Detailed Information on Club Pilates’ Initial Franchise Fee, Royalty Fee + 24 Other Fees (Items 5 and 6, 2021 FDD)
- All fees are imposed by and are payable to Club Pilates, unless otherwise noted. No other fees or payments are to be paid to Club Pilates, and it does not currently impose and collect any other fees or payments for any third party.
- Any fees paid to Club Pilates are nonrefundable unless otherwise noted. Fees payable to third parties may be refundable based on your individual arrangements.
1. Initial Franchise Fee: $60,000
- You must pay to Club Pilates a lump sum initial franchise fee of $60,000 (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 Club Pilates upon payment and is not refundable, in whole or in part, under any circumstances.
- Except as disclosed here, Club Pilates uniformly imposes the Initial Franchise Fee on all parties that are purchasing a single Franchised Business.
2. Furniture and Fixture Package: $27,300 to $36,700
- As part of the standard franchise offering, you must pay Club Pilates to provide (or arrange for its Approved Suppliers to provide) you with the following prior to the opening of your Studio: (i) a Studio fixture package comprised of a desk, displays and display rack, storage cubbies, pedestals, and 1 Barre package; (ii) other items related to the outfitting and design and buildout of your Studio; and (iii) the installation and transportation of the foregoing items, as well as the other Exercise Equipment Package that Club Pilates assumes and expects you will lease from a third-party Approved Supplier (collectively, these products and services will be referred to as the “Furniture and Fixture Package”).
3. Proprietary Initial Inventory Kit: $12,000
- Prior to opening your Studio, you must purchase the following from Club Pilates: (i) opening inventory that includes branded apparel, including t‐shirts, yoga pants, toe socks, and related accessories; and (ii) a pre‐sale start‐up package that typically includes (a) marketing and promotional items such as a branded EZ Up tent, feather flags, and a portable reformer to be utilized in conjunction with your pre-opening support program, and (b) branded apparel that is specific to the location of your Studio (collectively, the “Proprietary Initial Inventory Kit”).
- The cost of the Proprietary Initial Inventory Kit is $12,000, which Club Pilates may require you pay to it immediately upon execution of your Franchise Agreement.
4. Orientation Program Fee(s) in Connection with Initial Instructor Personnel: $200 to $1,600
- You must ensure that your initial staff of Authorized Instructors attends and completes the appropriate Orientation Program training before the opening of your franchised Studio. This training will take place at one of Club Pilates’ corporate training facilities, which currently has a program tuition fee amounting to $200 per instructor (the “Orientation Program Fee”).
- As such, Club Pilates estimates that you will pay to it between $200 and $1,600, depending on how many Instructors you determine to send to receive this Orientation Program, prior to the opening of your franchised Studio.
5. Development Agreement: depends on the number of Franchised Businesses Club Pilates grants you the right to open within the Development Area
- If Club Pilates awards you the right to develop three or more Franchised Businesses within a given Development Area, you must pay Club Pilates a one-time Development Fee upon execution of your Development Agreement.
- Your Development Fee will depend on the number of Franchised Businesses Club Pilates grants you the right to open within the Development Area, and is calculated as follows: (i) $45,000 per Franchised Business if you agree to open and operate between three and five Franchised Businesses; (ii) $40,000 per Franchised Business if you agree to open and operate between six and nine Franchised Businesses; and (iii) $35,000 per Franchised Business if you agree to open and operate 10 or more Franchised Businesses.
- You will be required to enter into Club Pilates’ 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 an Initial Franchise Fee at the time you execute each of these Franchise Agreements.
- If you enter into a Development Agreement, you must execute Club Pilates’ current form of Franchise Agreement for the first Studio that Club Pilates grants you the right to open within your Development Area concurrently with the Development Agreement.
- Your Development Fee will be deemed fully earned upon payment, and is not refundable under any circumstances. The Development Fee described above is calculated and applied uniformly to all Club Pilates franchisees.
6. Royalty: 7% of Gross Sales generated by your Franchised Business over the relevant reporting period
- Due Date: Payable weekly via electronic funds transfer (“EFT”) based on the Gross Sales of your Franchised Business during the preceding business week.
