FDD Talk 2021: Premier Martial Arts Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Premier Martial Arts franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Premier Martial Arts franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Premier Martial Arts franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Premier Martial Arts outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Premier Martial Arts’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2019 average gross revenue, cost of goods sold – product, bank fees + merchant charges, total marketing/advertising, rent, insurance, total supplies, total payroll, telephone, internet, cable, utilities, royalties, system development fees, and net income for the top 1/3, middle 1/3, and bottom 1/3 Premier Martial Arts studios that were open for all of 2019

• 2020 average gross revenue, cost of goods sold – product, bank fees + merchant charges, total marketing/advertising, rent, insurance, total supplies, total payroll, telephone, internet, cable, utilities, royalties, system development fees, and net income for the top 1/3, middle 1/3, and bottom 1/3 Premier Martial Arts studios that were open for all of 2020

• average number of presold students and number of weeks of presales for the Premier Martial Arts studios that opened for business in 2020

• average total general contractor contract amount, tenant improvement allowance, leasehold improvement cost, square footage, net cost per square foot, monthly rent before CAM NNN, and number of free months rent for the Premier Martial Arts studios that opened for business in 2020

Section I – Background Information

17 Things You Need to Know About the Premier Martial Arts Franchise

Launches New Franchise Development Website

1.  At the end of February 2020, Premier Martial Arts launched a new franchise development website. With 100+ locations in the U.S., as well as several schools around the world, Premier Martial Arts said that it was ready for nationwide expansion.

2.  Premier Martial Arts’ simple-to-run, easy-to-scale business model emphasizes profitability and financial success, as well as providing students aged 6 and up with the best martial arts experience in their community. Led by visionary martial artists Barry Van Over and Myles Baker, who have helped hundreds of martial arts business owners increase their profitability, Premier Martial Arts is a winning opportunity with a low cost of ownership.

3.  In order to facilitate rapid nationwide expansion, Premier Martial Arts launched a new franchise development website. The site is designed to provide interested candidates with an in-depth look into the franchise opportunity. Premier Martial Arts’ new website includes detailed information about:

• Startup costs and fees;
• What makes Premier Martial Arts stand out in the martial arts industry;
• Financial performance;
• Franchisee testimonials.

4.  In addition, candidates can watch documentary-style videos with members of Premier Martial Arts’ executive team, as well as the brand’s franchisees, to get a real sense and feel for how the business works and why so many entrepreneurs are signing up to join the brand.

Leader of the Pack in the Martial Arts Franchise World

5.  In March 2020, Premier Martial Arts founder Barry Van Over spoke about why the brand was a leader in the martial arts franchise world. With more than 100 schools in the United States, as well as branches in Canada and Great Britain, Premier Martial Arts stands as one of the world’s largest and most successful chains of franchised martial arts schools.

6.  Van Over said, “The main thing is treating your martial arts school like a business and not a hobby, which is what a lot of guys still seem to do. But many of us martial arts instructors are Type A personalities, so it can be difficult to convince some of them to change. They might be making a certain amount of money and they’d like to make more, but they’re just scared to change and [potentially] lose what they’ve got.”

7.  He continued, “But you have to be willing to make a dramatic change to get a dramatic improvement. It is easier now to convince people because we have the proof that this works. PMA has one school owner who recently grossed $90,000 in one month. We have another who once did $127,000 in a month. It shouldn’t be all about the money, but the money is a sign you’re firing on all cylinders. It shows that the students are happy and renewing with you. It’s an indicator of how things are going.”

8.  As in many martial arts schools, the majority of Premier Martial Arts students tend to be children, and instructors are coached in how to interact with youngsters as well as their parents – who often have different goals. To their credit, most Premier Martial Arts instructors learn how to satisfy the parents’ wishes, whether it’s for a child with poor attention to become more focused or for an aggressive child to become more disciplined. At the same time, the instructors strive to satisfy the kid’s main goal, which may be just to have fun.

9.  All the Premier Martial Arts schools, many of which were originally operated by consulting clients of Van Over who stayed with him through the years because they found that his full program worked brilliantly, follow the same proven model. From the beginning, students at each school are given a certain organizational structure, and they use a rotating lesson plan that includes elements of traditional karate and kata training, kicking concepts from taekwondo, weapons training, fighting skills that borrow from Muay Thai and self-defense based on Krav Maga. Instructors have the freedom to include separate classes in other arts, like Brazilian jiu-jitsu, if they wish – as long as the main lesson plan is taught to those looking for a belt ranking in the Premier Martial Arts system.

10.  Just as important, all the schools implement the same effective marketing and administrative practices. According to Van Over, marketing and having a qualified staff are two of the most important things a martial arts school owner can do to further his or her success, yet he still sees many instructors from outside the Premier Martial Arts family make those the first two things they cut when they get into financial difficulty.

