Considering an AKT (Anna Kaiser Technique) Franchise? Don’t Overlook These 25 Important Franchise Fees

If you are considering an AKT (Anna Kaiser Technique) franchise, don’t get blindsided by these 25 important franchise fees (from the initial franchise fee, to the royalty fee, to 23 other fees found in Items 5 and 6 of AKT’s 2018 FDD).

1.  Initial Franchise Fee:  $49,500

• You must pay to AKT 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 AKT upon payment and is not refundable, in whole or in part, under any circumstance.

2.  Initial FFE Package:  $103,900 to $160,500

• You must purchase an initial package of furniture, fixtures, and equipment that is designed to provide you with the majority of the 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 $103,900 and $160,500 and typically contains (a) exercise accessory equipment and various other 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, storage cubbies, pedestals, custom-made ballet bars, and assorted other fixtures, (c) signage and graphics, and (d) certain other equipment used in connection with the Studio, including audio visual equipment.

• You must currently purchase the Initial FFE Package from AKT, but it reserves the right to designate another approved supplier in its sole discretion.

3.  Opening Retail Inventory:  $12,000

• Prior to opening your AKT Studio, you must purchase opening inventory from AKT at a cost of approximately $12,000 (“Opening Retail Inventory”), which includes apparel and other merchandise that will be available for resale as part of your Approved Products, including items branded with the Proprietary Marks, and other t-shirts, towels, exercise clothing, and related accessories.

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

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

• Your Development Fee will depend on the number of Franchised Businesses AKT 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 AKT’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.

5.  Royalty:  7% of Gross Sales

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

6.  Marketing Fund:  then-current Fund Contribution; currently, AKT 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 AKT 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.

7.  AKT University Tuition:  then-current tuition fee; currently, $1,500 per trainee

• Due Date:  Prior to training.

• The AKT University Tuition Fee is payable to AKT in the event the program is completed at a corporate location. Currently, this fee is $1,500.

8.  Training Fee:  then-current training fee (the “Training Fee”); currently, $500 per day per trainer

• Due Date:  Prior to training.

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

• In addition to AKT’s then-current training fee, you will always be responsible for the costs and expenses that are incurred in connection with you and your personnel attending training.

9.  Authorized AKT Instructor Subscription Fee:  then-current Subscription Fee; currently, AKT has not yet established a subscription service but intends to do so

• Due Date:  Payable monthly.

• When AKT establishes an ongoing subscription service to provide Authorized AKT Instructors with new and updated choreography, workouts, techniques, and other content, you (or your Designated Operator) will have the option, but not be required, to pay the Authorized AKT Instructor Subscription Fee and receive direct access to these materials.

• All Authorized AKT Instructors must pay the Authorized AKT Instructor Subscription Fee, however you (or your Designated Operator) are not required to do so unless you are also serving as an Authorized AKT Instructor.

10.  Technology Fee:  while AKT does not currently charge a Technology Fee to cover certain costs, AKT 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.

11.  Performance Software Fee:  then-current fee charged by AKT’s approved supplier (the “Performance Software Fee”). AKT does not currently charge a Performance Software Fee, but reserves the right to charge its then-current Performance Software Fee in the future.

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

• AKT reserves the right to collect a Performance Software Fee in connection with the ongoing cost of providing, maintaining, and implementing data tracking hardware and software.

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 AKT’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 AKT 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 of Gross Revenue for the audited or reviewed period of 2% or more.

17.  Mystery Shopper and Other Quality Control Programs:  currently, AKT 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 AKT 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/year to help defray the costs of such programs that are designed to preserve the goodwill and brand image.

18.  Late Fees:  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.

• AKT may also require you to pay an administrative fee of $50 for each late payment or late report.

19.  Penalty Fee:  then-current fee charged by AKT; currently, $100 for each day of non-compliance

• 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 any fitness instruction or other Approved Services before they complete AKT University, or (b) offering or selling any unauthorized products or services at your Studio, including provision of the AKT University without an approved Master Trainer.

• The Penalty Fee will be incurred during each day of non-compliance.

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

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

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

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

22.  Alternative Supplier Approval:  $500 per day for personnel engaged in evaluating a supplier

• Due Date:  At time of request.

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

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

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

24.  Regional Cooperative:  as the Cooperative determines

• Due Date:  As the Cooperative determines.

• AKT 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.

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