The following is our best estimate of your initial investment to open 1 LA Boxing Franchise. The estimate presented covers the period before the opening of your LA Boxing Franchise and for the initial phase of your LA Boxing Franchise estimated to be 3 months. Our estimates do not provide for your cash requirements to cover operating losses after the initial phase or personal living expenses. You must have additional sums available, whether in cash or through unsecured credit lines, or have other assets that you can liquidate, or that you can borrow against, to cover your personal living expenses and any operating losses after the initial phase of your LA Boxing Franchise. We urge you to retain the services of an experienced accountant or financial advisor in order to develop a business plan and financial projections for your LA Boxing Franchise.
Your actual investment will vary depending upon local conditions peculiar to your geographic area or market, for example, real estate demand, availability and occupancy rates. Additional variables that will impact your initial investment are: size of your facility; age of the structure; length of your lease or other instrument granting you the right of occupancy to the Premises; if your space is to be built out by the developer with no initial out-of-pocket cost to you; lease arrangements; location in the market; costs of demolishing existing leasehold improvements; construction costs; other variable expenses and whether you currently hold a lease of an acceptable location. We do not expect you to purchase real estate or construct the building containing your LA Boxing Franchise.
The following chart contains a summary of your initial investment. Unless otherwise indicated, payments are generally not refundable.
| Expense | Amount | Method of Payment |
When Due | To Whom Payment Is To Be Made |
|
| Initial Franchise Fee1 | $25,000 | Lump Sum | On signing the Franchise Agreement | Us | |
| Misc. Supplies | $500 | Lump Sum | Before opening | Suppliers | |
| Opening Inventory3 | $10,000 | Lump Sum | Before opening | Suppliers | |
| Insurance4 | $350 to $500 | Monthly | Before opening | Insurer | |
| Printing and Signage5 | $12,000 | Lump Sum | Before opening | Suppliers | |
| Office Equipment/P.O.S.System6 | $3,500 | Lump Sum | Before opening | Suppliers | |
| Rent/Security Dep.7 | $18,000 to $20,000 | Lump Sum | As required | Landlord | |
| Initial Advertising | $7,500 | As Incurred | As required | Suppliers | |
| Leasehold Improvements9a | $19,000 to $24,000 | As Incurred | Before beginning business | Various contractors/Suppliers | |
| Architect Fee9b | $5,000 | Lump Sum | Before Opening | Architect | |
| Leased Equipment10a | $1,800 to $2,500 | Monthly | Before Opening | Suppliers | |
| Equipment10b | $23,000 | Lump Sum | Before beginning business | Suppliers | |
| Web Camera 10c | $3,500 | Lump Sum | Before beginning business | Suppliers | |
| Utilities Deposits11 | $750 | As Incurred | As required | Suppliers | |
| Licenses and Permits12 | $2,000 to $3,000 | Lump Sum | As required | Governmental Agencies | |
| Legal Review13 | $1,000 to $2,000 | Lump Sum | Before beginning business | Attorney | |
| Travel, Lodging, Meals, Etc. for Initial Training14 | $3,500 to $5,000 | As Incurred | As required | Suppliers | |
| Additional Funds15 (3 months) |
$35,000 | As Incurred | During the first 3 months of operation | Third Parties | |
| Miscellaneous Start-Up Costs16 | $3,000 | As Incurred | During the first 3 months of operation | Third Parties | |
| TOTAL INVESTMENT | $174,000 to $185,750 | ||||
1 Initial Franchise Fee: See ITEM 5 INITIAL FRANCHISE FEE for a description of the Initial Franchise Fee.
2 Misc. Supplies: The supplies include housekeeping, janitorial disinfectants and other miscellaneous supplies. The cost is $500.
3 Inventory: The inventory does not fluctuate as a function of seasonal sales. The typical for-sale items held in opening inventory are boxing gloves, protective gear, and LA Boxing wearing apparel in the amount of $10,000.
