Club Pilates - 2022-04-01 - FDD - Xponential Fitness
Club Pilates - 2022-04-01 - FDD - Xponential Fitness
Club Pilates - 2022-04-01 - FDD - Xponential Fitness
Club Pilates Franchise, LLC (“we,” “us,” or “our”) offers and awards franchises for the right to
establish and operate a fitness studio (each, a “Studio”) that provides Pilates and other exercise classes
utilizing (a) the proprietary marks we designate, including our current primary mark CLUB PILATES (the
“Proprietary Marks”), (b) a designated package of Pilates and other exercise equipment our franchise offering
expects and assume will be leased for use in connection with Studio operations (the “Exercise Equipment
Package”), and (c) other proprietary components and information comprising the system of business
operations we have developed for a Studio (our “System”).
The total estimated investment necessary to begin operations of a single franchised Studio ranges
from $185,800 to $388,200. This amount includes $101,200 to $114,250 that must be paid to the franchisor
or its affiliate prior to opening.
We may also grant existing System franchisees the right to own and operate a non-traditional Studio
from an agreed-upon dedicated space within a third-party “big box” gym/fitness facility (LA FITNESS®) that is
located within an existing territory (the “Non-Traditional Site”) that has already been awarded to that
franchisee in connection with a traditional Studio (described above) it has developed (each, a “Non-
Traditional Studio”).
The total estimated investment necessary to begin operations of a Non-Traditional Studio ranges
from $134,025 to $255,173. This amount includes $37,850 to $114,200 that must be paid to the franchisor
or its affiliates prior to opening.
The total investment necessary to develop multiple Studios under our form of area development
agreement depends on the number of franchises we grant you the right to open, which in all cases will be
three (3) or more under this Disclosure Document. The total investment necessary to enter into an area
development agreement for the right to develop three (3) Studios ranges from $260,800 to $463,200, which
includes (a) a development fee amounting to $135,000 at the time you enter into an area development
agreement with us, and (b) the total estimated initial investment to begin operation of your initial Studio
from a traditional site.
This Disclosure Document summarizes certain provisions of your Franchise Agreement and other
information in plain English. Read the disclosure document and all accompanying agreements carefully. You
must receive this disclosure document at least 14 calendar days before you sign a binding agreement with,
or make any payments to the Franchisor or an affiliate in connection with the proposed franchise sale. Note,
however, that no government agency has verified the information contained in this document.
You may wish to receive your Disclosure Document in another format that is more convenient for
you. To discuss the availability of disclosures in different formats, contact Mike Gray at Club Pilates Franchise,
The terms of your contract will govern your franchise relationship. Don’t rely on the disclosure
document alone to understand your contract. Read all of your contract carefully. Show your contract and this
disclosure document to an advisor, like a lawyer or accountant.
Buying a franchise is a complex investment. The information in this disclosure document can help
you make up your mind. Information about comparisons of franchisors is available. More information on
franchising, such as “A Consumer’s Guide to Buying a Franchise,” which can help you understand how to use
this Disclosure Document, is available from the Federal Trade Commission. You can contact the FTC at 1-877-
FTC-HELP or by writing to the FTC at 600 Pennsylvania Avenue, NW, Washington, DC 20580. You can also visit
the FTC’s home page at www.ftc.gov for additional information. There may also be laws on franchising in
your state. Call your state agency listed on Exhibit B or visit your public library for other sources of
information on franchising.
Here are some questions you may be asking about buying a franchise and tips on how to find more
information:
Continuing responsibility to pay fees. You may have to pay royalties and other fees even if you are losing
money.
Business model can change. The franchise agreement may allow the franchisor to change its manuals and
business model without your consent. These changes may require you to make additional investments in
your franchise business or may harm your franchise business.
Supplier restrictions. You may have to buy or lease items from the franchisor or a limited group of suppliers
the franchisor designates. These items may be more expensive than similar items you could buy on your own.
Operating restrictions. The franchise agreement may prohibit you from operating a similar business during
the term of the franchise. There are usually other restrictions. Some examples may include controlling your
location, your access to customers, what you sell, how you market, and your hours of operation.
Competition from franchisor. Even if the franchise agreement grants you a territory, the franchisor may have
the right to compete with you in your territory.
Renewal. Your franchise agreement may not permit you to renew. Even if it does, you may have to sign a
new agreement with different terms and conditions in order to continue to operate your franchise business.
When your franchise ends. The franchise agreement may prohibit you from operating a similar business after
your franchise ends even if you still have obligations to your landlord or other creditors.
