What assumptions does Fitstop make regarding the franchisee securing an approved premises?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
em 7 Chart Above**
General Note. The estimated investment ranges were prepared based upon and accounting for: (i) various sources of information, including (a) the experience of our affiliates developing two (2) System Businesses (each, an "Affiliate Business") over the past 18 months, (b) the experience of our Affiliate Franchisor and its System franchisees that have Franchised Businesses operating or under development in Australia, (c) information we have received from our current third-party Approved Suppliers for certain investment items or categories above, (d) information and data that we have received from various real estate brokers and/or other sources for information with respect to current real estate and commercial leasing markets, and (e) various other due diligence; and (ii) a number of expectations and reasonable assumptions that we make as part of our standard franchise offering, such as franchisee (a) securing an approved Premises and opening the Franchised Business within the prescribed timelines set forth in your Franchise Agreement (and on or before the Rent Commencement Date under the lease for the Premises), and (b) ensuring that the Premises is built out in accordance with our current System standards, specifications and processes, and (c) using our Approved Suppliers for certain Required Items as set forth in the Chart above and in Item 8 of this Disclosure Document below.
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- Initial Franchise Fee. Please see Item 5 of this Disclosure Document for additional details regarding this initial fee and the terms associated with the same. This amount must be paid in connection with each Franchised Business you are awarded the right to independently own and operate at the time such rights are awarded, and such amounts are deemed fully earned upon payment under your signed Franchise Agreement.
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- Training-Related Costs and Expenses. This is the estimated range of costs that a new System franchisee can expect to incur in connection with attending the Corporate Training portion of our Initial Training Program at our designated corporate training location (currently located in California).
Source: Item 7 — TEM 7: ESTIMATED INITIAL INVESTMENT (FDD pages 15–19)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, several assumptions are made regarding a franchisee's ability to secure an approved premises. Fitstop expects franchisees to secure an approved premises and open their Franchised Business within the timelines outlined in the Franchise Agreement, specifically on or before the Rent Commencement Date. Additionally, Fitstop assumes that the premises will be built out according to their current System standards, specifications, and processes. The document also assumes the franchisee will use Fitstop's Approved Suppliers for certain required items. The standard franchise offering also assumes that the approved Premises for your Franchised Business will be between 1,800 and 3,000 square feet in size.
These assumptions have direct financial implications for prospective franchisees. For example, the estimated initial investment includes a line item for "Security Deposit and other Pre-Opening Amounts under Lease for Approved Premises" which ranges from $8,000 to $75,000. The low end of this estimate assumes a Premises in a suburban or rural area that is not in a city or other densely populated area or metropolitan area, with a security deposit amounting 1-2 months of rent, while the high end assumes a location in a higher-end real estate market and/or more densely populated area, with a security deposit amounting to 2-3 months of rent. Furthermore, the "Leasehold Improvements" are estimated to cost between $100,000 and $325,000, indicating the potential expense of building out the premises to meet Fitstop's standards.
Prospective franchisees should carefully consider these assumptions and their potential impact on their initial investment. The FDD notes that rent for each franchised business is dependent on size, quality and position of Premises and local market conditions. Franchisees should also factor in the possibility of negotiating lease terms with the landlord, including rent and tenant improvement credits, to potentially offset some of the build-out costs. Understanding these assumptions is crucial for franchisees to accurately assess the financial requirements and operational expectations of establishing a Fitstop franchise.