Updated February 16, 2020.
Detailed Estimates of Row House Franchise Costs Based on Item 7 (Estimated Initial Investment) of Row House’s 2019 Franchise Disclosure Document
1. Initial Franchise Fee: $60,000
- The Initial Franchise Fee is non-refundable. The Initial Franchise Fee for a single Studio is $60,000. The franchisor does not provide financing for the Initial Franchise Fee.
2. Travel and Living Expenses While Training: $500 to $3,000
- This estimate is designed to cover the costs and expenses you might incur in connection with you (or if you are an entity, one of your operating principals you designate to be the Designated Operator for the Studio) attending and completing the required initial training.
- The franchisor will not charge you or your Designated Operator for this portion of the initial training that must be completed on behalf of the franchisee/owner under your Franchise Agreement.
- You will be responsible for the costs and expenses associated with attending this training (e.g., transportation, meals, lodging, and other expenses).
- The estimate assumes that you (or your Designated Operator) and the individual(s) you designate to attend RH University and serve as an Authorized Rowing Coach at your Studio will attend their respective training at the same time at the franchisor’s headquarters or one of the designated training Studios.
- The estimated RH University Tuition fees associated with your initial coaches is accounted for in the estimate of “Additional Funds”.
3. Real Estate/Lease: $9,300 to $28,000
- If you do not own adequate Studio space, you must lease suitable premises. These figures assume that the leased premises will be at least 2,000 square feet and that you will hire a lawyer to negotiate the details of your lease on your behalf. Landlords may also vary the base rental rate and charge rent based on a percentage of gross sales.
- In addition to base rent, the lease may require you to pay common area maintenance charges (“CAM Charges”), your pro rata share of the real estate taxes and insurance, and your pro rata share of HVAC and trash removal.
- You will also likely be required to pay a security deposit. This estimate assumes your security deposit will amount to approximately one month of rent.
4. Net Leasehold Improvements: $35,000 to $105,000
- The cost of leasehold improvements will vary depending on: (i) the size and configuration of the premises; (ii) pre-construction costs (e.g., demolition of existing walls and removal of existing improvements and fixtures); (iii) the need for soundproofing; and (iv) the cost of materials and labor which may vary based on geography and location.
- For clarity, the estimates presented herein are net of tenant improvement amounts incurred by the landlord.
- The low end of the range reflects modest improvements to a smaller location with significant tenant improvements incurred by the landlord, and the high end reflects significant physical improvements to a larger Studio with limited improvements incurred by the landlord as well as costs to engage an architect and costs incurred for mechanical, electrical, and plumbing engineering.
5. Sound Consultant: $1,000 to $3,000
6. Signage: $20,000 to $30,000
- You will need to purchase appropriate signage for your Studio that the franchisor approves.
- Each landlord has different restrictions it places on interior and exterior signage that may affect your costs.
7. Insurance: $1,400 to $1,500
- This estimate is for 3 months of your minimum required insurance. The actual cost may be more than shown here. You will need to check with your insurance carrier for actual premium quotes and costs, and for the actual amount of deposit.
8. Lease-Related Payments for Exercise Equipment Package: $2,000 to $3,000
- The standard franchise offering assumes and expects that a new System franchisee will lease the required rowing ergometers and other exercise equipment necessary to open and initially commence operations.
- As such, the range above is designated to capture and account for the typical deposit and lease payments you will make to a supplier the franchisor approves (it has pre-approved several as of the Issue Date of the disclosure document) to lease this equipment.
- The initial required amount of rowing and other exercise equipment for a standard Studio is approximately 26 rowing ergometers, free weights of various sizes, various equipment/supplies for use in connection with the provision of the Approved Services, and certain other equipment used in connection with the Studio.
- Financing for certain equipment may be available, but neither the franchisor nor its affiliates provide such financing.
- If you determine not to follow the franchisor’s System-recommended practice of leasing this equipment associated with the standard franchise offering described above, the estimated cost to purchase this equipment outright will be substantially more (approximately $26,400 to $26,850) and will be paid to the franchisor or its designated supplier of such equipment.
9. Opening Retail Inventory: $12,000
- The typical for-sale items held in opening inventory are the apparel and other branded merchandise that you will be permitted to resell at your Studio as part of your Approved Products, including items such as t-shirts, towels, exercise clothing, and related accessories.
10. Utility Deposits: $0 to $1,000
- Typically, a utility deposit will be required only if you are a new customer of the utility company.
11. Licenses and Permits: $500 to $3,500
- The range of costs covers the expense to acquire the required local business permits. The estimated costs include building permits, fire inspection, sales tax permit, and retail sales permits. If an electrical permit is necessary, the costs may be more.
- The costs also include certain music licenses, which could increase depending on the selection of music played in the studio.
12. Furniture, Fixtures, and Related Supplies: $19,000 to $26,000
- This is a range of expenses that will be incurred when decorating and furnishing the Studio, including certain components of the Furniture and Fixture Package that you must purchase from the franchisor.
- Both the low-end and the high-end numbers represent a straight purchase of all furniture, fixtures, and related supplies (rather than leasing or making installment payments on these items as the franchisor expects you will do for the Exercise Equipment Package).
13. Computer System and Related Equipment: $1,200 to $2,000
- You may need to purchase a laptop for activities that take place outside of the Studio. You will also need to use the franchisor’s required Point-of-Sale system (“POS”) for use in the operation of the Studio. Your computer system must be equipped with a high-speed connection to the Internet and must include a local area network with a dedicated server.
14. Software: $3,300
- The franchisor will make available to you a certain business management software program specific for the Studio to be loaded on to your system for an upfront fee of $3,300. You will pay the third-party vendor directly for all fees associated for the ongoing use of the software.
15. Audio/Visual Equipment: $45,000 to $48,000
- The Audio/Visual Equipment package comes with a computer which will be used for front desk operations.
- You are required to have at least one surveillance camera installed in the Studio. You may be required to purchase the camera(s) and related accessories from an Approved Supplier. The camera(s) must be web accessible.
- You will use the camera to monitor teacher performance, quality assurance, and safety. The franchisor has an absolute right to also review and monitor the camera(s) for the same purposes as you, and to ensure compliance with the System.
- You are responsible for ensuring customer consent and for any failure to obtain such consent. You must indemnify the franchisor for any breaches of privacy from your use of any surveillance camera.
16. Shipping: $2,200
- The franchisor arranges for the shipping of all of your equipment and furniture/fixtures. These amounts may vary based upon the location of your Studio.
17. Installation: $6,600
18. Initial Marketing Spend: $15,000
- You are required to expend this “Initial Marketing Spend” in coordination with the pre-opening sales plan the franchisor approves or designates for your Studio as part of the opening support program that the franchisor’s approved supplier provides in connection with your Studio, as the franchisor determines appropriate in its discretion (the “Opening Support Program”).
- Typically, the franchisor expects your Opening Support Program to commence prior to the “soft opening” of your franchised Studio through your actual opening of the Studio.
- These funds must be expended on your Opening Support Program and any other pre-opening marketing and/or advertising activities the franchisor designates.
19. Coach Training: $9,000 to $18,000
20. Additional Funds – First Three Months: $15,000 to $30,000
- This is an estimate of certain funds needed to cover your business (not personal) expenses during the first three months of operation of the Studio.
- These expenses include initial employee wages; ongoing purchases of equipment and supplies; marketing expenses/fees and local advertising; ongoing utilities (other than initial deposits); and repairs and maintenance.
21. Total: $257,700 to $400,800