Considering a StretchLab Franchise? Don’t Overlook These 26 Important Franchise Fees

If you are considering a StretchLab franchise, don’t get blindsided by these 26 important franchise fees (from the initial franchise fee, to the royalty fee, to 24 other fees found in Items 5 and 6 of StretchLab’s 2018 FDD).

1.  Initial Franchise Fee:  $49,500

• You must pay to StretchLab a lump sum initial franchise fee of $49,500 (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 StretchLab upon payment and is not refundable, in whole or in part, under any circumstance.

2.  Initial FFE Package:  $57,575 to $67,925

• You must purchase an initial package of furniture, fixtures, and equipment that is designed to provide you with the majority of these 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 2018 Disclosure Document, the Initial FFE Package costs approximately between $57,575 and $67,925 and typically contains (a) 10 stretching benches and various related equipment/supplies for use in connection with the provision of the Approved Services, (b) a Studio fixture package comprised of a desk, displays, and display rack, and (c) certain other equipment used in connection with the Studio (e.g., foam rollers, ab mats, etc.).

3.  Proprietary Inventory Kit:  $12,000

• Prior to opening your StretchLab Studio, you must purchase opening inventory from StretchLab in the amount of approximately $12,000 (“Proprietary Inventory Kit”), which includes stretching tools for home use; apparel, including t-shirts; towels; exercise clothing; and related accessories.

4.  Pre-Opening Instructor Training:  $11,000 to $15,000

• StretchLab estimates that you will cover the FTP Tuition Fee (currently, $1,499) that it charges to provide its Flexologist Training Program (or “FTP”) to your initial instructor(s) so that such instructor(s) can become Authorized Flexologists that offer and provide the Approved Services at your Franchised Business.

• Prior to opening, StretchLab estimates it will provide the FTP to up to 10 individuals – either at 1 of its corporate training locations or, if it determines appropriate, at your Studio by StretchLab’s training personnel – and you will pay StretchLab between $11,000 and $15,000 in corresponding FTP Tuition Fee(s).

5.  Development Fee:  depends on the number of Franchised Businesses StretchLab grants you the right to open within the Development Area

• If StretchLab grants you the right to open 3 or more Franchised Businesses under a Development Agreement, you must pay StretchLab a one-time Development Fee upon executing your Development Agreement.

• Your Development Fee will depend on the number of Franchised Businesses StretchLab grants you the right to open within the Development Area and is calculated as follows: (i) $125,000 for the right to open three Franchised Businesses, plus an additional $40,000 for the right to open each additional Franchised Business (up to a total of five); (ii) $35,000 per Franchised Business if you agree to open and operate between six and nine Franchised Businesses; and (iii) $30,000 per Franchised Business if you agree to open and operate 10 or more Franchised Businesses.

• You will be required to enter into StretchLab’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.

6.  Royalty:  7% of Gross Sales

• Due Date:  Payable weekly based on the Gross Sales of your Franchised Business during the preceding business week.

• You will be required to start paying your Royalty once your Franchised Business begins collecting revenue from operations.

7.  Marketing Fund:  then-current Fund Contribution. Currently, Stretch Lab has not yet established a Fund but intends to do so.

• Due Date:  Payable weekly at the same time and in the same manner as the Royalty.

• When StretchLab establishes a Marketing Fund, it may require you to make a contribution to that Fund amounting to up to 2% of the Gross Sales of your Franchised Business (the “Fund Contribution”), and your obligation to contribute will commence once you have started operating your Franchised Business.

8.  Local Advertising Requirement:  $1,500 per month

• Due Date:  As arranged.

• You must expend a minimum of $1,500 per month on local advertising and promotion of your Franchised Business within your Designed Territory.

9.  FTP Tuition Fee:  then-current fee. Currently, $1,499 per trainee.

• Due Date:  Prior to training.

• The FTP Tuition Fee is payable to StretchLab in the event the program is completed at a corporate location.

• If the Program is provided by an authorized Master Trainer at a franchised Studio, then currently: (i) $1,000 of this fee is payable to StretchLab; and (ii) the remaining $499 is retained by the franchisee that owns the franchised Studio.

10.  Ongoing/Refresher Training:  then-current training fee. Currently, $500 per day per trainer.

• Due Date:  Prior to training.

• This fee is paid in connection with additional training/instruction that StretchLab may provide on an ongoing basis in connection with the overall operation and development of your Studio.

11.  Technology Fee:  while StretchLab does not currently charge a Technology Fee, it reserves the right to charge its then-current technology fee in the future (the “Technology Fee”)

• Due Date:  Payable monthly in the same manner as the Royalty.

12.  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 StretchLab’s then-current standards and image.

13.  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.

14.  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.

15.  Insurance Policies:  amount of unpaid premium

• Due Date:  Must have the policies within 60 calendar days after signing the Franchise Agreement, but no later than the time that you acquire an interest in the real property from which you will operate the Studio.

• Payable only if you fail to maintain required insurance coverage and StretchLab elects to obtain coverage for you.

16.  Audit Fees:  $500 to $2,500

• Due Date:  Within 15 calendar days after receipt of audit report.

• Payable only if audit shows an understatement equal to or greater than 2% of Gross Sales.

17.  Mystery Shopper and Other Quality Control Programs:  currently, StretchLab does not require franchisees to contribute to these programs, but it reserves the right to do so in the future

• Due Date:  Within 30 days of demand.

• Payable only if Stretch Lab 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 per year to help defray the costs of such programs that are designed to preserve the goodwill and brand image.

18.  Interest on Late Payments:  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.

19.  Administrative Fee:  then-current fee charged by StretchLab. Currently, $50 for each late payment or late report.

• Due Date:  Upon demand.

• StretchLab reserves the right to require you to pay an administrative fee of $50 for each late payment or late report in connection with payment of all amounts due under your Franchise Agreement.

20.  Penalty Fee:  then-current fee charged by StretchLab. Currently, $100 for each day of noncompliance.

• 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 Approved Services before they become an Authorized Flexologist, or (b) offering or selling any unauthorized products or services at your Studio, including provision of the Flexologist Training Program without an approved Master Trainer.

• The Penalty Fee will be incurred during each day of noncompliance.

21.  Cost of Enforcement or Defense:  all costs, including attorneys’ fees

• Due Date:  Upon settlement or conclusion of claim or action.

• You will reimburse StretchLab for all costs in enforcing your obligations concerning the Franchise Agreement if it prevails.

22.  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 StretchLab harmless against suits involving damages resulting from your operation of the Studio (subject to applicable state law).

23.  Alternative Supplier Approval:  $500 per day for personnel, plus expenses

• Due Date:  At time of request.

• Additionally, you must reimburse StretchLab for any travel, accommodations, and meal expenses.

24.  Business Management Software Fee:  then-current fee charged by StretchLab’s Approved Supplier, which is currently $269

• Due Date:  Payable every 4 weeks, as agreed.

25.  Regional Cooperative:  as the Cooperative determines

• Due Date:  As the Cooperative determines.

• StretchLab 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.

26.  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 StretchLab liquidated damages in the amount of $10,000, to compensate it for the breach and related damage to the System.