Degree Wellness: $565K Average Sales for Affiliate Studios vs. $349K-$687K Franchise Cost

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

Section I – Estimated initial investment (franchise costs) for a Degree Wellness franchise, based on Item 7 of the company’s 2024 FDD

Section II – Initial franchise fee, royalty fee, and marketing fee for a Degree Wellness franchise, based on Items 5 and 6 of the company’s 2024 FDD

Section III – Number of franchised and company-owned Degree Wellness outlets at the start of the year and the end of the year for 2021, 2022, and 2023, based on Item 20 of the company’s 2024 FDD

Section IV – News updates on the Degree Wellness franchise opportunity

Section V – Presentation and analysis of Degree Wellness’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2024 FDD, including information on the:

• 2023 percentage breakdown of clients as between members and non-members for the 2 affiliate-owned Degree Wellness locations that were open for the entire 2023 calendar year

• 2023 average number and spend per month of members and non-members for the 2 affiliate-owned Degree Wellness locations that were open for the entire 2023 calendar year

• 2023 average gross revenue, cost of goods sold, gross profit, disclosed expenses, and net operating income for the 2 affiliate-owned Degree Wellness locations that were open for the entire 2023 calendar year

Section VI – Key ratios, comparables, computations, and analyses for the Degree Wellness franchise opportunity (exclusive content for Platinum subscribers)

Section I – Degree Wellness Franchise Costs

• Degree Wellness franchise costs, based on Item 7 of the company’s 2024 FDD:

• Franchise License Fee:  $49,500
• Initial Training Fee:  $8,000
• Training Program Expenses:  $1,500 to $5,000
• Studio Layout, Architect, Engineer, Drawings, and Permits:  $8,200 to $20,000
• Real Estate and Construction Management Fee:  $15,000 to $20,000
• Lease – Security Deposit (3 months):  $19,564 to $26,728
• Initial Equipment Package:  $13,512 to $167,861
• Leasehold Improvements:  $143,322 to $262,669
• Furniture, Fixtures, and Equipment:  $28,976 to $32,978
• Point of Sale System, Hardware, Software, and Installation:  $3,850 to $4,250
• Initial Inventory and Supplies:  $10,487 to $12,658
• Professional Fees and Licenses:  $2,586 to $6,000
• Presale Marketing:  $12,000 to $15,000
• Insurance:  $1,146 to $2,172
• Exterior Signage:  $8,000 to $15,000
• Additional Funds:  $23,910 to $40,000
• Total Estimated Degree Wellness Franchise Costs:  $349,554 to $687,816

Section II – Degree Wellness’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

• Degree Wellness’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2024 FDD:

• Franchise License Fee:  $49,500
• Continuing Franchise Fee:  7% of gross revenues
• Brand Development Fund:  currently 1% of gross revenues generated by your Franchised Business over the preceding reporting period
• Local Marketing Requirement:  $2,500 per month
• Local and Regional Advertising Cooperatives:  currently, $0 per month, unless established

Section III – Number of Franchised and Company-Owned Degree Wellness Outlets

Franchised

2021

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

2022

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

2023

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

Company-Owned

2021

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

2022

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

2023

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

Section IV – News Updates on the Degree Wellness Franchise

• How Degree Wellness Is Disrupting the Wellness Industry with Tech-Driven Solution

• Degree Wellness Joins Franchise FastLane’s Family of Brands

• Franworth and Degree Wellness Announce Partnership to Revolutionize Self-Care

• Meet 4 New Emerging Wellness Franchises

• Degree Wellness Celebrates the Opening of Its National Headquarters

• Degree Wellness Did Not Rank on Entrepreneur’s 2024 Franchise 500 List

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Degree Wellness Franchise (Item 19, 2024 FDD)

• This Item discloses the historical performance of each affiliate-owned location that was open for the entire 2023 calendar year (the “Measurement Period”).

• Some affiliate locations sold these amounts. Your individual results may vary. There is no assurance that you will sell as much.

Part 1 – Breakdown of Revenue by Client Type

• Parts 1 and 2 show the percentage breakdown of clients as between members and non-members as well as the average spend per month by client type.

