In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Retro Fitness franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Retro Fitness franchise, based on Item 7 of the company’s 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Retro Fitness franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Retro Fitness outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of Retro Fitness’ financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• fiscal year 2017 average gross sales for the 134 Retro Fitness franchised outlets that were open to the public for the entire period commencing on January 1, 2017 and ending on December 31, 2017

• fiscal year 2017 average gross revenue per square foot for the 134 Retro Fitness franchised outlets that were open to the public for the entire period commencing on January 1, 2017 and ending on December 31, 2017

• average number of members as of March 31, 2018 for the 134 Retro Fitness franchised outlets that were open to the public for the entire period commencing on January 1, 2017 and ending on December 31, 2017

• 2016 average earnings before interest, taxes, depreciation, and amortization for the 99 Retro Fitness franchised outlets that were officially open to the public and in operation for the entire 2016 calendar year (not including Outlets in pre-sales during this period), and submitted copies of their 2016 tax returns to Retro Fitness

• 2016 average earnings before interest, taxes, depreciation, and amortization as a percentage of total revenue for the 99 Retro Fitness franchised outlets that were officially open to the public and in operation for the entire 2016 calendar year (not including Outlets in pre-sales during this period), and submitted copies of their 2016 tax returns to Retro Fitness

• 2016 average payroll expenses for the 99 Retro Fitness franchised outlets that were officially open to the public and in operation for the entire 2016 calendar year (not including Outlets in pre-sales during this period), and submitted copies of their 2016 tax returns to Retro Fitness

• 2016 average rent expenses for the 99 Retro Fitness franchised outlets that were officially open to the public and in operation for the entire 2016 calendar year (not including Outlets in pre-sales during this period), and submitted copies of their 2016 tax returns to Retro Fitness

Section I – Background Information

19 Things You Need to Know About the Retro Fitness Franchise

Named Official Fitness Center of the New York Yankees

1.  In early February 2018, just in time for the start of baseball season, Retro Fitness announced that it was now the Official Fitness Center of the New York Yankees. Under this multi-year partnership, Retro Fitness receives logo usage, player appearances, game tickets and contests to win unique experiences at Yankee Stadium for its members, and more.

2.  Bryan Calka, vice president of partnerships for the New York Yankees, said, “Although Retro Fitness is spreading rapidly across the country, its roots are in the Tri-State area. This exciting partnership brings together two passionate, dedicated organizations that share a deep dedication to loyalty and success.”

3.  To celebrate the new partnership, Retro Fitness launched a contest for its members in New York, New Jersey, and Connecticut, offering game tickets and access to watch batting practice on the field of Yankee Stadium prior to a game. Also through the partnership, Retro Fitness will receive player appearances for company events, in-stadium signage, the right to use the Yankees logo on printed materials in the Tri-State area, and the right to use the Yankees logo anywhere online.

4.  According to Scott Breault, chief brand officer for Retro Fitness, “With 85 percent of our clubs in the Tri-State area and the Yankees’ passionate fanbase that overlaps that region, the partnership was an ideal fit. The Yankees are a world-class organization and an iconic global brand. There is a lot of excitement surrounding the team that will provide opportunities for Retro Fitness to reach new and larger audiences with our mission and message of providing a customized fitness experience for our members.”

New Members on Executive Leadership Team

5.  Retro Fitness expanded its executive leadership team in 2017, including a new chief operations officer, marketing director, and chief brand officer. At the end of June 2017, Retro Fitness appointed Mike Rogers as the company’s first chief operations officer. A month later, the company hired Jennifer Gillon as marketing director and to close out the year, Scott Breault stepped into the newly-created role of chief brand officer in early November.

6.  Prior to joining Retro Fitness, Rogers most recently served as director of license store operations at Starbucks Coffee Company, where he led the brand through record growth for over 20 years. Known for his ability to grow organizations from mid-sized start-up to national brand presence, Rogers is a strategic leader who will be realigning Retro Fitness’ resources and assets for future growth.

7.  In his new role as COO, Rogers will oversee the company’s ongoing operations and procedures. He will also enhance business growth efforts in order to unleash disciplined innovation and encourage long-term stability.

8.  Gillon comes to Retro Fitness with over two decades of experience in consumer marketing. Before joining the company, Gillon spent the last seven years at Walt Disney Parks and Resorts, most recently as a program manager in the customer relationship marketing department. There she managed the triggered and on-demand guest communication strategies for Walt Disney World and Disneyland, specifically focusing on lead conversion.

9.  One of the new marketing director’s first tasks is to enhance the conversation between Retro Fitness and its members and prospects, inside and outside the gyms. Gillon is also charged with elevating every communication touchpoint, including emails, social media, direct mail, the mobile app, when members are in the gym, and more.

10.  Breault is known for successfully leading the marketing efforts for consumer brands and franchises through periods of hyper growth. His recent history includes taking fitness brands such as Pure Barre and Orangetheory to the top of their games. His strategic brand awareness campaigns, product launches, and partnerships contributed to increased YOY same-store sales and AUV for both brands, highlighted by increases in system-wide sales from $46M to $540M and AUV from $400,000 to $900,000 at Orangetheory.