Your state may have a franchise law, or other law, that requires franchisors to register before offering
or selling franchises in the state. Registration does not mean that the state recommends that franchise or
has verified the information in this document. To find out if your state has a registration requirement, or to
contact your state, use the agency information in Exhibit B.
Your state also may have laws that require special disclosures or amendments be made to your
franchise agreement. If so, you should check the State Specific Addenda. See the Table of Contents for the
location of the State Specific Addenda.
1. Out-of-State Dispute Resolution. The franchise agreement requires you to resolve disputes with the
franchisor by arbitration only in California. Out-of-state arbitration may force you to accept a less
favorable settlement for disputes. It may also cost more to arbitrate with the franchisor in California
than in your own states.
2. Spousal Obligation. Your spouse must sign a document that makes your spouse liable for all financial
obligations under the franchise agreement even though your spouse has no ownership interest in
the franchise. This guarantee will place both your and your spouse’s marital and personal assets,
perhaps including your house, at risk if your franchise fails.
3. Minimum Monthly Gross Revenue. You must meet a minimum monthly gross revenue quote
requirement. Your inability to meet this requirement may result in loss of any territorial rights you
are granted, termination of your franchise, and loss of your investment. This obligation will not apply
if you are awarded the right to own and operate a Non-Traditional Studio from within a non-
traditional venue as disclosed more fully in this Disclosure Document.
Certain states may require other risks to be highlighted. Check the “State Specific Addenda” (if any)
to see whether your state requires other risks to be highlighted.
PAGE
ITEM 1 THE FRANCHISOR, ANY PARENTS, PREDECESSORS AND AFFILIATES ....................................................... 2
ITEM 2 BUSINESS EXPERIENCE ......................................................................................................................... 7
ITEM 3 LITIGATION .......................................................................................................................................... 8
ITEM 4 BANKRUPTCY ....................................................................................................................................... 8
ITEM 5 INITIAL FEES ......................................................................................................................................... 9
ITEM 6 OTHER FEES........................................................................................................................................ 11
ITEM 7 ESTIMATED INITIAL INVESTMENT ....................................................................................................... 19
ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES ................................................................. 26
ITEM 9 FRANCHISEE’S OBLIGATIONS .............................................................................................................. 31
ITEM 10 FINANCING ......................................................................................................................................... 32
ITEM 11 FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING ............................... 34
ITEM 12 TERRITORY .......................................................................................................................................... 45
ITEM 13 TRADEMARKS ..................................................................................................................................... 49
ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION ................................................................. 51
ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS .................... 52
ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL .......................................................................... 52
ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION ....................................................... 53
ITEM 18 PUBLIC FIGURES .................................................................................................................................. 64
ITEM 19 FINANCIAL PERFORMANCE REPRESENTATIONS ................................................................................... 64
ITEM 20 OUTLETS AND FRANCHISEE INFORMATION.......................................................................................... 68
ITEM 21 FINANCIAL STATEMENTS ..................................................................................................................... 78
ITEM 22 CONTRACTS ........................................................................................................................................ 78
ITEM 23 RECEIPTS ............................................................................................................................................. 78
Exhibits
To simplify the language, this disclosure document uses “we,” “us,” “our,” “Franchisor” or “Club Pilates”
to mean Club Pilates Franchise, LLC, the franchisor. “You” means the person, corporation, partnership or other
entity that buys the franchise. Terms not defined in this Disclosure Document (including various capitalized
terms) are defined in the Franchise Agreement attached as Exhibit A-1 to this Disclosure Document (the
“Franchise Agreement”).
Franchisor
We do business under the name Club Pilates Franchise, LLC, or in some cases, simply as “Club Pilates.”
We do not do business under any other name. Our principal business address is 17877 Von Karman Ave., Suite
100, Irvine, CA 92614, and our business phone number is (949) 346-9794. We are a Delaware limited liability
company formed on March 12, 2015.
Except as provided in this Item, we have not and do not offer franchises in any other line of business and
we have not otherwise been involved in other substantive business activity.
On March 12, 2015, we completed a transaction under which we acquired all rights, title and interest in
and to the CLUB PILATES franchise system and marks from our predecessor, Club Pilates Global, LLC (“CP
Global”). Please see additional disclosures regarding CP Global below. As part of that same transaction, we also
obtained the ownership rights to five (5) CLUB PILATES Studios that were open and operating in and around San
Diego, California from our affiliate Club Pilates, LLC (“CP”). CP Global and CP's principal business address is the
same as ours. Our affiliate CP does not engage in any other business activities, and CP has never offered
franchises in any line of business. From 2007 to March, 2015, our affiliate, CP operated the five (5) non-
franchised Club Pilates Studios described above. Our predecessor CP Global offered and sold franchises for CLUB
PILATES Studios before the transaction above was completed from September 2012 through March 12, 2015,
but CP Global does not currently offer franchises in any line of business or engage in any other business activities.