11.  Van Over is quick to emphasize that success isn’t just about the number of children schools can sign up. It’s about empowering all Premier Martial Arts students through martial arts. For children, that might mean taking an 8-year-old boy who comes from a broken home and having the instructor serve as a father figure for him. It might mean taking an out-of-shape girl and getting her to enjoy exercise. For adults, it might mean taking a lonely 35-year-old who walks in off the street looking for social acceptance and making him feel as if he now belongs to a tribe that wants him there.

12.  Originally a licensing program, Premier Martial Arts decided a year ago to switch to a full franchise system. Every one of the 68 affiliated schools came with Van Over, opting to become fully franchised branches. Needless to say, a 100-percent retention rate is unusual for any organization that switches to a franchise system. But those who had been part of the Premier Martial Arts system obviously appreciated the results. Since then, the organization has grown to 120 franchises.

13.  Those new franchise owners include martial arts instructors who have converted their existing schools to the Premier Martial Arts model, as well as non-martial artists who believe that owning a Premier Martial Arts school is a sound investment. In return, Premier Martial Arts provides training in its business model and teaching method. For those investors who have no martial arts experience, Premier Martial Arts helps them recruit experienced instructors, vetting potential teachers and then placing them in a training program so they can teach the full Premier Martial Arts system.

14.  Most owners still come from the ranks of existing school owners who decide to go the conversion route, though. And for many of these struggling dojo owners, the turnaround has been remarkable. According to Van Over, “One of our guys, Tim Rook, was teaching out of daycare centers, teaching 40 or 50 kids all week long and making nothing. He called me and said he wanted to become part of Premier. Now he has one school with 400 students and just signed a lease on a second location. So what we’re doing here really does work. We’re in well over 100 locations now, and not one of our schools has left us. I intend to keep growing Premier as long as I can keep servicing all our schools the same way I’ve been servicing them since 2004.”

Company History

15.  Premier Martial Arts was founded in 2004 by Barry Van Over in Knoxville, Tennessee. Van Over opened the school using his lifelong knowledge of martial arts; Van Over has been doing martial arts since he was just nine years old. Before starting Premier Martial Arts, Van Over ran a consulting enterprise to help independent martial arts studio owners grow their businesses.

16.  The first Premier Martial Arts location was a success and Van Over opened additional locations in the Knoxville area. Over the next decade and a half, Van Over continued to open Premier Martial Arts locations and started franchising the concept in 2019. Today, there are Premier Martial Arts locations around the United States as well as a few locations in Canada and Great Britain.

Entrepreneur’s Franchise 500

17.  Premier Martial Arts did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Premier Martial Arts franchise costs, based on Item 7 of the company’s 2021 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Premier Martial Arts’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  59
• Net Change:  +59

2019

• Outlets at the Start of the Year:  59
• Outlets at the End of the Year:  65
• Net Change:  +6

2020

• Outlets at the Start of the Year:  65
• Outlets at the End of the Year:  91
• Net Change:  +26

Company-Owned

2018

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  5
• Net Change:  +5

2019

• Outlets at the Start of the Year:  5
• Outlets at the End of the Year:  5
• Net Change:  0

2020

• Outlets at the Start of the Year:  5
• Outlets at the End of the Year:  5
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

Part 1 – Average Gross Revenue, Select Expenses, and Net Income for Franchised Studios in 2019 and 2020

• The following charts include average data from 18 franchised Premier Martial Arts Studios that were open for all of 2019, and 24 franchised Premier Martial Arts Studios that were open for all of 2020.

• Premier Martial Arts had 60 franchised outlets operating for the entire year of 2019. The majority of these franchised outlets were previously licensees of Premier Martial Arts’ parent, PMAI, and then entered into Franchise Agreements with Premier Martial Arts. These franchisees do not fully operate within the franchise model offered under the current Disclosure Document. Eighteen of the franchised outlets operated during all of 2019 under this franchise model and were compliant with their Franchise Agreements. Their financial performance data is displayed below.

• During 2020, the Premier Martial Arts Studios were impacted by the COVID-19 pandemic. Some of the Premier Martial Arts Studios were required to close for periods of time. Some of the Premier Martial Arts Studios were required to operate with limited capacity. In response to the pandemic, Premier Martial Arts modified the franchise model to include significantly more online content available to members, which did not impact franchisees’ expenses.

• “Gross Revenue” is the same as “Annual Gross Sales” as defined under the Franchise Agreement, which means the total revenue derived from the sale of goods and services less sales tax, discounts, allowances, and returns.

2019

High 2019 (6 Studios)