11.  Previously, he also served as VP of marketing for The Learning Experience, a 150-unit international franchisor of child care and early learning centers.

12.  As CBO, Breault will be responsible for driving the overall brand marketing and communications efforts for the 155-unit, $150M franchise, including creating new member engagement opportunities through consumer insight inspired campaigns, programs, product launches, and strategic partnerships. Breault will work with the existing marketing team to enhance the conversation between Retro Fitness and its members and prospects through an omni-channel campaign strategy that reaches consumers at home, at work, on their mobile devices and tablets, and elsewhere.

Plans for Major Expansion in Pennsylvania

13.  At the end of March 2017, Retro Fitness announced that it was targeting Pennsylvania for significant expansion. With 17 franchise locations already open and operating throughout the greater Philadelphia market, the company plans to have upwards of 30 additional Pennsylvania locations open or in development within the next three years through strategic franchise partnerships.

14.  Retro Fitness said that there is plenty of room to build its presence in the following Pennsylvania markets: Philadelphia can accommodate another 15 to 20 additional clubs; Pittsburgh has room for at least 10 to 12 more locations; the Harrisburg/Lancaster/Lebanon/York area can accommodate 7 to 10 additional gyms; and Wilkes Barre and the surrounding area has space for another 2 to 3 gyms in the market.

15.  One of Retro Fitness’ newest Pennsylvania locations opened in January 2017 in Spring Garden. The new gym features the newest Retro Fitness design and amenities and will act as a prototype for all new gyms in the state. The gym is the first in Pennsylvania to offer Retro Results, powered by the New Exercise Order, a multi-level personal training program that provides a solution to members of all fitness levels and desired price points. The program includes Team Conditioning (TEAM), Small Group Strength Training (SGST), and One-on-One Training (1:1). It also incorporates MYZONE technology, which turns the workout experience into a game.

Company History

16.  Retro Fitness was founded in 2004 by Eric Casaburi in Colts Neck, New Jersey. Casaburi, who has always had a passion for fitness, began working in gyms when he was a teenager. He continued to work at various gyms while he attended college to study exercise science, but Casaburi dropped out to pursue his own fitness business.

17.  In 1997, at the age of 23, Casaburi opened his first gym in New Jersey. After successfully running his first gym for five years, Casaburi opened a second gym in the area in 2002. About a year and a half later, he opened his third gym and began thinking about scaling his business. In 2004, Casaburi came up with the concept for Retro Fitness and a year later, he converted his three gyms to his new brand.

18.  Casaburi overhauled his business and decided to position Retro Fitness as a low-cost gym membership brand, only charging members about $19 per month. According to Casaburi, this low-cost model enabled Retro Fitness to grow during the Great Recession. Today, Retro Fitness continues its domestic growth and has locations in 16 states.

Entrepreneur’s Franchise 500

19.  Retro Fitness ranked No. 290 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Retro Fitness franchise costs, based on Item 7 of the company’s 2018 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Retro Fitness’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  124
• Outlets at the End of the Year:  144
• Net Change:  +20

2016

• Outlets at the Start of the Year:  144
• Outlets at the End of the Year:  153
• Net Change:  +9

2017

• Outlets at the Start of the Year:  153
• Outlets at the End of the Year:  145
• Net Change:  -8

Company-Owned

2015

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  0
• Net Change:  -1

2016

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2017

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

• This is a historic financial performance representation. The representation only relates to the subset of Outlets identified below and does not relate to the performance of all of the System’s existing Outlets.

• All information reported in this Item 19 pertains to franchisee-owned Retro Fitness Outlets and reflects the membership, sales numbers, rent expenses, payroll expenses, and EBITDA reported by franchisees.

• Retro Fitness franchisees are required to report sales and membership data to ABC Financial. Retro Fitness franchisees are also required to provide the franchisor with a copy of their federal tax returns, which contain their payroll expenses, rent expenses, and EBITDA.

• As such, the figures below are derived from reports generated from computer data reported to ABC Financial by Retro Fitness franchisees, maintained by ABC Financial, and reported to Retro Fitness, and data as reported by franchisees to Retro Fitness in the franchisees’ 2016 federal tax returns. Retro Fitness has not undertaken any independent investigation to verify the amounts reported.

Part 1 – Average Gross Sales Information for Retro Fitness Franchised Outlets

• As of December 31, 2017, there were 145 franchised Retro Fitness Outlets open and in operation (each, a “Franchised Outlet”).

• Of those 145 Franchised Outlets, 134 were open to the public for the entire period commencing on January 1, 2017 and ending on December 31, 2017. All 134 of these Franchised Outlets were included in the results displayed in Tables A, B, and C below (the “ABC Outlets”).

• Table A provides information on the average gross sales for the ABC Outlets for the period from April 1, 2017 through March 31, 2018.

• Table B provides information on the average revenue per square foot for the ABC Outlets for the period from April 1, 2017 through March 31, 2018.

• Table C provides information on the average membership of the ABC Outlets as of March 31, 2018.

Table A – Average Gross Sales of ABC Outlets Reported to ABC Financial from April 1, 2017 to March 31, 2018

Top 10%