Parent
Xponential Fitness, LLC (“Xponential”) is our direct parent company. Xponential is a Delaware limited
liability company with a principal business address at 17877 Von Karman Avenue, Suite 100, Irvine, California
92614. Xponential, via an intermediate holding company, is controlled by Xponential Fitness, Inc., a Delaware
corporation that is publicly traded and listed on the New York Stock Exchange with the same principal business
address as Xponential. As of the Issue Date, please note that none of these parent entities: (i) provide products
or services to our franchisees directly; or (ii) have directly offered or sold franchises in any line of business.
Affiliates
Our affiliate, CycleBar Franchising, LLC (“CBF”), an Ohio limited liability company with a principal
business address of 299 E 6th St., Floor 1, Cincinnati, Ohio 45202, franchises indoor cycling studios under the
CYCLEBAR® marks. CBF began franchising CYCLEBAR studios in January 2015. As of December 31, 2021, there
were 234 franchised CYCLEBAR studios in operation.
Our affiliate, CycleBar Canada Franchising, LLC (“CycleBar Canada”), a British Columbia unlimited liability
company with a registered office at 2200 HSBC Building, 885 West Georgia Street, Vancouver, BC V6C 3E8, offers
2
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CYCLEBAR franchises in Canada. Our affiliate, CycleBar International Inc. (“CycleBar International”) an Ohio
corporation with a principal business address of 299 E 6th St., Floor 1, Cincinnati, OH 45202 offers CYCLEBAR
franchises in other international territories. CycleBar Canada has offered franchises in Canada since August 2015,
and CycleBar International has offered franchises outside the United States since February 2016.
Our affiliate, AKT Franchise, LLC (“AKT Franchising”), a Delaware limited liability company with a principal
business address at 17877 Von Karman Ave., Suite 100, Irvine, California 92614, franchises fitness studios that
provide indoor fitness classes/instruction through a combination of circuit training, dance cardio, Pilates, and
yoga under the AKT® marks. AKT Franchising began franchising at some point in July 2018. As of December 31,
2021, there were 24 franchised AKT studios actively open and providing classes.
Our affiliate, PB Franchising, LLC (“PB Franchising”), a Delaware limited liability company with a principal
business address at 17877 Von Karman Ave., Suite 100, Irvine, California 92614, franchises fitness studios that
provide indoor fitness classes/instruction through a combination of Pilates, weights and ballet, including using a
ballet barre, under the PURE BARRE marks. PB Franchising commenced franchising as the franchising arm of the
brand in October 2012 and, as of December 31, 2021, there were 603 franchised PURE BARRE studios actively
open and providing classes.
Our affiliate, Row House Franchise, LLC (“Row House Franchise”), a Delaware limited liability company
with a principal business address at 17877 Von Karman Ave., Suite 100, Irvine, California 92614, franchises
rowing and free weight exercise classes under the ROW HOUSE® marks. Row House Franchise began franchising
ROW HOUSE studios at some point in early 2018. As of December 31, 2021, there were 81 franchised ROW
HOUSE studios actively open and providing services.
Our affiliate, Stretch Lab Franchise, LLC (“SL Franchising”), a Delaware limited liability company with a
principal business address of 17877 Von Karman Ave., Suite 100, Irvine, California 92614, franchises fitness
studios that provide stretching classes in both private and group formats, related therapy activities and, if
approved, a proprietary “flexologist” training programs under the STRETCH LAB® marks. SL Franchising began
offering franchises for STRETCH LAB studios in late December 2017. As of December 31, 2021, there were 148
franchised STRETCH LAB studios actively open and providing classes.
Our affiliate, Stride Franchising, LLC (“Stride Franchising”), a Delaware limited liability company with a
business address at 17877 Von Karman Ave., Suite 100, Irvine, California 92614, franchises fitness studios that
provide indoor running classes and related fitness classes and instructions through the use of treadmills and live
instruction under its then-current proprietary marks, including its current primary mark STRIDE. As of December
31, 2021, there were 10 franchised STRIDE studios actively open and providing classes.
