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

• Section I – Background information on the Farrell’s eXtreme Bodyshaping franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Farrell’s eXtreme Bodyshaping 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 Farrell’s eXtreme Bodyshaping franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Farrell’s eXtreme Bodyshaping 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 Farrell’s eXtreme Bodyshaping’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2019 and 2020 average, median, highest, and lowest annual gross sales for the Farrell’s eXtreme Bodyshaping franchised 2.0 Studios, franchised 1.0 Studios, and affiliate location that were open and operating as of January 1, 2019 (for the 2019 calendar year) or January 1, 2020 (for the 2020 calendar year) and operating throughout the entirety of the calendar year at issue

• 2019 and 2020 average, median, highest, and lowest monthly gross sales for the Farrell’s eXtreme Bodyshaping franchised 2.0 Studios, franchised 1.0 Studios, and affiliate location that were open and operating as of January 1, 2019 (for the 2019 calendar year) or January 1, 2020 (for the 2020 calendar year) and operating throughout the entirety of the calendar year at issue

Section I – Background Information

18 Things You Need to Know About the Farrell’s eXtreme Bodyshaping Franchise

Founder Explains the Success of Farrell’s

1.  In early October 2021, The Daly Coach blog interviewed Lance Farrell, the founder of Farrell’s eXtreme Bodyshaping, about his business, his decision to franchise, and how Farrell’s has created such a powerful and successful brand. When asked why his fitness franchises is successful, even in a crowded market, Farrell said, “You know, when you talk about a crowded space, fitness is very crowded. There are a ton of options for people out there and a lot of really, really good options. So it is crowded there. But you got to find your niche.”

2.  “Our niche is really helping people lose body fat. So from the very, very beginning, we’ve tracked how many pounds people lose, how much body fat. And it’s been a remarkable total number for the past 20 years with 20,000 people who have gone through. We’ve helped them lose nearly 5 million pounds of body fat, and most have kept it off. So we’re very proud of that,” said Farrell.

3.  He continued, “I really didn’t have intentions of franchising in the beginning. We opened 7 stores initially in the Des Moines area. But once we moved outside of Des Moines, I went to Omaha, I went to Cedar Rapids outside of our marketing reach, and those were successful, we decided to make it a franchise. That’s how we grew to 50 plus stores, just organically. Pure organic growth.”

4.  When asked how the brand keeps its members happy and engaged, Farrell said, “Really, our thing is about evoking pride. When somebody has failed at other fitness things…they tried to lose weight, maybe they’ve tried just dieting and stuff, it hasn’t worked…We want them to come in and we want to evoke pride in them. So they look in the mirror and they feel good about who they’re looking at, and they feel good about going to work. They feel good about putting that swimsuit on. And that’s really what we want to do, is help them feel better about themselves to live that life at Level 10.”

Franchisee Adapts to New Restrictions

5.  In early January 2021, as many states began easing some COVID-19 restrictions and allowing businesses to reopen, Farrell’s eXtreme Bodyshaping in Mankato, Minnesota said that it had to rework its business model to adapt because it operates mainly through instructor-led strength training and kickboxing classes.

6.  Group fitness classes were able to resume under the Minnesota governor’s executive order, but faced new regulations such as a requirement that group classes be held in a space separated from the rest of the facility. Classes also could not exceed 10 people, including instructors.

7.  Farrell’s owner Jeremy Whiteford said the second round of shutdowns was especially hard because the fitness center was already taking precautions such as tracking who visits the gym and ensuring equipment is sanitized before and after use. Whiteford said, “It was tough because we thought we were doing right, and we weren’t seeing people with cases coming through our doors.”

8.  To adapt to the latest round of restrictions, Farrell’s had to start an open-gym concept, allowing members to do individual workouts. Members came to the gym to do a workout with a virtual instructor. It was difficult for Whiteford to be in the gym with members but not being able to lead them while group classes were prohibited.

9.  The restriction limiting gyms and fitness centers to 25% capacity also made it challenging to get everybody back in the gym. Only about 10 people could be in Farrell’s at a time to meet restrictions, which also required people to maintain 12 feet of social distancing instead of the standard 6 feet.

10.  Whiteford said the restrictions had been hardest on members because it made it more difficult for them to stay on their fitness routine. “People utilize us as stress relief,” he said, adding that not having that outlet is especially difficult amid the added pressure of the pandemic. “People have stressful lives. Taking that stress out on a bag is good.”

