Detailed Estimates of Hotworx Franchise Costs Based on Item 7 (Estimated Initial Investment) of Hotworx’s 2021 Franchise Disclosure Document
For a Single Hotworx Studio (Traditional or Express)
- Estimates are based on a single unit.
1. Initial Franchise Fee: $12,950 to $19,950
- You must pay Hotworx an initial franchise fee of $12,950 for an express studio model which is 5 saunas only or $19,950 for a location with more than 5 saunas (traditional studio). These fees are non-refundable.
2. Sauna and Workout Equipment, Computer, Phone and Internet Equipment, Exterior Signage, Security Cameras, Water Fountain, Vending Machine, Chairs, and Washer/Dryer: $84,650 to $133,600
- All studios are required to have the minimum required equipment mix.
- The low estimate represents 5 saunas. The high estimate represents 8 saunas.
- This amount does not include the cost for shipping, installation, or taxes.
- Hotworx’s estimate for equipment assumes you buy all the equipment.
- The vending machine is required.
- If you choose not to buy your equipment, you may choose to lease the equipment through a third-party lender, if leasing is available to you. Item 7 figures do not include any expenses related to your leasing arrangements with third parties.
3. Leasehold Improvements: $15,000 to $65,000
- The high estimate is based on a studio with an estimated 2,000 square foot studio including landlord participation (in the form of actual landlord improvements performed or tenant improvement allowance).
- This estimated range assumes actual landlord improvements or a tenant improvement allowance of a range of $65,000 to $160,000.
- You will likely need to negotiate with your landlord and contractors to keep your costs within budget.
- This estimated range will vary depending on the location, necessary leasehold improvements, and landlord participation and condition of location space, including whether electrical and HVAC component upgrades are necessary.
- Hotworx reserves the right to reject proposed lease sites if the estimated build out exceeds the stated estimate.
4. CAD Fee/Engineering and Architect Fees: $3,200 to $12,000
- Some states may require review of studio plans by an architect or engineer. In this event, in addition to the CAD fee that shall be paid to Hotworx, Hotworx will incur additional architectural and/or engineering fees to be paid by its selected architectural/engineering professional.
- This estimated range will vary depending on the geographic location and condition of location space, and fees or rate structure of your selected engineering and/or architectural professional.
5. Trade Dress Items and Finish Out: $28,000 to $45,000
- Trade dress and finish out items consist of millwork (including service stand and retail display), lighting, flooring, and interior branding components/signage.
6. Utility, Phone, Real Estate, and Real Estate Lease Deposits: $5,000 to $19,000
- Some landlords may require a deposit of first and last month’s rent and/or a percentage of additional monthly charges. Deposits on utilities will also vary. Deposits will vary based on the market rental rates for your market and what you are able to negotiate with your landlord.
- This rent estimate is based on you negotiating for free rent for the approximately 5 months between signing a lease and opening. If you are unable to negotiate for said free rent, then your real estate cost will be higher.
7. Insurance Initial Payment: $3,500 to $7,000
- At a minimum, you will need to obtain Commercial General Liability, broad form contractual, property liability, and professional liability with annual limits of $1 million per occurrence and $3 million annual aggregate.
- You will also need business interruption coverage with annual limits of at least $300,000.
- You will also need both builder’s risk coverage and tenant improvement and betterment coverage each sufficient to cover the cost of build-out and any landlord participation.
- You will also need to obtain contents coverage with annual limits of up to $210,000 depending on the number of saunas purchased and size of studio.
- Flood contents coverage is highly recommended but not required by Hotworx.
- This is an annual estimate, though whether premiums are paid annually or in installments will depend on the insurance provider.
- This estimate does not include insurance premiums or limits for worker’s compensation and/or automobile liability insurance.
- This range is an estimate only and may vary depending on your location and other rating factors considered by the insurance provider.
8. Printing, Marketing, and Advertising: $10,000
- You are required to invest this amount in marketing during your pre-sale and through the initial opening of your studio. You may spend additional amounts with Hotworx’s approval.
- This estimate also includes an allocation for initial printed supplies.
- Should the duration of your pre-sale exceed Hotworx’s standard pre-sale timeline, you may spend more than this estimated amount due to monthly local advertising budget requirements.
9. Wholesale Goods/Inventory to Begin Operating: $20,000
- You will be required to purchase a specified amount of wholesale goods for the initial inventory of products to be offered for sale based on the size of your studio. A selection of Hotworx’s proprietary branded products and other branded products must be stocked.
10. Professional Fees: $1,000 to $3,000
- These fees may include inspection fees, occupational licenses, financing administrative and/or application fees, and legal fees associated with business entity set-up and lease review.
11. Additional Funds During Startup Period (such as for first three months, initial operations, and working capital): $12,500 to $35,500
- You will need additional funds during the start-up phase of your business to pay employees, purchase supplies, and pay other expenses, such as monthly rent, POS fees, and SAIL fee.
- Hotworx estimates the start-up phase to be 3 months from the date you open for business.
- These amounts do not include any estimates for debt service or amounts for the owner(s) salary or draw.
- You must also pay the Royalty Fees and other related fees described in Item 6 of the disclosure document.
- These figures are estimates, and Hotworx cannot assure you that you will not have additional expenses. Your actual costs will depend on factors like your management skills, experience, and business acumen. You should base your estimated start-up expenses on the anticipated costs in your market and consider whether you will need additional cash reserves.
- These figures are based on Hotworx’s affiliate’s experience operating a similar studio in Oxford, Mississippi and Marrero, Louisiana. Hotworx recommends that you have additional funds available to fund your studio.
12. Out-of-Pocket Initial Training Expenses (including travel and lodging): $600 to $3,500
- This includes expenses associated with attending training as well as travel and accommodations for the required on-site training. Additionally, these include expenses associated with accessing and using G-Suite (training and communication platform).
13. Totals: $196,400 to $373,550