Our affiliate, Yoga Six Franchise, LLC (“Y6 Franchising”), a Delaware limited liability company with a
principal business address of 17877 Von Karman Ave., Suite 100, Irvine, California 92614, franchises fitness
studios that offer and provide indoor yoga classes/instruction and other related exercise classes under the YOGA
SIX® marks. Y6 Franchising began offering franchises for YOGA SIX studios in September 2018. As of December
31, 2021, there were 125 YOGA SIX studios actively open and providing classes.
Our affiliate, Rumble Franchise, LLC (“Rumble Franchise”), a Delaware limited liability company with a
principal business address of 17877 Von Karman Ave., Suite 100, Irvine, California 92614, franchises fitness
studios that offer and provide boxing classes/instruction and other related exercise classes under the RUMBLE®
marks. Rumble Franchise began offering franchises for RUMBLE studios in March 2021. As of December 31, 2021,
there were 14 RUMBLE franchised Studios actively open and providing classes.
3
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Our affiliate, BFT Franchise Holdings, LLC (“BFT Franchise”), a Delaware limited liability company with a
principal business address of 17877 Von Karman Ave., Suite 100, Irvine, California 92614, franchises fitness
studios that offer and provide functional, group training fitness instruction and related services under the BFT®
marks. BFT Franchise began offering franchises for BFT studios in January 2022; however, its predecessor began
offering franchises for BFT studios in 2020. As of December 31, 2021, there were 2 BFT franchised Studios actively
open and providing classes.
We have three (3) other affiliates that previously offered franchises outside of the fitness industry that
no longer require disclosure because they ceased franchising in 2019 and, as of the Issue Date, they have no
plans to resume offering franchises in our next fiscal year.
As disclosed in Item 12 of the 2018 FDD, please recall that our Parent may acquire or develop other
affiliate franchisor brands, whether in the fitness industry or otherwise, in the future at its discretion.
Traditional Studio
We offer for sale a franchise to operate a franchised Studio (each, a “Franchised Business”), which is
operated pursuant to the terms of our franchise agreement attached to this Disclosure Document as Exhibit A-
1 (the “Franchise Agreement”). We expect that a Studio will typically be located in a retail shopping center, and
this franchise offering assumes that the size of a typical Studio will be at least 1,500 square feet in size (a 25 ft.
by 60 ft. rectangle). We may, however, consider alternative sites, on a case-by-case basis. Under the Franchise
Agreement, we will also grant you the right to operate your Franchised Business within a designated
geographical area wherein you will also be able to actively promote the Franchised Business and solicit new
clientele (the “Designated Territory”).
If you own an existing fitness facility and meet our other qualifications, you may convert your existing
business to a Studio. A converted Studio may encounter lower investment requirements than those of a start-
up Studio.
Each Studio will offer Pilates and other exercise programs through live instructional group and individual
classes, including, but not limited to, Pilates Reformer exercises; exercises using a Pilates Ballet Bar, Springboard,
EXO Chair, and other Pilates’ apparatuses; strength training; stretching exercises; a teacher training program;
and any other services that we authorize (collectively, the “Approved Services”). As of the Issue Date, all Studio
classes are scheduled and paid for online via the Internet utilizing, among other things, a designated
Studio/business management software and related services.
The Studios are established and operated under a comprehensive design that includes spacious interior,
a significant number of exercise equipment/apparatuses, specifications, and procedures for operations; quality
customer service; management and financial control; training and assistance; and advertising and promotional
programs (which we call our “System”). The System’s standards, specifications and procedures (collectively, the
4
©2022 Club Pilates Franchise, LLC
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This document was downloaded from franchimp.com. All the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
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“System Standards”) are described in our confidential operations manual (the “Manual”). The System and the
Manual may be changed, improved and further developed by us.
The Franchise Agreement is signed by us, by you, and by those of your principals whom we designate as
the principal franchisee-operator(s) (the “Designated Operator(s)”) of your Franchised Business. The Designated
Operator(s) (there may be up to two such individuals, but only one address to which we communicate in regards
to the franchise) named has the authority to act for you in all matters relating to the Club Pilates Franchise,
including voting responsibilities.
By signing the Franchise Agreement, you and the Designated Operator(s) agree to be individually bound
by certain obligations in the Franchise Agreement, including covenants concerning confidentiality and non-
competition, and to personally guarantee your performance under the Franchise Agreement. Depending on the
type of business activities, which must be fully disclosed prior to signing this document, in which you or your
Designated Operator(s) may be involved, we may require you or your Designated Operator(s) to sign additional
confidentiality and non-competition agreements.