11.  During the first round of shutdowns in March 2020, Farrell’s began offering virtual classes so members could continue working out at home. Some adapted well to the virtual classes but others struggled, Whiteford said, because of kids at home or not having adequate equipment such as punching bags or enough space to workout. They continued to offer these classes to accommodate those who may not feel comfortable being in a gym or people who couldn’t get in due to the limited capacity.

12.  While membership hasn’t had a big decline during the pandemic, recruitment of new members was challenging. The gym typically allows people to come in for open gym and see if they like it before signing up for a membership. With gyms closed to in-person workouts for part of the year and then at limited capacity, Whiteford said it was hard to bring in prospective members.

13.  The regulations also came at a time when fitness centers usually see a spike in membership and people visiting gyms because of New Year’s resolutions and a want to get in shape after the holidays. Changing restrictions had resulted in a lot of challenges for Farrell’s, but Whiteford said they did what they could to adapt and continue supporting members. Whiteford said, “We are going to try this. We are going to make adjustments…We are providing members with what we are able to provide.”

Company History

14.  Farrell’s eXtreme Bodyshaping was founded in 2001 by Lance Farrell in Des Moines, Iowa. Farrell, who is a 6th degree black belt in Taekwondo, has always had a passion for fitness and wanted to help other people live with power and purpose.

15.  He spent many years teaching Taekwondo, and when he moved to Des Moines he opened his first fitness studio. Farrell’s fitness program was a success and he noticed that his clients not only became fitter, but they also underwent mental and spiritual transformations.

16.  Building on this success, Farrell developed a fitness program that blended the disciplines of martial arts and the principles of healthy living. Farrell developed a 10-Week Challenge program using the art of Taekwondo, the concepts of bodybuilding, and the martial arts culture of accountability.

17.  Through word of mouth, demand for Farrell’s program grew and he began franchising Farrell’s eXtreme Bodyshaping in 2007. Today, there are Farrell’s eXtreme Bodyshaping locations across more than 12 states.

Entrepreneur’s Franchise 500

18.  Farrell’s eXtreme Bodyshaping did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Farrell’s eXtreme Bodyshaping franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• Detailed information on Farrell’s eXtreme Bodyshaping’s 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:  60
• Outlets at the End of the Year:  66
• Net Change:  +6

2019

• Outlets at the Start of the Year:  66
• Outlets at the End of the Year:  65
• Net Change:  -1

2020

• Outlets at the Start of the Year:  65
• Outlets at the End of the Year:  55
• Net Change:  -10

Company-Owned

2018

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2019

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2020

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

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

• This Item 19 presents the average, median, and certain other historical Gross Sales performance information reported to Farrell’s amongst the:

• (i) franchised Studios that were open and operating as of January 1, 2019 (for the 2019 calendar year) or January 1, 2020 (for the 2020 calendar year) and operating throughout the entirety of the calendar year at issue (the “Disclosed Franchised Studios” for each calendar year); and

• (ii) the Studio that was owned and operated by Farrell’s affiliate throughout the 2020 calendar year (the “Affiliate Location”).

• Specifically, the charts below in this Item disclose this Gross Sales information reported to Farrell’s amongst:

• (i) the Disclosed Franchised Studios that were operated over the calendar year at issue utilizing Farrell’s current System standards and specifications for (a) equipment, (b) marketing and sales programs designed to generate memberships and all required ongoing marketing activities once the franchised Center has commenced operations, and (c) the provision of the Approved Services via the membership and other models that a new System franchisee will be required to comply with (each, a “2.0 Studio”); and

• (ii) the remaining Disclosed Studios that operated over the calendar year at issue in a manner that did not meet (or that deviated from) the criteria for a 2.0 Studio – and instead operated using certain older (or “legacy”) System standards and/or specifications (each, a “1.0 Model”).

• Part 1 of this Item displays the annual Gross Sales information reported amongst the 2.0 Studios and the 1.0 Studios, while Part 2 details the monthly Gross Sales information reported amongst these 2 subsets of the Disclosed Studios.

• With regards to each calendar year disclosed and discussed in the charts below (each, a “Measurement Period”), this Item 19 excludes the performance of any System Studio that was (i) not open at the start of that Measurement Period, or (ii) ceased operations permanently at some point during that Measurement Period.

• Some outlets have sold this amount. Your individual results may differ. There is no assurance that you’ll sell as much.

