Club Pilates Franchise Costs: Estimated Initial Investment (Item 7, 2021 FDD)
For a Studio
- This Item 7 assumes and expects that you will (a) lease the Exercise Equipment Package, and (b) timely perform all pre-opening obligations and open and commence operations of your Studio within the time periods prescribed in your Franchise Agreement.
1. Initial Franchise Fee: $60,000
- The Initial Franchise Fee is non-refundable. The Initial Franchise Fee for a single studio is $60,000. The franchisor does not provide financing for the Initial Franchise Fee.
2. Initial Training Program (Fees): $0
3. Travel and Living Expenses While Training: $500 to $3,000
- You (or, if you are an entity, your Designated Operator) must attend the franchisor’s proprietary Initial Training Program. The franchisor will not charge any tuition or training fee in connection with your attendance at the Initial Training Program, provided all individuals attend at the same time.
- The estimate assumes that you (or your Designated Operator) will attend the Initial Training Program, and you will be responsible for the costs and expenses associated with attending the Initial Training Program (e.g., transportation, meals, lodging, and other expenses).
4. Real Estate/Lease: $7,000 to $35,000
- If you do not own adequate Studio space, you must lease suitable premises. These figures assume that the leased premises will be approximately 1,500 square feet.
- Landlords may also vary the base rental rate, and charge rent based on a percentage of gross sales.
- In addition to base rent, the lease may require you to pay common area maintenance charges, your pro rata share of the real estate taxes and insurance, and your pro rata share of HVAC and trash removal.
- The estimate covers the first 3 months of operation, and 1 month’s rent as a security deposit.
5. Leasehold Improvements: $21,000 to $128,000
- The cost of leasehold improvements will vary depending on (i) the size and configuration of the premises; (ii) pre-construction costs (e.g. demolition of existing walls and removal of existing improvements and fixtures); and (iii) cost of materials and labor which may vary based on geography and location.
- For clarity, the estimates presented herein are net of tenant improvement amounts incurred by the landlord.
- The low end of the range reflects modest improvements to a smaller location, and the high end reflects significant physical improvements to a larger Studio.
- This estimate also includes amounts you may expend in connection with architect services and utility deposits. The range of costs also covers the expense to acquire the required local business licenses and permits.
- The franchisor makes no representations or assurances as to what (if any) licenses, permits, authorizations, or otherwise may be required in connection with your Studio. The franchisor’s estimated costs include building permits, fire inspection, sales tax permit, retail sales permits, and certain music licenses, which could increase depending on the selection of music played in the Studio.
- You should investigate applicable requirements in your area and the related costs, including receiving advice from regulatory agencies and your own lawyer, before making any commitments, whether to the franchisor or anyone else.
6. Signage: $10,000 to $18,000
- You will need to purchase appropriate signage for your Studio that the franchisor approves.
- The cost of your signage may be more or less than this estimate, and depends on the size, type, and method of installation you choose.
- Each landlord has different restrictions it places on interior and exterior signage that may affect your costs.
7. Insurance: $900 to $2,500
- This estimate is for 3 months of your minimum required insurance, using the franchisor’s required or approved third-party vendor.
8. Payments in Connection with Pilates and Other Exercise Equipment: $7,600
- The standard franchise offering assumes and expects that a new System franchisee will lease the required Pilates and other exercise equipment necessary to open and initially commence operations. As such, the range above is designated to capture and account for (a) the typical deposit, and (b) lease (or comparable installment) payments you make to a third-party provider the franchisor approves (the franchisor has pre-approved several as of the Issue Date of the Disclosure Document) to lease this equipment.
- The initial required amount of Pilates and other exercise equipment for a standard Studio is typically comprised of a package that is comparable to the following: 13 Pilates Reformers, a Pilates Ballet Bar Kit, 13 Spring Boards, 13 EXO Chairs, 13 TRX units, and smaller pieces of related exercise equipment (e.g., balls, mats, etc.) – but the franchisor may raise or lower this requirement depending on the size of your Studio.
- If you determine not to follow the System-recommended practice of leasing this equipment associated with the standard franchise offering described above, the estimated cost to purchase this equipment outright will be substantially more (approximately $78,881 to $86,881) and will be paid to the franchisor or its designated supplier of such equipment.