You (or, if you are an entity, one of your Designated Operators) must complete the “Owner/Operator
Module” of our proprietary initial training program (the “Initial Training Program”) prior to the opening of the
Franchised Business. Your Studio will also need to ensure that there is at least one individual at the Studio that
is capable and authorized of providing the Pilates instruction and other Approved Services at all times they are
being provided (an “Authorized Instructor”). In order to be an Authorized Instructor, an individual must: (i)
demonstrate that he/she previously completed all requirements necessary to meet what we refer to as the
“Instructor Eligibility Criteria” by an industry-recognized third-party institution, including without limitation,
accumulating at least 450 hours of Pilates instruction; and (ii) attend our proprietary “orientation program” (the
“Orientation Program”) – otherwise known as “Bridge Training” -- designed to provide individuals who meet the
Instructor Eligibility Criteria with additional guidelines and information on how to provide the Approved Services
in accordance with our current System Standards.
Please note that our standard franchise offering assumes that any individual you engage to serve as an
initial Authorized Instructor at your Franchised Business will already meet the Instructor Eligibility Criteria at the
time he/she commences involvement with your franchised Studio and prior to attending the required
Orientation Program.
We do offer, and will permit our franchisees to offer, a full “teacher training” course that provides the
kind of instruction typically associated with meeting the Instructor Eligibility Criteria. Our standard franchise
offering assumes that the initial instructor and subsequent instructors at your Studio will already meet the
Instructor Eligibility Criteria and that such individuals will only be required to complete our Orientation Program
before they can commence working at your Franchised Business.
If you are awarded the right to own and operate a franchised Studio from a Non-Traditional Site, then
this will be considered a Non-Traditional Studio for purposes of this Disclosure Document. You will be required
to enter into our then-current form of Franchise Agreement to govern the operations of each Non-Traditional
Studio, as well as the Non-Traditional Venue Addendum, attached to this FDD as Exhibit A-2 (the “Non-
Traditional Studio Addendum” or “Addendum”, and you will be obligated to comply with all obligations under
that agreement and addendum with regards to the Non-Traditional Studio operations from such a Non-
Traditional Site. We expect that the Non-Traditional Site will be approved and designated by us in the governing
Franchise Agreement at the time it is executed.
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©2022 Club Pilates Franchise, LLC
2022 Franchise Disclosure Document
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Please note that you will not be awarded any Territory beyond the boundaries of the Non-Traditional
Site (the “big box” fitness/gym facility) itself if you determine to acquire the right to own and operate a Non-
Traditional Studio.
Multi-Unit Offering
We also offer qualified individuals and entities the right to open and operate three or more Franchised
Businesses within a designated geographical area (the “Development Area”) under our current form of
development agreement that is attached to this Disclosure Document as Exhibit J (the “Development
Agreement”), which will also outline a schedule or defined period of time in which you must open and commence
operating each Franchised Business (a “Development Schedule”).
As of the Issue Date, we are only awarding franchise development rights in connection with Studios that
are operated from a traditional Authorized Location (site) – and any Non-Traditional Studios you determine to
acquire the right to own and operate will not be counted towards your Development Schedule or otherwise
governed under the Development Agreement.
You will be required to sign our current form of Franchise Agreement for the initial Franchised Business
we grant you the right to open within the Development Area at the same time you sign your Development
Agreement. You will subsequently need to sign our then-current form of franchise agreement for each of the
Franchised Businesses you open under the Development Schedule closer to the time you are required to develop
such Studio locations that may contain different terms from our current form of Franchise Agreement attached
to this Disclosure Document as Exhibit A-1.
You will be required to pay us a one-time development fee that will be calculated based on the number
of Franchised Businesses we grant you the right to open under the Development Agreement (the “Development
Fee”), but you will not be required to pay any other initial franchise fee at the time you execute your franchise
agreements for each Franchised Business we permit you to open under your Development Agreement.
The initial and each subsequent Franchised Business you are required to develop under your
Development Agreement must be a traditional Studio that you operate from a traditional Authorized Location
that we approve. Any Non-Traditional Studio you determine to open and operate will not be counted towards
your development obligations within the Development Schedule.
The market for fitness services and studios is crowded. You will face competition for members from other Pilates
studios, gyms, personal trainers, yoga studios, fitness/exercise centers and studios, health clubs, barre-based
studios, and even other System franchisees.
Applicable Regulations
Some states require that health/fitness facilities have a staff person available during all hours of operation that
is certified in basic cardiopulmonary resuscitation or other specialized medical training. Some state or local laws
may also require that health/fitness facilities have an automated external defibrillator and/or other first aid
equipment on the premises. At a minimum, your Studio will be subject to various federal, state and local laws,
and regulations affecting the business, including laws relating to zoning, access for the disabled, and safety and
fire standards. You may need the local fire marshals or other local, state or federal agency’s permission before
6
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from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
you begin operations. In addition, there may be local licensing and employment regulations, including worker’s
compensation insurance requirements.
