Franchise Costs: Detailed Estimates of Premier Martial Arts Franchise Costs (2021 FDD)

Detailed Estimates of Premier Martial Arts Franchise Costs Based on Item 7 (Estimated Initial Investment) of Premier Martial Arts’ 2021 Franchise Disclosure Document

• For the estimated range of costs, Premier Franchising Group, LLC relied on its predecessor’s (PMAI) experience in the Martial Arts industry and the experience of its franchisees to date.

1.  Franchise Fee:  $49,500

2.  Optional Pre-Sale/Grand Opening Coordinator Fee:  $0 to $1,000

3.  Studio Pro:  $248

• The $248 fee to Studio Pro for a single PMA Studio consists of a $49 set-up fee and a $199 fee for its first month’s subscription.

4.  Franchise Resource Accounting – First Month and Setup:  $450 to $735

5.  Grand Opening Advertising Expenditures:  $10,000 to $15,000

6.  Lease Payments – 2 Months’ Rent/Deposit:  $4,640 to $10,119

7.  Leasehold Improvements:  $969 to $80,000

• Premier Martial Arts’ model is that you lease and remodel an existing building to a PMA Studio. This estimate assumes 13 monthly lease payments of $2,500 to $5,000 per month.

• The low (1,200 sq. ft.) and high (1,600 sq. ft.) range assumes the landlord includes leasehold improvement costs in the rent (TI). The low range assumes little out of pocket leasehold improvements are necessary. The high range assumes up to $59,034 in leasehold improvements are needed, which are not included in Tenant Improvement (“TI”).

• Premier Martial Arts assumes approximately 0% to 50% of leasehold improvements may be included in TI. In some instances, leasehold improvements could be up to $80,000 if there is no TI in the lease arrangement.

• Further, there may be an increase in construction materials in 2021 and the leasehold improvement cost can vary due to the experience and quality of the contractors engaged.

• Premier Martial Arts does not recommend or estimate the cost of purchasing a building, constructing a building, or paying cash for leasehold improvements.

• PMA Studios are generally located in strip malls and shopping centers or in line spaces, and require from 1,200 to 1,600 square feet. The rental rate will generally be between $20 and $30 per square foot, including build-out allowance. The monthly rental for your franchised location may include common area maintenance fees and real estate taxes.

• The amount indicated also includes a one-month advanced rental payment, security deposit, and prepaid expenses.

• These estimates are based upon both Premier Martial Arts’ predecessor’s experience in Tennessee where its PMA Studios are currently located, and its franchisees’ experience in various markets.

• While Premier Martial Arts recommends you negotiate with the landlord to obtain 3 to 6 months of free rent, you must be prepared to pay rent prior to opening of the PMA Studio.

• If you are under the Conversion Program, Premier Martial Arts assumes you do not incur the cost to move locations and negotiate a new lease.

• These estimates assume real estate broker fees are included in the rent.

8.  Licenses, Architectural, and Engineering Fees:  $2,500 to $9,800

• You will need to obtain licenses, bonds, and other approvals needed, and may have an architect and engineer as necessary to build-out or remodel the site for your PMA Studio.

• If you are under the Conversion Program, your Site may already be suitable and require little additional build-out.

9.  Wages, Travel, and Living Expenses for You and Your Manager During Training:  $577 to $6,892

• This is based on two trainees for one week. You must pay for the salaries, benefits, travel expenses, and other expenses while you and your Manager attend the training program. This also includes meals and expenses during the Opening Team’s visit.

10.  Furniture, Fixtures, Point of Sale/Proprietary Software, and Equipment and Supplies:  $15,897 to $20,325

• The equipment and supplies necessary for operation will include mats, uniforms, chairs, desk, printer, counter, and lobby furniture. Premier Martial Arts will provide the initial drawings of your space that you can provide locally to an architect for engineering and/or stamped drawings, depending on code requirements in your area.

• Your furniture, fixtures, equipment (FFE) (Martial Arts and other), and signs may be financed through a bank or other financial institution, leased, or purchased outright. If you cannot obtain leasing/financing, the low range of your estimated initial investment will increase by this amount.

11.  Computer System and Audio Visual/IT:  $3,407 to $4,677

• The Computer System ranges from $3,407 to $4,677. This item also includes the computers, iPad, credit card swipe and chip processor, barcode scanner, printer, Sonos speakers, and Swann camera system.

12.  Signs:  $6,829 to $12,815

• You must purchase signs that meet Premier Martial Arts’ System Standards. Required signage includes channel letters, monument, and other signage available and must adhere to Premier Martial Arts’ design specifications.

13.  Initial Inventory and Supplies:  $786 to $24,271

• You may need to purchase inventory for resale and consumable supplies (which require replenishing – these are not durable equipment or fixtures) to operate your PMA Studio, including branded items, Martial Arts equipment, logoware, which Premier Martial Arts requires you to purchase from it, its affiliates, or Approved Suppliers.

14.  Employee Salaries – Pre-Sales:  $9,867 to $35,845

• You will need to hire employees and pay salaries to staff of the PMA Studio. This assumes 2 people during the pre-sale period (1 to 3 months prior to opening), and 2 people after opening, and Martial Arts instructors paid on a per class basis.

15.  Optional Construction and Project Management Services:  $0 to $15,000

• Premier Martial Arts designates your minimum required Grand Opening Advertising Expenditures in Exhibit A to your Franchise Agreement when you sign it, or after you select a Site. You must spend a minimum of the amount Premier Martial Arts designates between $10,000 to $15,000 on pre-sale advertising for the Grand Opening Program for your PMA Studio.

• Conversion Program franchisees usually do not need to do so.

• Both ranges assume you utilize a Pre-Sale/Grand Opening Coordinator. The expense reimbursements associated with the Pre-Sale Grand Opening Coordinator are included in the miscellaneous costs in the Additional Funds category.

• Franchisees have the option of engaging a third-party vendor for real estate and project management services. Premier Martial Arts’ preferred vendor is currently RPM. However, Premier Martial Arts may offer additional vendor recommendations in the future.

16.  Digital Footprint Creation:  $750

• Premier Martial Arts or its affiliate, PMAI, will create your “digital footprint” prior to the opening of your PMA Studio. This includes your website, digital marketing setup, Facebook pages, and other social media presence.

17.  Business Liability Insurance – Initial Installment:  $120 to $1,917

• You must purchase insurance that meets Premier Martial Arts’ minimum standards. Insurance premiums are dependent upon requirements of the state in which your franchise is located, the amount of your payroll, and other factors.

• This estimate is for your initial 1st quarter premiums. These fees are usually incurred annually or quarterly (sometimes monthly).

18.  Legal and Accounting Fees:  $1,936 to $13,576

• Your legal and accounting fees vary based on your needs. Assumes $500 to $1,000 for each of legal and accounting, if you hire an attorney or accountant. The low range assumes you do not do so.

19.  Additional Funds – Working Capital:  $0 to $15,767

• The disclosure laws require Premier Martial Arts to include this estimate of all costs to operate your franchise during the “initial phase” of your business. Premier Martial Arts defines the initial phase as 3 to 12 months. This initial investment period begins when you sign the Franchise Agreement and ends following the first month the PMA Studio is open and in operation (and assumes your PMA Studio is opened within either 2 months or 12 months following the signing of the Franchise Agreement).

• These figures are estimates, and Premier Martial Arts cannot guarantee that you will not have additional expenses or a longer initial phase starting the business.

20.  Total:  $108,476 to $318,237