• For the purposes of this disclosure, Client Type means either a Member who pays a monthly recurring fee, or a Non-Member who pays for services on an a la carte basis. No locations that operated during the entire measurement period were excluded from this table.

Studio 1

• Members:  81%
• Non-Members:  19%
• Total Revenue:  100%

Studio 1

• Members:  75%
• Non-Members:  25%
• Total Revenue:  100%

Average

• Members:  78%
• Non-Members:  22%
• Total Revenue:  100%

Part 2 – Average Spend per Month by Client Type

Studio 1

• Members – Average Number Per Month:  271
• Members – Average Spend Per Month:  $157
• Non-Members – Average Number Per Month:  128
• Non-Members – Average Spend Per Month:  $79

Studio 2

• Members – Average Number Per Month:  250
• Members – Average Spend Per Month:  $129
• Non-Members – Average Number Per Month:  128
• Non-Members – Average Spend Per Month:  $84

Average

• Members – Average Number Per Month:  260
• Members – Average Spend Per Month:  $144
• Non-Members – Average Number Per Month:  128
• Non-Members – Average Spend Per Month:  $82

Part 3 – Total Memberships Pre-Sales and Total Memberships for Studio 3 One Month After Opening

• Part 3 contains information regarding membership sales for the most recently opened affiliate studio as of the date of the disclosure document (“Studio 3”). The affiliate studio opened March 31, 2024.

• For purposes of this table, a “Pre-Sale” means a membership that was sold prior to the studio opening.

• Total Pre-Sales as of 3/30/24:  144
• Total Memberships as of 4/30/24:  189

Part 4 – Profit and Loss Information of Affiliate Studios

• Part 4 below shows the profit and loss information for affiliate locations operating for the “Measurement Period”. No locations that operated during the entire measurement period were excluded from this table.

Studio 1

Gross Revenue:  $616,910 (100.0%)

Cost of Goods Sold:  $57,840 (9.4%)

Gross Profit:  $559,070 (90.6%)

Expenses

• Advertising and Marketing:  $26,850 (4.4%)
• Insurance:  $6,560 (1.1%)
• Office Expenses:  $12,390 (2.0%)
• Payroll Expenses:  $144,395 (23.4%)
• Rent and Lease:  $51,960 (8.4%)
• Repairs and Maintenance:  $5,130 (0.8%)
• Taxes:  $4,670 (0.8%)
• Utilities:  $17,330 (2.8%)
• Total Expenses:  $269,285 (43.7%)

Net Operating Income:  $289,785 (47.0%)

Estimated Fees

• Royalties:  $43,184 (7.0%)
• Brand Fund:  $6,169 (1.0%)
• Total Estimated Fees:  $49,353 (8.0%)

Net Income Adjusted, Owner Operator (OO):  $240,432 (39.0%)

General Manager Expenses:  $46,175 (7.5%)

Net Income Adjusted, Investor:  $194,257 (31.5%)

Studio 2

Gross Revenue:  $513,610 (100.0%)

Cost of Goods Sold:  $40,860 (8.0%)

Gross Profit:  $472,750 (92.0%)

Expenses

• Advertising and Marketing:  $47,040 (9.2%)
• Insurance:  $4,040 (0.8%)
• Office Expenses:  $11,860 (2.3%)
• Payroll Expenses:  $105,798 (20.6%)
• Rent and Lease:  $100,440 (19.6%)
• Repairs and Maintenance:  $1,070 (0.2%)
• Taxes:  $2,840 (0.6%)
• Utilities:  $2,750 (0.5%)
• Total Expenses:  $275,838 (53.7%)

Net Operating Income:  $196,912 (38.3%)

Estimated Fees

• Royalties:  $35,953 (7.0%)
• Brand Fund:  $5,136 (1.0%)
• Total Estimated Fees:  $41,089 (8.0%)

Net Income Adjusted, Owner Operator (OO):  $155,823 (30.3%)

General Manager Expenses:  $39,834 (7.8%)