You will be solely responsible for ensuring you acquire and maintain any specific licenses, permits, authorizations
or otherwise that may be required to operate your Studio under the applicable laws of where the Studio is
located. Among other things, you will need to endure that all music played by you or your Authorized Instructors
at the Studio is properly licensed for use in connection with the provision of the Approved Service, or if permitted
by us, any other purpose.
If you acquire the right to own and operate a Non-Traditional Studio from a Non-Traditional Site, then you will
need to ensure that you comply with all regulations related to operating and providing the Approved Services
and Approved Products from the Non-Traditional Site at issue.
You should examine the laws and regulations described above and confirm you will be able to operate your
Studio in compliance with the same before purchasing a franchise.
You should consult with your attorney, and local and state agencies/authorities, before buying a franchise to
determine if there are any specific regulations you must comply with as it relates to offering the Studio products
and services to consumers in your state, and consider the effects on you and the cost of compliance. These
requirements can affect a broad scope of your operations, including location selection, and hiring of personnel,
among other things. It is your sole responsibility to investigate any regulations in your area, including those
related to the establishment and operation of a Studio generally.
We make no representations or assurances as to the specific licenses, permits, authorizations or otherwise that
may be required for operating your Studio, which can vary significantly by venue and change over time. Among
other things, you will need to ensure that all music played by you or your Authorized Instructors at the Studio is
properly licensed for use in connection with the provision of the Approved Services or otherwise.
It is your responsibility to investigate and ensure that you are in compliance with all local, state, provincial and
federal business, retail sales, zoning, and other regulations and licensing requirements, and any applicable laws
and regulations, and to identify and obtain all authorizations necessary to operate your Studio. Please be advised
that you must investigate and comply with all of these applicable laws and regulations. You alone are responsible
for complying with all applicable laws and regulations, despite any advice or information that we may give you.
We have not researched any of these laws to determine their applicability to your Franchised Business.
Mr. Gray has been our President since May 2021. Previously, Mr. Gray was our Senior Vice President of
Operations from October 2018 to May 2021. From July 2017 to October 2018, Mr. Gray was our Vice President
of Sales. From December 2014 to June 2017, Mr. Gray worked as the Director of Operations (both domestically
and international) for UFC Gym Franchise Company in Santa Ana, California.
Mr. Junk has served as our Chief Operating Officer since March 2021. Since June 2016, Mr. Junk has also served
as a Consultant and Owner for R.L.J Consulting Group, LLC in Redondo Beach, California. Mr. Junk has also served
as the COO of the following affiliates since March 2021: (i) AKT Franchise, LLC (“AKT”); (ii) CycleBar Franchising,
7
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2022
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from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
LLC (“CB”); (iii) PB Franchising, LLC (“PB”); (iv) Row House Franchise, LLC (“RH”); (v) Rumble Franchise, LLC
(“Rumble”); (vi) Stretch Lab Franchise, LLC (“SL”); (vii) Stride Franchise, LLC (“Stride”); and (viii) Yoga Six
Franchise, LLC (“Y6”). He has also served as the COO for Xponential Fitness, LLC since July 2020. From November
2017 to June 2020, Mr. Junk served as President of our affiliate, CycleBar Franchising, LLC. From June 2017 to
November 2017, Mr. Junk served as the President of UFC Gym in Santa Ana, California.
Ms. Luna has served as our President since March 2021. Ms. Luna has also served as Founder of Pilates by Sarah
since January 2012. Ms. Luna has also served as the President of the following affiliates since March 2021: (i)
AKT Franchise, LLC (“AKT”); (ii) CycleBar Franchising, LLC (“CB”); (iii) PB Franchising, LLC (“PB”); (iv) Row House
Franchise, LLC (“RH”); (v) Rumble Franchise, LLC (“Rumble”); (vi) Stretch Lab Franchise, LLC (“SL”); (vii) Stride
Franchise, LLC (“Stride”); and (viii) Yoga Six Franchise, LLC (“Y6”). Ms. Luna has also served as the President of
our parent, Xponential Fitness, LLC, since January 2021. Previously, Ms. Luna was Brand President of PB from
October 2018 to January 2021. Prior to that time, Ms. Luna was our Senior Vice President from July 2017 to
October 2018, and our National Sales Director from July 2015 to June 2017.
