchise Fee:  $33,750 to $45,000

  • You must pay barre3 a lump sum of $45,000 for your Studio franchise at the time you sign the Franchise Agreement (the “Initial Franchise Fee”). The range of Initial Franchise Fees paid during the fiscal year ended December 31, 2015 was $30,000 to $40,000.
  • If you choose to develop more than one Authorized Territory, you must enter into a separate Franchise Agreement for each Authorized Territory. You must pay a fee for each additional Franchise Agreement you enter into.
  • The fee for each Franchise Agreement after your first is discounted from barre3’s then-current Initial Franchise Fee (the “Discounted Fee”). The Discounted Fee as of the Issuance Date of the 2016 Disclosure Document is $33,750.
  • The Initial Franchise Fee and Discounted Fee are deemed to be fully earned and nonrefundable upon payment to barre3.

2.  FitBalls and DVDs:  $1,075

  • You must purchase 100 barre3 branded “FitBall” inflatable exercise balls from barre3, its affiliate, or its designated supplier for use both in your exercise classes and for retail sale at your Studio, for approximately $700 prior to the opening of your Studio. The fee for the FitBalls is nonrefundable.
  • You will pay barre3 a nonrefundable fee of $375 for 50 DVDs of exercise training videos for sale at your Studio.
  • Other than the payments described above, you do not pay anything to barre3 or its affiliates for Products or Services provided to you before your Studio opens.

3.  Royalty:  the greater of 5% of Gross Revenues or $850 per month

  • Due Date:  Monthly on the 10th day of the month or another period as barre3 may determine, via Electronic Funds Transfer (“EFT”).
  • Royalties are based on “Gross Revenues.” “Gross Revenues” means the gross revenue from all sales of Products and Services at and through your Studio, whether for cash or credit, which includes any assumed gross revenue calculated for the purpose of an insurance claim for lost profits to the extent a claim is paid by the insurer, but excludes:
  • (1) all sales or service taxes collected from customers and paid or payable to the appropriate taxing authority; and
  • (2) customer refunds and credits made by the Studio which are issued pursuant to barre3’s standard policies and specifications (exclusions will not include any fees incurred by you in collecting any funds).
  • If you have not timely reported your Studio’s Gross Revenues for any reporting period, then barre3 is authorized, at its option, to debit your account for (a) the fees transferred from your account for the last reporting period for which a report of the Studio’s Gross Revenues was provided to barre3, or (b) the amount due based on information retrieved from barre3’s approved Computer Systems (defined below).

4.  Marketing Fund:  2% of Gross Revenues

  • Due Date:  Monthly on the 10th day of the month or another period as barre3 may determine, via EFT.
  • These funds will be used to generate general brand advertising and promotion for the System, for administrative costs associated with barre3’s marketing efforts, and to maintain and update its website.

5.  Late Fees and Interest:  $100, plus interest on late amounts at 18%, not to exceed the maximum rate of interest allowable under law

  • Due Date:  As incurred.
  • Late fees and interest begin to accrue the day after payment becomes past due.

6.  Renewal Fee:  25% of the then-current Initial Franchise Fee

  • Due Date:  Upon submission of request to renew.
  • You must pay to barre3 the renewal fee of 25% of the then-current Initial Franchise Fee when you send it notice that you wish to renew your Franchise Agreement. Barre3 may retain this fee regardless of whether it grants your request to renew.
  • In order to renew, you must meet barre3’s renewal standards and qualifications and be approved by it. There are other conditions to renewal.

7.  Audit Fee:  cost of audit. Cost may range from $1,000 to $5,000.

  • Due Date:  As incurred.
  • Payable to barre3 only if you understate your Gross Revenues by 2% or more.

8.  Indemnification:  amount of claim or judgment

  • Due Date:  As incurred.
  • You must reimburse barre3 for, and defend it against, claims brought against and taxes imposed on it due to your operations.

