Considering a Farrell’s eXtreme Bodyshaping Franchise? Don’t Overlook These 20 Important Franchise Fees

Updated August 20, 2018.

If you are considering a Farrell’s eXtreme Bodyshaping franchise, don’t get blindsided by these 20 important franchise fees (from the initial franchise fee, to the royalty fee, to 18 other fees found in Items 5 and 6 of Farrell’s eXtreme Bodyshaping’s 2018 FDD).

1.  Preliminary Agreement Deposit:  $15,000

• In many cases, you will sign a Preliminary Agreement while evaluating whether to move forward with a franchise relationship and pay Farrell’s a $15,000 deposit (the “Deposit”).

• You may terminate the Preliminary Agreement at any time.

• Farrell’s may terminate the Preliminary Agreement for any reason or for no reason during the 30-day period after its execution. Farrell’s may also terminate it later for certain reasons, such as its concerns about your qualifications or failure to meet certain criteria.

• If either party terminates the Preliminary Agreement within the first 30 days, regardless of the reason for termination, and if you sign a general release in Farrell’s favor, Farrell’s will refund the deposit without interest.

• If Farrell’s terminates the Preliminary Agreement because it believes that you are not able, or are likely to be unable, to complete the Instructional Training to its satisfaction, and if you sign a general release in Farrell’s favor, Farrell’s will refund $12,000 of the Deposit and keep the rest to compensate it in part for its training expenses.

• If you terminate the Preliminary Agreement more than 30 days after signing it, or if Farrell’s terminates the Preliminary Agreement because you have failed, within 6 months of signing the Preliminary Agreement, to satisfy Farrell’s criteria for new franchisees and/or to sign a Franchise Agreement, and if you sign a general release in Farrell’s favor, Farrell’s will refund $7,500 of the Deposit and keep the rest to compensate it in part for its training expenses and lost opportunities.

• If the Preliminary Deposit is terminated for any other reason, then Farrell’s will keep the entire Deposit.

• If all conditions are satisfied and you enter into a Franchise Agreement, Farrell’s will credit the Deposit toward payment of the initial franchise fee, described below.

2.  Initial Franchise Fee:  $30,000

• You must pay Farrell’s a non-refundable initial franchise fee in a lump sum when you sign the Franchise Agreement. The initial franchise fee is $30,000, and is fully earned upon payment.

• If you signed a Preliminary Agreement covering this franchise, Farrell’s will apply the Deposit (without interest) towards the initial franchise fee.

3.  Development Fee:  $10,000 multiplied by the number of Farrell’s Centers that you agree to develop under the Schedule

• If Farrell’s awards you multi-unit development rights, you must sign Farrell’s Development Rights Agreement and pay Farrell’s a Development Fee when you sign that Agreement.

• The Development Fee is equal to $10,000 multiplied by the number of Farrell’s Centers that you agree to develop under the Schedule.

• The Development Fee is non-refundable and fully earned upon payment, but Farrell’s will apply $10,000 of the Development Fee towards the initial franchise fee owed under each Franchise Agreement that the Development Rights Agreement covers. The initial franchise fee under each of those Franchise Agreements is $20,000.

• The Development Fee is calculated uniformly for all new franchisees.

4.  Royalty:  5% of Merchandise Gross Sales and 8 1/2% of Service Gross Sales, subject to Compliance Rebate and minimum royalty

• Due Date:  Due monthly on day Farrell’s specifies.

• First Royalty payment is due on the payment day of the month following the month during which you first open the Center for business, based on all Merchandise Gross Sales and Service Gross Sales before then (including Service Gross Sales derived during pre-sale of Courses).

• This Royalty applies for all franchises under the Development Rights Agreement.

5.  Marketing Fund Contributions:  amount Farrell’s specifies, subject to Marketing Spending Requirement

• Due Date:  Due monthly on day Farrell’s specifies.

• Farrell’s has not yet begun collecting Fund contributions but may do so on 60 days’ notice.

6.  Cooperative Contributions:  amount the Cooperative determines, subject to Marketing Spending Requirement

• Due Date:  As Cooperative specifies.

7.  Successor Franchise Fee:  $7,500

• Due Date:  Upon signing successor Franchise Agreement.

8.  Transfer:  $10,000

• Due Date:  Upon transfer.

9.  Ongoing Training and Special Assistance:  currently $750 per day, plus out-of-pocket costs and expenses, but could increase if Farrell’s costs increase

• Due Date:  As incurred.

• Farrell’s may charge you for supplemental training courses, programs, and conventions and for additional or special assistance or training you need or request.

10.  Replacement Copy of Operations Manual:  currently $50, but could increase if Farrell’s costs increase

• Due Date:  As incurred.

• Due only if you need a replacement copy.

11.  New Product/Supplier Testing:  costs of testing

• Due Date:  When billed.

• Covers costs of testing new products or inspecting new suppliers you propose.

12.  Relocation:  reasonable costs Farrell’s incurs

• Due Date:  As incurred.

• Due only if you ask to relocate the Center.

13.  Costs to Maintain Center:  reasonable costs Farrell’s incurs

• Due Date:  5 days after billing.

• Due only if you do not maintain or upgrade the Center as required, and Farrell’s chooses to do so.

14.  Administrative Fee:  $250 per enforcement effort (i.e., written or verbal notification and follow up), and $250 per week for each week that the issue remains unresolved

• Due Date:  On demand.

• Farrell’s may assess an administrative fee to compensate it for its time.

15.  Audit:  cost of inspection or audit

• Due Date:  As incurred.

• Due only if you fail to report or understate Royalty by 2% or more.

16.  Interest:  lesser of 1.5% per month or highest commercial contract interest rate law allows

• Due Date:  15 days after billing.

• Due on all overdue amounts more than 7 days late.

17.  Management Fee:  20% of combined Merchandise Gross Sales and Service Gross Sales while Farrell’s manages Center

• Due Date:  As incurred.

• Due only if Farrell’s or its designee manages Center after your (or your managing owner’s) death or disability, after your default or abandonment, or after termination.

18.  Software License Fee:  $65 per month

• Due Date:  As incurred.

• Due monthly to Farrell’s; it collects fee from all Centers and pays lump-sum to licensor.

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

• Due Date:  As incurred.

• Due only if Farrell’s prevails in legal proceeding.

20.  Indemnification:  will vary under circumstances

• Due Date:  As incurred.

• You must reimburse Farrell’s if it is held liable for claims from your Center’s operation, your business, breach of agreement, or non-compliance with any law or regulation.