What costs are included when Punch King Fitness exercises its step-in rights?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
| Name of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Supplier Approval | Reimbursement of costs and expenses Franchisor incurs in approving a supplier | When applicable | If you want us to approve a supplier for the purchase of a designated product or service other than the supplier we designate, we may require that you reimburse us for the costs and expenses we incur in approving the supplier. |
| Step-In Right Expenses5 | Franchisor's personnel and administrative and travel costs, plus fifteen percent (15%) of that Gross Revenues | As incurred | If you are absent, ill, or unable to operate the Franchised Business or fail to pay taxes or required amounts, or the Franchised Business is having a significant negative impact on the Punch King Fitness System, we may step-in, and you must reimburse us our costs and expenses. |
| Audit | All costs of inspection and audit | Upon demand | You must reimburse us for audit expenses if the audit is initiated due to your non compliance with the terms herein or the Operating Manual or if an inspection reveals an understatement of Gross Revenues by 3% or more. |
| System Standard Violation | All costs of inspection and audit | Upon demand | If you fail to adhere to the System Standards, you must reimburse us for any and all costs and expenses associated with counsel, inspection, support, assistance, and enforcement rendered to and against Franchisee regarding said System Standards |
Source: Item 6 — OTHER FEES (FDD pages 10–16)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, if Punch King Fitness exercises its step-in rights to operate a franchised business, the franchisee is responsible for reimbursing Punch King Fitness for certain costs and expenses. These costs include the franchisor's personnel, administrative, and travel costs. Additionally, the franchisee must reimburse Punch King Fitness an amount equal to fifteen percent (15%) of the business's Gross Revenues. These expenses are due as they are incurred by Punch King Fitness.
Punch King Fitness may step in to operate the business if the franchisee is absent, ill, or unable to operate the business. Step-in rights may also be exercised if the franchisee fails to pay taxes or other required amounts, or if the franchised business is having a significant negative impact on the Punch King Fitness system.
This provision means that a franchisee could face significant financial burdens if Punch King Fitness deems it necessary to take over operations. The 15% of Gross Revenues charge, in addition to covering personnel, administrative, and travel costs, could substantially reduce any potential profits the franchisee might have otherwise received during the period Punch King Fitness operates the business. Prospective franchisees should carefully consider these potential costs and ensure they have sufficient financial resources to cover them if such a situation arises.