4 Insurance: As discussed in ITEM 8 and Section 9.1 of the Franchise Agreement, you must carry certain specified insurance. The method and timing of payments is a matter to be resolved between you and your insurer. Because the selection of the carrier, size of the Premises, location of the Premises, value of the leasehold improvements, amount of inventory, amount of wages and other related conditions will vary, it is difficult to estimate the ultimate cost to you. Therefore, we can only estimate the total cost with the caution that you should obtain quotes from carriers of choice before proceeding. Our best estimate is approximately $4,200 to $6,000 per year, paid at the rate of $350 to $500 per month, for insurance coverage.
5 Graphics: We will specify the signs and graphics and only those we approve will be used. Signs and graphics will be maintained in a condition acceptable to us at all times. You, at your own expense, must prepare, construct and erect the signs and graphics in accordance with approval from governmental authority and the landlord. The costs of fabricating and installing approved signs and graphics can vary depending upon local market conditions but are estimated to cost approximately $12,000. These costs are paid to suppliers, when incurred, before beginning business and are usually not refundable.
6 Office Equipment: Office equipment consists of a PC computer and printer and Point of Sale system amounting to $3,500. You can expect initial cash outlays to be lower if the items can be leased rather than purchased. These costs are paid to suppliers, when incurred, before beginning business and are usually not refundable.
7 Rent: We expect that you will lease rather than own real estate and construct a building. Lease costs will vary based upon variances in: (i) size in square feet to be leased; (ii) cost per square foot; and (iii) common area maintenance costs. These variances are determined by location, the length of the lease, the age of the leased property, local market conditions, the size of the Premises and the bargaining power of the developer or property management company. We assume that the landlord will require first and last months' rent and a security deposit equal to one months' rent. We estimate this will be $18,000 to $20,000.
8 Grand Opening: We feel strongly that a you should enter the market in an aggressive way to minimize early lack of awareness of the LA Boxing Franchise among large numbers of potential customers in the Exclusive Territory. Grand opening promotional activities vary greatly based upon the nature of the events you elect and the local rates for services selected, for example, printing and advertising. We believe that $7,500 is sufficient to create awareness using a multi-media advertising program.
9a and 9b Leasehold Improvements: Leasehold Improvements and Architects Fee The cost of leasehold improvements for your LA Boxing Franchise will vary as a function of size, condition and location of the Premises, price differences among contractors, local wage rates and material costs, other local conditions and the nature of your leasehold improvements. The previous tenant or landlord may have installed leasehold improvements that are very compatible, thereby reducing costs. We estimate that leasehold improvements vary from $19,000 to $24,000. All leasehold improvements are directly related to conforming the Premises to our current standards for layout, traffic flow and other specifications. Included in this amount is the cost of TV/audio equipment estimated to cost you $4,000. Also, included in the total amount is the cost of wall mirrors estimated to cost you $5,000. Architectural services are estimated to cost you an additional $5,000. These costs are paid to suppliers, when incurred, before beginning business and are usually not refundable.
10a, 10b and 10c Equipment: You must purchase certain equipment including boxing ring, heavy punching bags, bag cage, retail counters and speed bags. Our estimate is $23,000 paid in lump sum. Leased Equipment includes cardio and strength machines and free weights costing $50,000 that can be leased for $1,800 to $2,500/mo. The Web based camera system cost is $3,500. These costs are paid to suppliers, when incurred, before beginning business and are usually not refundable.
11 Utilities: You must incur certain deposits with local utilities, for example, electric, telephone, gas, water, etc. These will vary depending on the policies of the local utilities but are estimated to be $750.
12 Licenses: Local, municipal, county and state regulations vary on what licenses and permits are required to operate a LA Boxing Franchise. Classification of various types of fitness centers by local governments can cause the cost of licenses to vary. The total cost is approximately $2,000 to $3,000. These fees are paid to governmental authorities, when incurred, before beginning business and are usually not refundable.
13 Legal: Legal While you must sign the LA Boxing Franchise Agreement individually, you may decide to hold the franchise interest in a corporation or other entity and will transfer the LA Boxing Franchise Agreement to a corporation or other entity formed before beginning operations. Regardless of the ownership of the LA Boxing Franchise, you must comply with the fictitious, assumed, or trade name statutes of the state in which the LA Boxing Franchise will be located. We estimate that the attorneys' fees, publication fees, filing fees and other costs will total $1,500 to $2,000 for incorporation, compliance with your state's fictitious or assumed name statute and review of this Franchise Disclosure Document, depending on the scope of legal services rendered. These fees may vary from state to state depending on each state's laws and the prevailing rate of attorneys' fees. These costs are paid to attorneys, newspapers and governmental agencies, are not refundable and usually incurred before beginning business.
