StretchLab Franchise Costs: Estimated Initial Investment (Item 7, 2021 FDD)

1.  Initial Franchise Fee:  $60,000

• The Initial Franchise Fee is non-refundable. The Initial Franchise Fee for a single Studio is $60,000. StretchLab does not provide financing for the Initial Franchise Fee.

2.  Costs and Expenses Associated with Attending Pre-Opening Training:  $500 to $3,000

• This estimate is designed to cover the costs and expenses you might incur in connection with you (or if you are an entity, one of your operating principals you designate to be the Designated Operator for the Studio) attending and completing the required initial training.

• StretchLab will not charge you or your Designated Operator for this portion of the initial training that must completed on behalf of the franchisee/owner under your Franchise Agreement. You will be responsible for the costs and expenses associated with attending this training (e.g., transportation, meals, lodging, and other expenses).

3.  Real Estate/Lease:  $14,500 to $40,500

• If you do not own adequate Studio space, you must lease suitable premises. These figures assume that the leased premises will be approximately 1,200 square feet.

• In addition to base rent, the lease may require you to pay common area maintenance charges (“CAM Charges”), your pro rata share of the real estate taxes and insurance, and your pro rata share of HVAC and trash removal, all of which are all accounted for in this estimate.

• This estimate assumes your security deposit will amount to approximately 1 month of rent.

• As of the Issue Date of the Disclosure Document, StretchLab has a number of third-party law firms that have experience with its System criteria for potential Studio sites, and that have worked with the franchisee networks of StretchLab and certain of its affiliate franchisors to review leases for the potential Approved Location of your Studio and, if appropriate and authorized by you, to negotiate the terms of and close on that lease acquisition.

• Each of these 4 law firms is an “Approved Supplier” and this estimate includes the costs to engage such an Approved Supplier to review and negotiate the lease for your Premises.

• If you wish to use other counsel to perform this legal work, StretchLab will consider such proposal so long as you or the counsel at issue can demonstrate experience with commercial real estate transactions in the state and/or area where your Studio is to be located. If you determine to and StretchLab approves your use of counsel other than an Approved Supplier, you may expend more or less than is set forth above.

4.  Leasehold Improvements:  $18,400 to $78,000

• You must adapt StretchLab’s prototypical plans and specifications for the construction and finish-out of the Studio, including approved flooring, mirrors, and paint.

• 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.

• The range of costs also covers the expense to acquire the required local business permits. StretchLab’s estimated costs include building permits, fire inspection, sales tax permit, retail sales permits, and, if applicable, any “MEP” permitting. 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 StretchLab or anyone else.

5.  Signage:  $8,000 to $13,000

• You will need to purchase appropriate signage for your Studio that StretchLab approves. Each landlord has different restrictions it places on interior and exterior signage that may affect your costs.

6.  Insurance:  $900 to $2,500

• This estimate is for 3 months of your minimum required insurance. The actual cost may be more than shown here.

7.  Payments in Connection with Fitness Equipment and Certain Other FFE – 3 Months:  $3,900 to $14,000

• StretchLab’s standard franchise offering assumes and expects that a new System franchisee will acquire the required exercise equipment necessary to open and initially commence operations. As such, the range above is designated to capture and account for the typical deposit and lease payments you will make to a supplier StretchLabs approves (StretchLab has pre-approved several as of the Issue Date) for you to lease this equipment.

• The initial required amount of exercise equipment for a standard Studio is typically approximately 10 stretching benches and various related equipment/supplies for use in connection with the provision of the Approved Services, and certain other equipment used in connection with the Studio (e.g., foam rollers, ab mats, blocks, electric massage tools, pillows, straps, exercise balls, etc.), although StretchLab may raise or lower this requirement depending on the size of your Studio.

• If you determine not to follow StretchLab’s 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 $61,000 to $66,000) and will be paid to StretchLab or its designated supplier of such equipment.

8.  Presale & Soft Opening Inventory Package:  $12,000

• The typical for-sale items held in pre-sales and soft opening inventory are branded apparel, including t-shirts, towels, exercise clothing, and related accessories.

9.  Computer System and Related Equipment:  $2,500 to $3,500

• You must acquire a personal computer and a Point-of-Sale system (“POS”) 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.

• StretchLab will make available to you a certain business management software program specific for the Studio to be loaded on to your system. You will pay the third-party vendor directly for all fees associated with the use of the software.

• You can expect initial cash outlays to be lower if the items can be leased rather than purchased.

• These costs are paid to suppliers, when incurred, before beginning business and are usually not refundable.

• You are required to have at least 1 surveillance camera installed in the Studio. You may be required to purchase the camera(s) and related accessories from an Approved Supplier.

• The camera(s) must be web accessible. You will use the camera to monitor teacher performance, quality assurance, and safety. You are responsible for ensuring customer consent and for any failure to obtain such consent. You must indemnify StretchLab for any breaches of privacy from your use of any surveillance camera.

10.  Initial Marketing Spend Including Certain Costs Associated with Opening Support Program:  $15,000

• You are required to expend this “Initial Marketing Spend” in coordination with the pre-opening sales plan StretchLab approves or designates for your Studio as part of the opening support program that StretchLab’s approved supplier provides in connection with your Studio, as StretchLab determines appropriate in its discretion (the “Opening Support Program”).

• Typically, StretchLab 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 StretchLab designates.

11.  Authorized Instructor Training Fees:  $11,000 to $15,000

• This is the estimated range of fees that StretchLab expects you will expend and pay to it on behalf of the initial instructors you hire or otherwise engage to provide the stretching classes and other Approved Services in accordance with its System standards and specifications.

12.  Technology Fee – 1 Month Prior to Opening Plus First 3 Months:  $1,100

13.  Additional Funds for 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 three months of operation of the Studio. These expenses include: initial employee personnel wages and the costs/expenses that might be incurred in connection with sending your initial staff of prospective Flexologists to attend proprietary instructor training prior to your opening; management compensation (but not any draw or salary for you); ongoing purchases of equipment and supplies; marketing expenses/fees and local advertising; ongoing utilities (other than initial deposits); and repairs and maintenance.

14.  Total Estimated Initial Investment:  $157,800 to $297,600