- You will be required to start paying your Royalty once your Franchised Business begins collecting revenue from operations.
- Club Pilates reserves the right to collect your Royalty on a different interval (for example, monthly).
7. Contributions to Brand Development Fund: currently, 2% of Gross Sales
- Due Date: Payable weekly at the same time and in the same manner as the Royalty.
- Your Fund Contributions will begin when the Studio begins collecting revenue from operations.
8. Local Advertising Requirement: you must expend a minimum of $1,500 per month (the “Local Advertising Requirement”) on the local advertising and promotion of your franchised Studio
- Due Date: As arranged or incurred.
- This is the minimum amount you must expend on the local advertising and promotion of your Studio within the Designated Territory awarded under your Franchise Agreement. Club Pilates encourages you to expend additional amounts on promoting and advertising your Franchised Business as you and your business advisors determine appropriate.
9. Orientation Program: then-current program fee; currently, $200 per Instructor
- Due Date: As incurred.
- You must have at least 1 individual who meets the Instructor Eligibility Criteria (which may be you or your Designated Operator) attend and complete Club Pilates’ Orientation Program, also known as Bridge Training (which is for your instructors, whom Club Pilates assumes already meet the Instructor Eligibility Criteria, as part of the standard franchise offering).
- You will be responsible for the costs and expenses associated with completing the Orientation Program (e.g., employee payroll expenses and Orientation Program Fee).
10. Teacher Training Program Fee: $2,000 per person
- Due Date: Prior to training.
- This fee is only payable to Club Pilates in connection with each individual that does not meet the Instructor Eligibility Criteria, but wishes to obtain instruction necessary to meet the Instructor Eligibility Criteria.
- If an individual wishes to attend the Teacher Training Program at your Studio, then they will pay a single fee to Club Pilates’ approved third-party provider of $4,750, with (a) $2,000 going to Club Pilates for certain materials that it provides in connection with this training (including the “Webinar Training”), and (b) the balance of $2,750 going to your Franchised Business (or the appropriate Studio that will be providing the in-person instruction).
- In order to provide the Teacher Training Program at your Studio, such training will need to be provided by an instructor that (a) meets the Instructor Eligibility Criteria and has completed Club Pilates’ Orientation Program, and (b) is otherwise approved by Club Pilates as a “Master Instructor.” Please note that Club Pilates’ then-current criteria and conditions for an individual who meets the Instructor Eligibility Criteria and has completed the Orientation Program to also become a Master Instructor will be set forth in Club Pilates’ Operations Manual.
- If you are not able to provide the Teacher Training Program, then Club Pilates will advise you of the Studio closest to your Franchised Business that can provide such instruction to interested clientele.
11. Ongoing/Refresher Training: then-current training fee, which is currently $500 per day per trainer
- Due Date: Prior to training.
- This fee is paid in connection with additional training/instruction that Club Pilates may provide on an ongoing basis in connection with the overall operation and development of your Studio.
- Club Pilates will only charge this fee in connection with training that (a) you request Club Pilates provide, or (b) Club Pilates is required to provide on-site at your Franchised Business.
- Club Pilates will not charge this fee in connection with training that it requires you to attend at its corporate headquarters or other training facility it designates.
- Club Pilates will not charge any training fee in connection with minor, day-to-day assistance that it provides remotely over the phone or via email, subject to its availability.
- In addition to Club Pilates’ 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.
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 Club Pilates’ then-current standards and image.
13. Transfer Fee (Franchise Agreement and Development Agreement): $10,000
- Due Date: Upon your application for Club Pilates’ approval of any proposed transfer.
- Instead of the standard transfer fee, Club Pilates will only charge an administrative fee amounting to: (i) $500 if you are an individual franchisee and assigning your Franchise and/or Development Agreements rights to an entity that you fully own; or (ii) $1,500 if the assignment is from an existing System franchisee to another immediate family member.
- Payment of the transfer fee is one (1) of the conditions you must satisfy in order to assign an interest in your Franchise Agreement, franchised business, and/or you (if you are a business entity). There are various other terms and conditions upon which Club Pilates may condition its approval or consent to any such transfer.
