What is the role of Approved Suppliers in determining the estimated investment ranges for a Fitstop franchise?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
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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). The low end of this estimate assumes that you or your operating principal will be the only person attending the Corporate Training and that the franchisee resides close enough that no major flight costs will be incurred. The high end of this estimate assumes that you and possibly one (1) other person (either your Designated Manager and/or lead Authorized Instructor) will attend the Corporate Training and that the attendees' travel costs will include standard airfare and lodging at one (1) of the hotels that we recommend nearby the Corporate Training location.
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- Initial Marketing Spend; Other Initial Marketing and Promotional Activities. The $10,000 Initial Marketing Spend will be expended as we direct in the Manuals or otherwise in writing, consistent with our System standards and practices, and we expect that all or substantial portion of this spend will be remitted to our designated Approved Supplier for online marketing and promotional services.
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, Approved Suppliers play a significant role in determining the estimated initial investment ranges for several key expenditure categories. Fitstop relies on information received from its current third-party Approved Suppliers to estimate costs for certain investment items. These estimates are crucial for prospective franchisees as they plan their initial financial outlay.
Specifically, Approved Suppliers directly influence the estimated costs for items such as the initial marketing spend, where a substantial portion is expected to be remitted to a designated Approved Supplier for online marketing. They also impact costs related to signage, the computer system and required software, and the operational equipment and supplies package necessary to outfit the premises. For instance, the cost of music licensing, ranging from $500 to $1,000, is based on the amount charged by Fitstop's current Approved Supplier. The use of Approved Suppliers ensures that franchisees acquire items that meet Fitstop's standards, but it also means franchisees may be limited in their choice of vendors and potentially miss out on lower prices from alternative sources.
The FDD notes that the estimated investment ranges are also based on the experience of Fitstop's affiliates and franchisees in Australia, as well as data from real estate brokers. However, the reliance on Approved Suppliers for specific items means that these suppliers have a direct impact on the overall initial investment required. While Fitstop provides these estimates as a guide, it's important for franchisees to review these figures carefully, considering local conditions and consulting with their own financial advisors to ensure they are adequately prepared for the actual costs, which may vary.
Prospective Fitstop franchisees should carefully evaluate the list of Approved Suppliers and understand the terms and conditions associated with these suppliers. It would be prudent to inquire about the possibility of using alternative suppliers and the process for obtaining approval, as well as the potential impact on the overall investment and the franchise's compliance with Fitstop's standards.