9. Retail Inventory Package for Presale and Soft Opening: $12,000
- This estimate is the cost associated with acquiring the following proprietary and required items: (i) a pre-sale start-up package, which is approximately $7,500 and is comprised 0f (a) your pre-opening sales marketing plan that is designed to generate clientele memberships and other sales prior to the opening of your Studio as Club Pilates approves or designates via the Opening Support Program, and (b) other pre-opening and initial launch promotional items; and (ii) opening stock of retail inventory, which is approximately $4,500 and includes items such as branded apparel, including t-shirts, yoga pants, and related accessories.
- The entire Package must be purchased and used at one time. In the event any part of the Package is comprised of a gift card, that gift card must be redeemed for required or other Approved Products by you prior to your opening.
10. Professional Fees: $4,500
- This estimate is designed to cover the legal and other professional fees associated with securing an approved premises, including appropriate lease negotiations based on estimates the franchisor has received from a panel of legal professionals that have experience working with Club Pilates’ System franchisees (and those of its affiliate franchisors) in connection with such negotiations and associated pre-opening legal work.
- The franchisor does not require that you use one of the approved providers on this panel, but it recommends you do so and provides this information as part of the System as a resource.
11. Furniture, Fixtures, and Related Supplies: $17,500 to $19,500
- This is a range of expenses that will be incurred when decorating and furnishing the Studio.
- Both the low-end and the high-end numbers represent a straight, outright purchase of the furniture, fixtures, and related items comprising this package (rather than leasing or making installment payments on these items).
12. Computer System and Related Components: $2,500 to $3,500
- You must acquire a personal computer, a printer, and a Point-of-Sale system for use in the operation of the Studio. Your computer system must be equipped with a high speed connection to the Internet and must include a local area network with a dedicated server.
- You can expect initial cash outlays to be lower if the items can be leased rather than purchased.
- In addition, this estimate includes certain related equipment (e.g. tablets, etc.) as well as the costs associated with at least one surveillance camera to be installed for use at the Studio.
13. Initial Marketing Spend (including amounts on Opening Support Program): $15,000
- You are required to expend this “Initial Marketing Spend” in coordination with the pre-opening sales plan the franchisor approves or designates for your Studio as part of the opening support program that the franchisor’s approved supplier provides in connection with your Studio, as the franchisor determines appropriate in its discretion (the “Opening Support Program”).
- Typically, the franchisor expects your Opening Support Program to commence prior to the “soft opening” of your franchised Studio through your actual opening of the Studio. These funds must be expended on your Opening Support Program and any other pre-opening marketing and/or advertising activities the franchisor designates.
- This estimate is in addition to your required contributions to the Fund.
14. Shipping: $4,300 to $9,200
- The franchisor arranges for the shipping of all of your equipment and furniture/fixtures. These amounts will vary based upon the geographic location of your Studio.
15. Installation: $5,500 to $8,000
16. Orientation Program Fee: $200 to $1,600
- The franchisor’s Orientation Program or “Bridge Training” is an instructor onboarding training. It is for all instructors you and other System franchisees engage to work at a franchised Studio location. Bridge Training is not a Pilates certification nor is it meant to fill in gaps for non-comprehensive instructors.
- The franchise offering assumes that any prospective Authorized Instructor you wish to involve in your Studio operations will already meet the Instructor Eligibility Criteria prior to any involvement with your Studio.
- The instructor will complete onboard training videos, online training, and a training manual prepared specifically for Bridge Training. They will be required to complete a video test out that will be reviewed by the franchisor for specific feedback about the instructor to complete the training.
17. Tech Fee(s) – 3 Months and 1 Month Prior to Opening: $600
- This estimate is designed to cover the franchisor’s current Technology Fee obligations prior to opening and over the first 3 months of operation, for a total of four 4 months of payments. As of the Issue Date of the Disclosure Document, this fee amounts to $150/month.
18. Additional Funds – 3 Months: $10,000 to $40,000
- This is an estimate of certain funds needed to cover your business (not personal) expenses during the first 3 months of operation of the Studio.
- These expenses include initial personnel wages, management compensation (but not any draw or salary for you), ongoing purchases of equipment and supplies, continuing improvement of the Studio’s physical features, utilities, repairs, and maintenance, as well as payments due to use under your Franchise Agreement.
- This estimate is based on the experience of the franchisor and its affiliates in owning and operating Club Pilates Studios for more than 10 years, as well as the experience of Club Pilates’s (a) franchisees, and (b) affiliate franchisors’ experience with their respective brands.
19. Total Estimated Initial Investment: $179,100 to $368,000
- All of the above figures are estimates of certain initial start-up expenses. The franchisor cannot guarantee that you will not have additional expenses in starting or operating the Studio.