Part 1 – Average, Median, and Other Annual Gross Sales Information Reported for 2019 and 2020 Calendar Years Amongst the 2.0 Studios (Franchised), 1.0 Studios (Franchised), and Affiliate Location

Table 1A – 2.0 Studios (Franchised)

2019

• Average Annual Gross Sales:  $371,405
• Studios in Applicable Subset:  9
• High Annual Gross Sales:  $479,501
• Median Annual Gross Sales:  $390,259
• Low Annual Gross Sales:  $249,203
• Number of Studios That Met or Exceeded the Average:  5 (or 56%)

2020

• Average Annual Gross Sales:  $287,898
• Studios in Applicable Subset:  10
• High Annual Gross Sales:  $354,436
• Median Annual Gross Sales:  $300,088
• Low Annual Gross Sales:  $178,074
• Number of Studios That Met or Exceeded the Average:  6 (or 60%)

Table 1B – 1.0 Studios (Franchised)

2019

• Average Annual Gross Sales:  $273,315
• Studios in Applicable Subset:  42
• High Annual Gross Sales:  $578,362
• Median Annual Gross Sales:  $267,362
• Low Annual Gross Sales:  $84,051
• Number of Studios That Met or Exceeded the Average:  19 (45%)

2020

• Average Annual Gross Sales:  $194,108
• Studios in Applicable Subset:  43
• High Annual Gross Sales:  $423,743
• Median Annual Gross Sales:  $179,007
• Low Annual Gross Sales:  $60,634
• Number of Studios That Met or Exceeded the Average:  19 (44%)

Table 1C – Affiliate Location

2019

• Gross Sales for This Studio Only:  $206,240

2020

• Gross Sales for This Studio Only:  $188,811

Part 2 – Average, Median, and Other Monthly Gross Sales Information Reported for 2019 and 2020 Calendar Years Amongst the 2.0 Studios (Franchised), 1.0 Studios (Franchised), and the Affiliate Location

Table 2A – 2.0 Studios (Franchised)

2019

• Average Monthly Gross Sales:  $30,950
• Studios in Applicable Subset:  9
• High Monthly Gross Sales:  $39,958
• Median Monthly Gross Sales:  $32,522
• Low Monthly Gross Sales:  $20,767
• Number of Studios That Met or Exceeded the Average:  5 (56%)

2020

• Average Monthly Gross Sales:  $23,991
• Studios in Applicable Subset:  10
• High Monthly Gross Sales:  $29,536
• Median Monthly Gross Sales:  $25,142
• Low Monthly Gross Sales:  $14,849
• Number of Studios That Met or Exceeded the Average:  6 (60%)

Table 2B – 1.0 Studios (Franchised)

2019

• Average Monthly Gross Sales:  $22,776
• Studios in Applicable Subset:  42
• High Monthly Gross Sales:  $48,180
• Median Monthly Gross Sales:  $22,280
• Low Monthly Gross Sales:  $7,004
• Number of Studios That Met or Exceeded the Average:  19 (45%)

2020

• Average Monthly Gross Sales:  $16,176
• Studios in Applicable Subset:  43
• High Monthly Gross Sales:  $35,312
• Median Monthly Gross Sales:  $14,917
• Low Monthly Gross Sales:  $5,053
• Number of Studios That Met or Exceeded the Average:  19 (44%)

Table 2C – Affiliate Location

2019

• Average Monthly Gross Sales for This Studio Only:  $17,187

2020

• Average Monthly Gross Sales for This Studio Only:  $15,734

• The term Disclosed Studios includes all Studio locations that were open and operating over the applicable calendar year at issue.

• For each Disclosed Studio, the term “Gross Sales” means the total sales that the Studio generated from the sale of all Approved Services and Approved Products, including memberships, that a System franchisee will be authorized to offer and sell at his/her Franchised Business. The term “Gross Sales” does not include sales tax that is collected by the Studio owner and paid directly to the appropriate taxing authority.

• The term “2.0 Studios” refers to those locations which are operating under the new “Farrell’s 2.0” business model, and following brand guidelines for pricing, membership sales packages, enrollment timing, and sales strategy.

• “1.0 Studios” includes all franchise locations that are not following the new brand guidelines.

• All new System franchisees and Franchised Businesses will be required to follow the 2.0 System model as of the Issue Date of the 2021 Franchise Disclosure Document.

• The 2020 numbers reflect significant business interruption due to COVID-19. All locations in Farrell’s system were subject to mandatory shutdowns, significant capacity restrictions, and increased regulations on traffic, behavior, and hygiene protocols.

• Individual locations varied in their ability to offer virtual training; many offered members the opportunity to suspend membership fees during times they could not access the facilities. In addition to the impact on collection of membership fees from existing members, the restrictions and shutdowns also resulted in multiple months where certain Studios were unable to sell new memberships, which also impacted revenue for 2020.

• The figures contained in these tables do not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the service gross sales figures to obtain net income or profit.

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