Franchising is a popular method for expanding business. Through a licensing relationship a franchisor, or business owner, essentially sells a franchisee the rights to open a new business location. For instance, Planet Fitness has many franchise locations, all of which were sold to various franchisees across the country. Once the Planet Fitness franchisee purchases a franchise, they are granted the right to build their own location using preexisting systems, regulations, etc.
Franchising is an attractive business model for anyone new (or not) to the industry. Unlike an independent business, which requires growing from the ground up, a franchise comes with a pre-established, and usually successful, operational system. Through extensive training programs, franchisees learn all the ropes behind the business, eliminating the daunting trial and error process. Not to mention, a franchise comes with brand recognition is built right in.
FRANCHISING IS AN ATTRACTIVE BUSINESS MODEL FOR ANYONE NEW TO THE INDUSTRY.
Anyone looking to purchase a franchise will be given a Franchise Disclosure Document (FDD). It’s imperative that any franchisee fully understand the components and contents in any business’ FDD. Consisting of 23 different parts, the FDD, a legally mandated document, outlines different key pieces of information involved in franchise purchase. For instance, a Franchise Disclosure Document tells the interested franchisee more about the total fees and costs associated with purchasing the franchise of their choice.
The overall intention of the document is transparency. Both the company and franchisee need to be on the same wavelength in order for the purchase and future management of the business to run smoothly. Click here to see a more in-depth description and analysis of the Franchise Disclosure Document.
Story Behind the Business
Retro Fitness is among the most popular fitness franchises today. With over 150 locations nationwide, Retro Fitness gained its popularity for its affordable membership costs and wide array of group training classes. Not to mention, the franchise has developed a loyal customer base by including amenities such as juice bars and personal training opportunities for its members.
Although Retro Fitness has come a long way since it was founded in 2004, founder Eric Casaburi’s passion for fitness began way back when he was only 13-years-old. Only ten short years later, Casaburi opened his first business, Retro Fitness.
Since then, Casaburi’s passion for fitness has flourished into a $150,000,000 per year business. With locations across 17 states and over 500,000 members , Casaburi’s dream has largely become a reality. Despite that health and fitness was and still is a largely saturated market, Retro Fitness continues to stay ahead of competitors with its exceptionally clean facilities and superior customer service. Paying close attention to new tech and trends, Retro Fitness continues to update and improve its facilities and business plan.
As for Casaburi, he has since been featured across news platforms due to his large success. Forbes, Wall Street Journal, and Entrepreneur Magazine have all featured Casaburi’s success story as he continues to study new ways to empower and support others.
Franchising Since 2006
Eric Casaburi, Chief Executive Officer
Robert Sprechman, Chief Financial Officer
Matt Schultz, Vice President of Franchise Relations
Richard Roser, Director of Real Estate Research and Development
Jason D. Mattes, Chief Development Officer
Patrick Pantano, Director of Franchise Development
Raymond Lauletti, Vice President of Real Estate and Development
Edward Kovas, Manager
Fernando Maddock, Manager
Interested franchisees of Retrofitness are expected to provide a nonrefundable Initial Franchise Fee of $69,000 upon signing the Franchise Agreement. The initial franchise fee should be made out to Retrofitness and is not refundable under any circumstances. Futhermore, Retrofitness reserves the right to negotiate any reduction in initial franchise fees that may sign several franchise agreements at once. However, otherwise, the initial franchise fee remains at $69,000.
Retro Fitness does not offer direct or indirect financing of any kind, nor does the franchise have affiliates that can offer assistance in this area.
Training and Assistance
Once the franchisee obtains an approved site, all training is conducted at the Retro Fitness designated training location in New Jersey. There is also onsite training provided later in the process. Training of up to four members of the franchisee’s management team is included in the initial franchise fee and is mandatory prior to opening the location.
All instructional materials, including the Operations Manual, are provided at no added charge. The current training staff holds more than fifty years of combined experience across different areas in the franchising and maintenance process.
Any new Retrofitness location must meet the standards and specifications of the franchisor. Once the franchisee’s site is selected, they are designated an approved territory, which is typically within a three mile “drivable distance” from the site. However, the territory may be a shorter distance depending on the area selected.
Term of Agreement and Renewal
For a Retrofitness franchise, the term length is ten years from the start date of the Franchise Agreement or from the set date the lease or sublease of the premises expires. If the franchisee is in good standing and wishes to renew their agreement, they may do so for the length of ten years. The franchisee must pay a renewal fee, which amounts to one-half of the current initial franchise fee.
If a franchisee wishes to renew their agreement, they must provide the franchisor with timely notice and sign a new agreement that could potentially contain different information from the original Franchise Agreement. Furthermore, the franchisee must complete all payments on time in order to be considered for renewal.
Note that termination without cause by either party is not allowed. However, the franchisor may terminate the agreement if the franchisee defaults on payments, misuses trademarks, breaches non-competition or provides an unauthorized transfer of any rights within the agreement.
Restrictions on Sources of Products and Services
All equipment, goods, and materials must be purchased from the franchisor’s approved suppliers (which Retrofitness reserves the right to edit and alter). Retrofitness also reserves the right to designate a required source for any products or services used in your Retrofitness location.
Should a franchisee wish to purchase any items from another supply, thy can submit an “Alternative Supplier Approval From,” along with a fee of $500. Depending on the information supplied, Retrofitness tests the products and reviews the supplier’s business and performance. After the franchisor reviews the application and products they may approve or refuse the request. Franchisees can refer to the Operations Manual to review the company’s criteria for approval of a new supplier.
The franchisee is obligated to select a site and attend/complete the Retrofitness training program in order to comply with company standards and policies. The franchisee must also pay all necessary fees and fulfill all pre-opening requirements.
The franchisee is also expected to fulfill all maintenance and remodeling requirements as they come up. These procedures may be associated with their own fees and costs, which the franchisee should be aware of.
Key among the franchisee’s obligations is the selection of an approved site. Retrofitness provides the franchisee with a sample layout of an existing location, which the franchisee can then use to model their new franchise.
According to Item 20 of the franchise disclosure document, Retrofitness had 102 different outlets by the end of 2013, up 14 locations from the beginning of that year.
Initial Investment and Costs
|Name of Fee||Low||High|
|Initial Franchise Fee||$69,000||$69,000|
|Opening Advertising Pre-Sales||$30,000||$45,000|
|Insurance and Bond||$9,350||$36,000|
|Equipment and Furnishings||$300,000||$600,000|
|Prepaid Rent and Security Deposit||$0||$75,000|
|Lease Review Fee||$1,500||$1,500|
|Leasehold Improvements/Fit Out||$500,000||$850,000|
|Licenses and Permits||$500||$5,000|
|Fictitious Name Registration||$250||$1,500|
|Travel/Lodging/Meals for Training||$500||$3,500|
|Miscellaneous Start-up Costs||$2,000||$2,000|