Ms. Moen has been our Executive Vice President of Finance since March 2021. Ms. Moen has also served as the
Executive Vice President of Finance for: (i) AKT Franchise, LLC, since March 2018; (ii) CycleBar Franchising, LLC,
since September 2017; (iii) PB Franchising, LLC, since November 2018; (iv) Row House Franchise, LLC, since
December 2017; (v) Rumble Franchise, LLC, since March 2021; (vi) Stretch Lab Franchise, LLC, since March 2021;
(vii) Stride Franchise, LLC, since January 2019; (viii) Yoga Six Franchise, LLC, since March 2021. Ms. Moen has also
served as the Executive Vice President of Finance of our parent, Xponential Fitness, since August 2017.
Mr. Meloun has been our Chief Financial Officer since March 2021. Mr. Meloun has also served as the Chief
Financial Officer for: (i) AKT Franchise, LLC, since October 2018; (ii) CycleBar Franchising, LLC, since October 2018;
(iii) PB Franchising, LLC, since October 2018; (iv) Row House Franchise, LLC, since March 2021; (v) Rumble
Franchise, LLC, since March 2021; (vi) Stretch Lab Franchise, LLC, since March 2021; (vii) Stride Franchise, LLC,
since March 2021; and (viii) Yoga Six Franchise, LLC, since March 2021. Mr. Meloun has also served as Chief
Financial Officer for Xponential Fitness, LLC, located in Irvine, California, since July 2018. Prior to that time, Mr.
Meloun was the Chief Financial Officer for The Joint Corp., located in Scottsdale, Arizona, from March 2015 to
June 2018.
ITEM 3 LITIGATION
ITEM 4 BANKRUPTCY
8
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
ITEM 5 INITIAL FEES
Franchise Agreement
You must pay to us a lump sum initial franchise fee of $60,000 (the “Initial Franchise Fee”) to establish
a single Studio under a Franchise Agreement (whether a start-up or conversion). The Initial Franchise Fee is due
upon the signing of the Franchise Agreement. The Initial Franchise Fee shall be fully earned by Franchisor upon
payment and is not refundable, in whole or in part, under any circumstance. Except as disclosed in this Item, we
uniformly impose the Initial Franchise Fee on all parties that are purchasing a single Franchised Business.
If you are offered the right to own and operate a Non-Traditional Studio from a Non-Traditional Site
located within a Designated Territory you have already been awarded in connection with a traditional franchised
Studio, then you will not be required to pay us any Initial Franchise Fee in connection with the Franchise
Agreement governing that Non-Traditional Studio.
As part of our standard franchise offering, you must pay us to provide (or arrange for its Approved
Suppliers to provide) you with the following prior to the opening of your Studio: (i) a Studio fixture package
comprised of a desk, displays and display rack, storage cubbies, pedestals and 1 Barre package; (ii) other items
related to the outfitting and design and buildout of your Studio; and (iii) the installation and transportation of
the foregoing items, as well as the other Exercise Equipment Package that we assume and expect you will lease
from a third-party Approved Supplier (collectively, these products and services will be referred to as the
“Furniture and Fixture Package”).
We estimate the total cost of a given Furniture and Fixture Package is between $29,000 and $40,000.
Currently, you must pay us for the Furniture and Fixture Package, but we reserve the right to designate one or
more other approved supplier(s) from which you must purchase these items in the future. You must purchase
the Furniture and Fixture Package prior to opening your Studio and this payment is not refundable under any
circumstances.
Prior to opening your Studio, you must purchase the following from us: (i) opening inventory that
includes branded apparel, including t-shirts, yoga pants, toe socks and related accessories. The amount paid for
the Proprietary Initial Inventory Kit is non-refundable under any circumstances; and (ii) a pre-sale start-up
package that typically includes (a) marketing and promotional items such as a branded EZ Up tent, feather flags
and a portable reformer to be utilized in conjunction with your pre-opening support program described below,
and (b) branded apparel that is specific to the location of your Studio (collectively, the “Proprietary Initial
Inventory Kit”).
The cost of the Proprietary Initial Inventory Kit is $12,000, which we may require you pay to us
immediately upon execution of your Franchise Agreement. The amount paid is non-refundable under any
circumstances and is deemed fully earned upon payment. We expect to impose this charge for the kit uniformly.
9
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
You are required to use certain of these items in coordination with the pre-opening sales plan we
approve or designate for your Studio as part of the opening support program that our approved supplier provides
in connection with your Studio, as we determine appropriate in our discretion (the “Opening Support Program”).
