Are Alloy club memberships subject to sales tax in some states?

According to Alloy's 2025 Franchise Disclosure Document, Alloy franchise owners should be aware that some states impose sales taxes on club memberships. This means that depending on the location of the Alloy franchise, franchisees may be required to collect and remit sales tax on membership fees. This can affect the overall pricing strategy and profitability of the franchise. Franchisees must factor in these potential tax obligations when setting membership prices to remain competitive and compliant with local regulations.

Additionally, the FDD highlights that states and municipalities may have bonding requirements for businesses that sell memberships or pre-sell training, which is relevant to Alloy's business model. There may also be liability insurance requirements for health clubs that may or may not apply to an Alloy Franchised Business. Furthermore, special permits might be necessary to operate some or all aspects of the business.

Prospective Alloy franchisees should consult with a tax advisor and legal counsel to understand the specific sales tax laws, bonding requirements, insurance obligations, and permitting procedures in their state and municipality. Compliance with these regulations is crucial, as failure to comply constitutes a material breach of the Franchise Agreement. This due diligence will help ensure that the franchisee operates the Alloy business legally and avoids potential penalties or disruptions.