AKT (Anna Kaiser Technique) Franchise Costs: Estimated Initial Investment (Item 7, 2021 FDD)

• These estimates generally expect and assume that you will: (i) timely open and commence operations of your Franchised Business within the time period prescribed in your Franchise Agreement; and (ii) acquire the Fitness Equipment and Other FFE Package via the lease-to-own or comparable program that you enter into with a third-party provider.

1.  Initial Franchise Fee:  $60,000

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

2.  Travel and Living Expenses While 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.

• AKT will not charge you or your Designated Operator for this portion of its initial training that must be 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).

• The estimate assumes that you will attend training at AKT’s headquarters.

• The estimated AKT Certification Program Tuition Fees associated with your initial instructors is accounted for in the estimate of “Additional Funds” below.

3.  Real Estate/Lease:  $21,500 to $52,500

• If you do not own adequate Studio space, you must lease suitable premises. These figures assume that the leased premises will be approximately 2,200 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 (“CAM Charges”), your pro rata share of the real estate taxes and insurance, and your pro rata share of HVAC and trash removal.

• You will also likely be required to pay a security deposit. This estimate assumes your security deposit will amount to approximately one month of rent.

4.  Leasehold Improvements:  $123,400 to $225,000

• You must adapt AKT’s prototypical plans and specifications for the construction and finish-out of the Studio, including approved flooring, mirrors, and paint. This estimate includes the cost of (a) installing any furniture, equipment, or fixtures that are required to complete the build-out of your Studio; (b) utility deposits; and (c) architect fees.

• Additionally, this estimate generally covers the expense to acquire the required local business permits, including building permits, fire inspection, sales tax permit, and retail sales permits. The low-end estimate will apply to franchisees who already have the necessary licenses and permits in place prior to executing the Franchise Agreement.

• 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.

5.  Signage:  $16,000 to $20,000

• You must purchase all signage and graphics directly from AKT’s Approved Supplier.

• The cost of your signage may be more or less than this estimate, and depends on the number, 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.

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. You will need to check with your insurance carrier for actual premium quotes and costs, and for the actual amount of deposit.

7.  Deposit and Payments in Connection with Fitness Equipment and Other FFE Package – 3 Months:  $3,900 to $13,600

• The standard franchise offering assumes and expects that a new System franchisee will enter into a lease agreement to cover the following costs: (1) furniture, fixtures, and related supplies; (2) specialty and other exercise equipment; and (3) shipping.

• As such, the range above is designated to capture and account for the typical deposit and lease payments you will make to suppliers AKT approves to lease these items: (i) the initial furniture, fixtures, and décor items; (ii) the initial required exercise equipment for a standard Studio includes various equipment/supplies for use in connection with the provision of the Approved Services such as resistance bands/straps, dance bars/beams, interval training equipment, weights, and heart rate monitors; and (iii) the shipping of the foregoing items and certain other minor equipment.

8.  Pre-Sale and Soft Opening Retail Inventory Package:  $12,000

• The typical for-sale items held in opening inventory are the apparel and other branded merchandise that you will be permitted to resell at your Studio as part of your Approved Products, including items such as t-shirts, towels, exercise clothing, and related accessories.

12.  Audio-Visual Equipment:  $47,000

• You must use AKT’s Approved Supplier for the purchase of your audio/visual equipment package (the “AV Package”) and the computer system components AKT requires you to utilize in connection with your Franchised Business, including but not limited to, a personal computer and the Point of Sale system (“POS”) hardware and software 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.

• AKT will make available to you a certain business management software program specific for the Studio to be loaded on to your system.

14.  Opening Support Program and Other Initial Marketing Spend:  $15,000

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

• Typically, AKT 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 AKT designates.

15.  AKT Certification Program for Initial Authorized Instructors:  $8,000

• This range is to cover the amounts payable in connection with the AKT Certification Program that your initial Authorized Instructors must complete prior to providing any classes or other Approved Services at your franchised Studio.

16.  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; ongoing purchases of equipment and supplies; marketing expenses/fees and local advertising; utilities; and repairs and maintenance.

16.  Tech Fee(s) – 3 Months and 1 Month Prior to Opening:  $1,100

17.  Total:  $319,300 to $499,700

• In preparing each of the ranges and figures in this chart, AKT relied on: (i) the experience of opening and commencing operations of the Existing Studios; (ii) AKT’s experience in franchising since its inception and the experience of AKT’s System franchisees based on reports and other information they provide; (iii) the experience of AKT’s sister brands in developing other fitness concepts and information related to their respective studio investment costs; and (iv) current estimates AKT has received from its Approved Suppliers and other third-party vendors.