14. Technology Fee: Club Pilates’ then‐current technology fee for the technology services it provides as part of the System (the “Technology Fee”); currently, $150/month
- Due Date: Payable monthly at the same time and in the same manner as the Royalty.
- Club Pilates charges you an on-going Technology Fee to help cover the costs and expenses associated with developing, implementing, licensing, or otherwise using and integrating the technology it determines appropriate to provide as part of the System or otherwise in connection with your Franchised Business and/or Studio network.
15. Relocation Fee: $5,000
- Due Date: Upon submission of a proposal to relocate.
- You will not be permitted to relocate your Studio without Club Pilates’ prior written approval, which may be withheld in its discretion.
- Club Pilates reserves the right to assess a relocation fee of $5,000 at the time you submit the proposed location for your relocated Studio.
- Generally, Club Pilates does not approve requests to relocate your Studio after a site selection has been made and you have opened for business unless (a) it is due to extreme or unusual events beyond your control, and (b) you are not in default of your Franchise Agreement.
- If Club Pilates approves your relocation request, it retains the right to approve your new site location in the same manner and under the same terms that are applied to your first site selection.
16. Music Licensing: actual cost of licensing and royalty payments
- Due Date: Upon demand.
- You must make payments to performing rights organizations for licenses from songwriters and composers as well as pay royalties due to record labels.
17. Insurance Policies: Amount of unpaid premium. Club Pilates’ estimate for 3 mos. of the minimum required insurance is $900 to $2,500.
- Due Date: As agreed.
- Payable only if you fail to maintain required insurance coverage and Club Pilates elects to obtain coverage for you.
- The minimum limits for coverage under many policies will vary depending on several factors, including the size of your Studio, and whether you offer classes.
18. Audit Fees: costs incurred by Club Pilates in connection with conducting audit. Currently, Club Pilates estimates that such costs will typically be between $500 to $2,500 (plus costs of any travel).
- Due Date: Within 15 calendar days after receipt of audit report.
- Payable only if audit shows an understatement.
19. Late Fees: the greater of (a) the highest applicable legal rate for open account business credit, or (b) 1.5% per month
- Due Date: Upon demand.
- Applies to all amounts not paid when due, until paid in full. Club Pilates may also require you to pay an administrative fee of $50 for each late payment or late report.
20. Penalty Fee: then-current fee charged by Club Pilates; 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 Pilates instruction or other Approved Services before they complete the Orientation Program, or (b) offering or selling any unauthorized products or services at your Studio.
- The Penalty Fee will be incurred during each day of non-compliance.
21. Cost of Enforcement or Defense: all costs including attorneys’ fees
- Due Date: Upon settlement or conclusion of claim or action.
- You will reimburse Club Pilates for all costs in enforcing your obligations concerning the Franchise Agreement if it prevails.
22. 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 Club Pilates harmless against suits involving damages resulting from your operation of the Studio.
23. Alternative Supplier Approval: $1,500 per day for personnel engaged in evaluating a supplier
- Due Date: At time of request.
- Additionally, you must reimburse Club Pilates for any travel, accommodations, and meal expenses.
- You may request the approval of an item, product, service, or supplier. Club Pilates may require you to pre-pay any reasonable charges connected with its review and evaluation of any proposal.
24. Studio Management Software Fee: then-current fee charged by Club Pilates’ Approved Supplier for such Studio management software; currently, approximately $269/month
- Due Date: Payable every 4 weeks, as agreed.
- Club Pilates will make available to you a business management software program that you will download onto your computer and use in the operation of your Studio. Currently, the approved and required software for use in the Studio is “ClubReady,” an online/web based business management program.
- You will pay the third party vendor directly for all fees associated with the use of the software.
- Club Pilates has the right to access any and all information stored in the program that pertains to the Studio through file transfer protocol or polling through the Internet, at its discretion.
25. Regional Cooperative: as the Cooperative determines
- Due Date: As the Cooperative determines.
- Club Pilates 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.
26. 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 Club Pilates liquidated damages in the amount of $10,000, to compensate it for the breach and related damage to the System.