9.  Relocation Fee:  $5,000

  • Due Date:  Upon approval of relocation request.
  • Payable to barre3 only if it approves your request to relocate your Franchised Location or Authorized Territory during the term or any renewal terms of the Franchise Agreement.

10.  Transfer Application Fee and Transfer Fee:  the “Transfer Application Fee” is $300 and the “Transfer Fee” is 25% of the then-current Initial Franchise Fee; plus if barre3 is involved in helping you sell your Studio, a sales commission equal to 25% of the then-current Initial Franchise Fee; plus the transferee pays an Initial Training Fee of $4,000 per person, plus travel and living expenses

  • Due Date:  The Transfer Application Fee is due upon submission of the application to transfer your Studio to a third party. The Transfer Fee is due upon approval of the transfer.
  • The Transfer Application Fee is nonrefundable. If the transfer is approved, the Transfer Application Fee will be applied to the Transfer Fee.
  • You may only transfer subject to the satisfaction of certain conditions and with barre3’s prior written consent.
  • No Transfer Fee is required if an owner of a franchisee transfers his or her interest in a franchisee entity to another owner who is a 50% or more owner, and who is the Designated Owner approved by barre3 as your manager, and who remains the majority owner of the franchisee entity.
  • There is also no Transfer Fee if the transferee is a new legal entity of which the existing franchisee is the sole owner and if the Designated Owner does not change.

11.  Product or Supplier Review Fee:  $200 for inspection and evaluation or testing for each new product or supplier, plus actual costs of tests

  • Due Date:  At time of request.
  • Payable only if you request that barre3 review a new supplier or product for use or sale in your Studio.

12.  Cost of Enforcement or Defense:  all mystery shopping costs, audit and accounting fees, barre3’s employees’ travel costs, court costs, and attorneys’ fees

  • Due Date:  Upon settlement or conclusion of claim or action.
  • You must reimburse barre3 if it incurs any expenses in enforcing its rights against you under the Franchise Agreement.

13.  Special Visit Fee:  $300 to $750 per day, plus travel and living expenses. The estimated range of travel and living expenses are $1,000 to $6,000.

  • Due Date:  As incurred.
  • Barre3 will provide you with continuing consultation and advice as it deems necessary and appropriate regarding the management and operation of your Studio. It will provide ongoing assistance, in its discretion, by telephone, facsimile, email, or intranet communication at no additional cost.
  • If you request or barre3 requires that you obtain additional onsite assistance, you must pay barre3 a fee. The cost for onsite assistance ranges from $300 to $750 a day depending on your needs, plus barre3’s travel and living expenses.

14.  Additional, Repeat, or New Instructor Training:  $400 per person, plus travel and living expenses. The estimated range of travel and living expenses are $1,000 to $6,000.

  • Due Date:  The Instructor Training Fee is due 15 days before the training program begins.
  • Payable to barre3 and third parties.
  • Instructor Training for up to 6 people is included in the Initial Franchise Fee.
  • Any instructor who attends Instructor Training may be required to attend additional training or retraining at barre3’s discretion, because such person did not complete the Instructor Training Program to barre3’s satisfaction or its operational standards or requirements are not being met.
  • You must also pay this fee for the Instructor Training Program for each new Instructor that either you or barre3 requires to take the Instructor Training Program.
  • Barre3 may change the fees for training or retraining additional Instructors at any time.

15.  Optional Management Training, When Available:  management training may be made available for owners, and $400 per person for studio managers, plus you are responsible for all travel and living expenses. The estimated range of travel and living expenses are $1,000 to $6,000, unless this is offered online.

  • Due Date:  The management training fee is due 15 days before the training program begins.
  • Additional management training may be available at barre3’s option and your option, subject to its availability, or barre3 may require it in its discretion. Barre3 may discontinue management training, or change the fees for management training, at any time.