14 TL&M:
14 TL&M You must pay for all out-of-pocket expenses, workers' compensation insurance and all employee compensation along with federal and state taxes for the Trainees. We assume no responsibility for your human resource-related liabilities or costs during Initial Training. You must bring no fewer than 3 people (owner, instructor and salesperson), of whom at least one must be the operating partner. The typical costs of training that you must bear are the transportation, lodging, compensation and meals. The estimate is for items that are non-discretionary in nature. Generally these costs will vary widely as a function of the distance traveled, accommodations selected, restaurants selected, the distance between the hotel and the training center and the transportation selected. Using different lifestyles, distances and compensation assumptions, the estimates are from $3,500 to $5,000.
15 Working Capital: You must have adequate working capital before beginning operation of a LA Boxing Franchise. Working capital should be sufficient to keep the LA Boxing Franchise in operation for 3 months and capable of covering the excess of expenses over cash flow from the gym covering independent contractor fees, employee salaries and taxes, inventory replenishment, insurance premiums, rent, utilities and other normal expenses that are associated with the day-to-day business operation of the Franchise. You must be able to meet operating expenses from pre-opening, including hiring and training expenses, until the LA Boxing Franchise develops sufficient cash flow to cover all costs. The estimate for working capital is $35,000. This figure does not include any payments to you during the start-up period. You must have sufficient personal resources to cover your living expenses during this period. In the area of working capital, you must fill out a personal/family cash flow budget and determine if there is sufficient revenue on the personal level to provide for your family through the start-up period. Clearly, working capital requirements will be a function of your decisions regarding nearly every aspect of your LA Boxing Franchise, for example, how many independent contractors you engage, the size of the payroll, rent, utilities, size of the operation and many other expenses that you decide to incur. We do not guarantee that you will not have greater start-up expenses than these estimates, or that you will not need more operating funds than these estimates. We do not imply or guarantee that you will “break even” by any particular time.
16 Miscellaneous: Although the estimated start-up expenses are our best estimate, it is possible that you will exceed these figures and it would be advisable to have additional working capital available. You must have an additional $3,000 in reserve cash.
BASIS FOR ESTIMATE
We relied on our management staff’s 16 years of experience as owners and operators of seven 7 boxing and fitness gyms in Southern California and Georgia, utilizing the LA Boxing name and trademark, to compile these estimates. You must review these figures carefully with a business advisor before making any decisions to purchase an LA Boxing Franchise.
FINANCING
As described in ITEM 10, neither we nor our agents offer any financing arrangements to you.
INITIAL FEES
Upon signing the Franchise Agreement, you must pay to us an Initial Franchise Fee of $25,000. The Initial Franchise Fee for an LA Boxing Franchise is based on a designated location. You will be assigned a protected territory based upon either population density or a 5-mile radius of the location of your LA Boxing Franchise. Your protected territory will have a population base of approximately 100,000 people.
The purposes for which the Initial Franchise Fee will be used are to provide the initial site location assistance, training and the other initial services provided by us to you, and for working capital. The Initial Franchise Fee is payable to us in full upon signing of the LA Boxing Franchise Agreement. The Initial Franchise Fee is fully earned and non-refundable upon signing the LA Boxing Franchise Agreement, except as provided below.
The Initial Franchise Fee must be refunded, without interest, to you if: (i) we do not accept you at its home office within 30 days from the date you sign the LA Boxing Franchise Agreement; (ii) any Trainee required to attend Initial Training fails to complete satisfactorily training as we determine, and we elect to terminate the LA Boxing Franchise Agreement; or (iii) you fail to obtain an approved site for the LA Boxing Franchise within 6 months from the Agreement Date and we elect to terminate the LA Boxing Franchise Agreement. In the case of (i) above, we must refund the entire Initial Franchise Fee. In the case of (ii) or (iii) above, we are entitled to retain an amount from the Initial Franchise Fee equal to our out-of-pocket costs and standard fees for training and other assistance provided to you (for example, site selection and lease negotiation assistance) and the LA Boxing Franchise Agreement terminates. The Initial Franchise Fee is uniform as to all Franchisees currently purchasing an LA Boxing Franchise.