Net Income Adjusted, Investor:  $115,989 (22.6%)

Average

Gross Revenue:  $565,260 (100.0%)

Cost of Goods Sold:  $49,350 (8.7%)

Gross Profit:  $515,910 (91.3%)

Expenses

• Advertising and Marketing:  $36,945 (6.5%)
• Insurance:  $5,300 (0.9%)
• Office Expenses:  $12,125 (2.1%)
• Payroll Expenses:  $125,097 (22.1%)
• Rent and Lease:  $76,200 (13.5%)
• Repairs and Maintenance:  $3,100 (0.5%)
• Taxes:  $3,755 (0.7%)
• Utilities:  $10,040 (1.8%)
• Total Expenses:  $272,562 (48.2%)

Net Operating Income:  $243,349 (43.1%)

Estimated Fees

• Royalties:  $39,569 (7.0%)
• Brand Fund:  $5,653 (1.0%)
• Total Estimated Fees:  $45,221 (8.0%)

Net Income Adjusted, Owner Operator (OO):  $198,128 (35.1%)

General Manager Expenses:  $43,005 (7.6%)

Net Income Adjusted, Investor:  $155,123 (27.4%)

• Gross Sales means all gross receipts, less tips and sales tax, and represents the amount upon which Degree Wellness will base your Royalty Fee, Local Advertising Requirement, and Fund Contribution under your Franchise Agreement with it.

• COGS means all variable cost inputs to facilitate customer sales, including equipment-related consumables, medical supplies, and other usage-based costs.

• Gross Profit means Gross Sales less COGS.

• Advertising and Marketing means the actual local marketing expenditures of the location. Your requirements will include $12,000 of Pre-Sale Marketing and an annual Local Marketing Requirement of $2,500 per month ($30,000 per year).

• Insurance means the actual amounts expended on insurance in the operation of the Studio.

• Office Expenses means general cleaning supplies/services, office supplies, postage, and software.

• Payroll Expenses means all hourly and salaried labor excluding general managers, including base wages, payroll taxes, and benefits. This definition excludes the cost of multi-unit managers.

• Rent and Lease means base rent and all related NNN (triple net) costs, including common area maintenance, insurance, and tax-related obligations under the Lease.

• Repairs and Maintenance means all standard maintenance items, including HVAC maintenance, electrical maintenance, necessary repair items, and any equipment repairs.

• Taxes means all taxes, including property taxes, incurred in the operation of the Studio.

• Utilities means the following utility expenses: electric, water, power, internet, and phone.

• Net Income Adjusted, OO means Gross Proft less all of the aforementioned expenses. This number excludes the costs associated with a general manager and intends to show the income of this studio if the franchisee was an owner-operator (“OO”). This data does not include or account for any other operating costs or expenses that are not specifically identified in this Explanatory Note.

• Net Income Adjusted, Investor means Net Income Adjusted, OO less the costs associated with a general manager and intends to show the income of this studio if the franchisee was an investor. This data does not include or account for any other operating costs or expenses that are not specifically identified in this Explanatory Note.

• Estimated Royalties (calculated at 7% of Gross Sales) means the calculated estimated Royalty Fees a location would have been required to pay had it been a franchise operating pursuant to the Franchise Disclosure Document. The affiliate owned locations will contribute to the Fund in the future.

• Estimated Brand Fund Contribution (calculated at 1% of Adjusted Gross Sales) means the calculated estimated Brand Fund expenditures a location would have been required to pay had it been a franchise operating pursuant to the Franchise Disclosure Document.

• Each of the Disclosed Affiliate Locations is located in Jacksonville, Florida or surrounding area, where Degree Wellness’s brand and concept have garnered goodwill and reputation over the years that these Affiliate Locations have been open and operating.

• Most of the Disclosed Affiliate Locations, other than the Recent Location, were open for some time as of the commencement of the 2023 calendar year. As such, the profit and loss information disclosed for certain of the disclosed affiliate locations of this Item did not incur certain of the startup/initial costs that might be incurred when first opening a Studio given their more mature operations.

Section VI – Degree Wellness Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️