16.  Additional or Repeat Initial Training Program:  $4,000 per person, plus travel and living expenses (the “Initial Training Fee”). The estimated range of travel and living expenses are $1,000 to $6,000.

  • Due Date:  Due 15 days before the initial Training Program begins.
  • The first initial Training Program for one or two persons is required and included in your Initial Franchise Fee. You must always have a trained Designated Owner on staff.
  • You will pay barre3 the Initial Training Fee any time you have a new Designated Owner, or it requires any person from your Studio to retake the initial Training Program, and for Transfers as stated elsewhere in Item 6.
  • Fees for the initial Training Program may increase in the future.

17.  Mandatory Seminars, Conventions, or Programs:  you must pay registration fees, plus your travel expenses, as well as the expenses that your employees incur in attending these events. The estimated range of costs is $500 to $2,500 per person. If you do not attend a mandatory meeting, convention, or any other required event, you must pay barre3 the registration fee, plus $500 as a penalty, regardless of cause for non-attendance.

  • Due Date:  As incurred.
  • Barre3 does not at this time have mandatory meetings, but it has had an annual convention, and may in the future conduct periodic meetings that you must attend.

18.  Return Check Fee:  $100 per returned check

  • Due Date:  At the time the check is returned.
  • Barre3 will collect all ongoing payments from you via EFT. In the event of a returned check or insufficient funds from your EFT account, you must pay a fee of $100 per occurrence.

19.  Insurance Costs:  will vary based on number of employees, location, and circumstances

  • Due Date:  As incurred.
  • Paid to the insurance provider.
  • If you fail to purchase insurance as required in the Manual, barre3 has the right to purchase it on your behalf and to charge you an administrative fee of up to 18% of the cost of buying the insurance for you.

20.  Software License Fee:  varies based on software package. The range of estimated fees is $250 to $400 per month.

  • Due Date:  As incurred.
  • Fees are payable directly to barre3, but may be payable to a vendor in the future.

21.  Cost to De-Identify the Studio:  costs and expenses associated with ceasing operations or changing the business to a dissimilar and noncompeting business, and de-identifying the Studio and yourself with the System

  • Due Date:  Upon expiration or termination of the Franchise Agreement.
  • Upon termination, expiration, non-renewal, or transfer of the Franchise Agreement for any reason, you must pay your own costs and expenses associated with ceasing operations and de-identifying the Franchised Location and yourself with the Studio and System.

22.  Management Fee:  the then-current fee barre3 publishes in the Manual, which currently is $500 per day. Additionally, you must reimburse barre3 for reasonable and actual overhead expenses.

  • Due Date:  Payable at the same time as the Royalty Fee.
  • Payable only if barre3 elects to manage the Studio after a death, permanent incapacity that results in a change in control, or during a cure period after a default of the Franchise Agreement.

23.  Ongoing Upgrades and Updates:  approximately $1,400 per year for Fitballs; certain other updates are limited to $25,000 for the first five years

  • Due Date:  As incurred.
  • The 100 FitBalls that are purchased for approximately $700 prior to the opening of your Studio must be replaced every six months by purchase from barre3 or its approved supplier.
  • Barre3 may at any time require you to upgrade, update, or replace the Studio fixtures, equipment, and other tangible property of the Studio in accordance with its standards to conform to the standards for similarly situated new Studios.
  • The maximum cumulative amount that you will be required to spend during the first five years of the first term of the franchise is $25,000 (the “Maximum Modernization Amount”).
  • The Maximum Modernization Amount does not include any required expenditures for Computer Systems, for improvements necessary to offer any required new Services or Products, for upgrades that you make voluntarily, for normal maintenance and refreshing of the Studio whenever necessary, or for compliance with upgrade requirements at the time of any transfer or renewal.

If you are looking for information on the estimated initial investment for a barre3 franchise, check out this post:   Franchise Costs:  Detailed Estimates of barre3 Franchise Costs

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