OPENING INVENTORY
The typical for-sale items held in opening inventory are boxing gloves, protective gear, and LA Boxing wearing apparel in the amount of $10,000.
TRAINING FEES
We will provide, at no extra charge to you, Initial Training and training materials for up to 3 Trainees. You must pay for all expenses of the Trainees in attending Initial Training including all travel, lodging and meal expenses. You must pay all expenses incurred to have your additional employees, independent contractors or agents attend Initial Training, including reasonable training fees (currently $500 per day per person.). We will make available to you pre-opening, on-site training by an opening supervisor. You must pay for all travel, meals and lodging costs for your attendees. Any training fee paid is not refundable under any circumstance. See ITEM 11, TRAINING for additional information on training.
OTHER FEES
The following is a detailed description of other recurring or isolated fees or payments that you must pay to us or that we impose or collect for a third party. All payments are non-refundable.
| Name of Fee | Amount | Due Date | Remarks |
| Royalty Fee1 | 6% of monthly Gross Revenues | Within 5 days of the end of the previous calendar month | "Gross Revenues" means the entire amount of all your revenues from the ownership or operation of the LA BOXING Franchise as more particularly defined in Section 19.1 of the Franchise Agreement. |
| Advertising Contributions to the Marketing Fund1 | 2% of monthly Gross Revenues | Within 5 days of the end of the previous calendar month | "Gross Revenues" are defined above under Royalty Fee. If we institute an Advertising Contribution, at our option, you must pay a continuing monthly Advertising Contribution (Currently not in effect). |
| Regional Cooperative Advertising2 | As determined by the Cooperative (not more than 2% of monthly Gross Revenues) | Within 5 days of the end of the previous calendar month | Cooperatives have not been established at this time. Once formed, company-owned units will have the same voting power as franchise units. Payments to the Cooperative are credited against any Local Advertising requirements. |
| LA BOXING Products1 | As set by us or our Affiliate | Immediately upon receipt of invoice or as otherwise arranged | You must purchase the LA BOXING Products from us or from an approved source we designate and license. |
| Training Fees1 | As set by us or our Affiliate | Immediately upon receipt of invoice | Any Initial Training required for new Managers, or refresher training programs or seminars we offer or require, you must pay our standard training fee (currently $500 per person per day). You must pay for all travel, meals and lodging costs for your attendees. |
| Fees for Special Assistance1 | As set by us or our Affiliate | Immediately upon receipt of invoice | If you request, we will furnish non-routine guidance and assistance to deal with your unusual or unique operating problems at reasonable per diem fees, charges and out-of-pocket expenses we establish. |
| Insurance Coverage1 | Cost of the insurance, interest on the monies we advance and a reasonable fee | Immediately upon receipt of invoice | If you fail to maintain the insurance required by the LA BOXING Franchise Agreement, we may obtain the required insurance and charge you the cost of the insurance, interest on the monies we advance and a reasonable fee for our efforts. |
| Reimbursement of Audit Costs1 | Actual cost to us | Immediately upon receipt of invoice | We have the right to have an audit made of your records and conduct a physical inventory. If any inspection discloses an understatement of any reported amount of any type, in any report, of 2% or more of Gross Revenues, you must, in addition to paying us the amount of the understatement, reimburse us for all expenses of the inspection (including reasonable accounting and attorneys' fees and costs). |
| Deficiencies1 | Actual cost to us | Immediately upon receipt of invoice | If you do not satisfy your obligations under the LA BOXING Franchise Agreement, we may perform your obligations for you. You must reimburse us for our costs in performing your obligations. |
| Renewal Fee1 | None | At the time you exercise the option | You must sign a new LA BOXING Franchise Agreement, but there will not be an Initial Franchise Fee |
| Transfer Fee1 | $10,000 | At the time of transfer | Upon a transfer, you or your personal representative or other legal representative must pay a Transfer Fee in lieu of an Initial Franchise Fee. If the transfer is to a corporation wholly owned by you, or to your spouse or child, no Transfer Fee will be charged. |
| Fee for Lost Manuals 1 | $250 for each Manual | Immediately upon receipt of invoice | Upon the theft, loss or destruction of any of the Manuals, a replacement copy will be loaned to you at a fee of $250 for each Manual. A partial loss or failure to update any Manual is considered a complete loss. |
| Interest on Late Payments1 | The lesser of: (i) 18% per annum; or (ii) the maximum rate of interest permitted by law. | Immediately upon receipt of invoice | Although each failure to pay monies when due is an Event of Default, to encourage prompt payment and to cover the costs involved in processing late payments, if any payment under the LA BOXING Franchise Agreement or any other agreement between us and you is overdue for any reason, you must pay to us, on demand, in addition to the overdue amount, any insufficient funds (NSF) charges we incur and interest on the overdue amount from the date it was due until paid equal to the lesser of: (i) 18% per annum; or (ii) the maximum rate of interest permitted by law. |
| Late Charge1 | $250 | Immediately upon receipt of invoice | In addition to interest on overdue amounts, you must pay a late charge for each payment that is more than 5 days overdue to cover our administrative costs in dealing with the late payment. |
| Liquidated Damages for Sale of Prohibited Products or Services 1 and 3 | $100 per day that unauthorized products or services are offered | Immediately upon receipt of invoice | The offer to sell or the sale of unauthorized or prohibited products and services will result in damages to us, for those damages you must pay $100 for each day of the prohibited offer or sale. |
| Liquidated Damages for Premature Termination land 3 | A lump sum equal to the total of all Royalty Fees and Advertising Contributions for 36 months | Immediately upon receipt of invoice | This amount is due if you default under your LA BOXING Franchise Agreement in lieu of us having to sue and prove its actual damages. |
| Indemnification1 | Actual cost to us | Immediately upon receipt of invoice | You indemnify and hold us harmless from all damages (including reasonable attorneys' fees and costs, even if incident to appellate, post judgment or bankruptcy proceedings), from claims brought by third parties involving your ownership or operation of your LA BOXING Franchise. This indemnity obligation continues in full effect after the expiration or termination of your Franchise Agreement. |
| Enforcement Costs1 | Actual cost to us | Immediately upon receipt of invoice | If any arbitration, legal action or other proceeding is begun for the enforcement of your LA BOXING Franchise Agreement, or for an alleged dispute, breach, default or misrepresentation under any provision of your Franchise Agreement, the prevailing party is entitled to recover reasonable pre-institution and post-institution attorneys' fees, court costs and all expenses even if not taxable as court costs. If we engage legal counsel for your failure to pay when due any monies owed under your Franchise Agreement or submit when due any reports, information or supporting records, or for any failure otherwise to comply with your Franchise Agreement, you must reimburse us for all of the Enforcement Costs we incur. |
1. This fee is payable to us.
2. This fee is payable to the Cooperative.
3. The following states have statutes that restrict or prohibit the imposition of liquidated damages provisions: California [Civil Code Section 1671], Indiana [1C 23-2-2.7-1(10)], Minnesota [Rule 2860.4400J], South Dakota [Civil Law 53-9-5]. State courts also restrict the imposition of liquidated damages. The imposition of liquidated damages is also restricted by fair practice laws, contract law and state and federal court decisions.
UNIFORMITY
The expenses in this ITEM are uniform for persons currently offered a Franchise.
PAYMENT SCHEDULE; PRE-AUTHORIZED TRANSFERS
All required monthly payments must be submitted to us by the 5th day of each month. All other amounts owed to us are due as specified above. If no time is specified, these payments are due upon receipt of our invoice. At our option, your payments to us must be effectuated by a Payment System by the use of pre-authorized transfers from your operating account through the use of special checks or electronic funds transfer that we will process at the time any payment is due including the Royalty Fee and the Advertising Contributions.
ADVERTISING COOPERATIVES
Advertising cooperatives have not been established at this time. Once formed, company-owned units will have the same voting power as franchise units.