You must ensure that your initial staff of Authorized Instructors attends and completes the appropriate
Orientation Program training before, which will take place at one of our corporate training facilities, which
currently has a program tuition fee amounting to $200 per instructor (the “Orientation Program Fee”). As such,
we estimate that you will pay us between $200 and $1,600, depending on how many Instructors you determine
to send to receive this Orientation Program, prior to the opening of your franchised Studio.
Our standard franchise offering assumes and expects that you will lease the Exercise Equipment Package
from our approved supplier for such leasing services, in which case: (i) you will pay that lessor directly for the
right to lease and possess that package of Pilates and other exercise equipment necessary to operate the Studio
(as described more fully in Item 7 of this Disclosure Document); and (ii) no disclosure is required in this Item.
If, however, you determine to outright purchase the Exercise Equipment Package, we may require that
you purchase that package from us or our affiliate (with the approximate cost being between $79,250 and
$86,881 that would be due prior to opening and non-refundable upon payment). Rather than purchase this
package outright, our standard offering assumes and expects that you will lease the equipment comprising this
package to increase or facilitate cash flow during early operations.
Development Agreement
If we award you the right to develop three (3) or more Franchised Businesses within a given
Development Area, you must pay us a one-time Development Fee upon execution of your Development
Agreement. Your Development Fee will depend on the number of Franchised Businesses we grant you the right
to open within the Development Area, and is calculated as follows: (i) $45,000 per Franchised Business if you
agree to open and operate between three and five Franchised Businesses; (ii) $40,000 per Franchised Business
if you agree to open and operate between six and nine Franchised Businesses; and (iii) $35,000 per Franchised
Business if you agree to open and operate 10 or more Franchised Businesses.
You will be required to enter into our then-current form of franchise agreement for each Franchised
Business you wish to open under your Development Agreement, but you will not be required to pay an Initial
Franchise Fee at the time you execute each of these franchise agreements. If you enter into a Development
Agreement, you must execute our current form of Franchise Agreement for the first Studio we grant you the
right to open within your Development Area concurrently with the Development Agreement.
Your Development Fee will be deemed fully earned upon payment, and is not refundable under any
circumstances. The Development Fee described above is calculated and applied uniformly to all of our
franchisees.
10
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
ITEM 6 OTHER FEES
Royalty 7% of Gross Revenue Payable weekly via You will be required to start paying your
generated by your Franchised electronic funds Royalty once your Franchised Business
Business over the relevant transfer (“EFT”) begins collecting revenue from
reporting period1 based on the Gross operations. We reserve the right to
Revenue of your collect your Royalty on a different
Franchised interval (for example, monthly).
Business during the
preceding business
week
Contributions to Brand Currently, 2% of Gross Payable weekly at Your Fund Contributions will begin
Development Fund2 Revenue1 the same time and when the Studio begins collecting
in the same manner revenue from operations.
as the Royalty
Local Advertising You must expend a minimum As arranged or This is the minimum amount you must
Requirement of $1,500 per month (the incurred expend on the local advertising and
“Local Advertising promotion of your Studio within the
Requirement”) on the local Designated Territory awarded under
advertising and promotion of your Franchise Agreement. We
your franchised Studio encourage you to expend additional
amounts on promoting and advertising
your Franchised Business as you and
your business advisors determine
appropriate.
11
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Type of Fee Amount Due Date Remarks
12
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Type of Fee Amount Due Date Remarks
Transfer Fee Franchise Agreement: Upon your request Instead of the standard transfer fee, we
$10,000 for our application will only charge an administrative fee
(Franchise Agreement and for our approval of amounting to: (i) $500 if you are an
Development Agreement) Development Agreement: any proposed individual franchisee and assigning your
$10,000 per undeveloped transfer franchise and/or development
franchise agreements rights to an entity that you
fully own; or (ii) $1,500 if the
assignment is from an existing System
franchisee to another immediate family
member.
14
©2022 Club Pilates Franchise, LLC
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from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Type of Fee Amount Due Date Remarks
Relocation Fee $5,000 Upon submission of You will not be permitted to relocate
a proposal to your Studio without our prior written
relocate approval, which may be withheld in our
discretion.
Insurance Policies3 Amount of unpaid premium. As agreed. Payable only if you fail to maintain
required insurance coverage and we
As of the Issue Date, the elect to obtain coverage for you.
estimate for 3 months of the
minimum required insurance
is between $900 - $2,500
Audit Fees4 Costs incurred by us in Within 15 calendar Payable only if (a) audit or review shows
connection with conducting days after receipt of an understatement of Gross Revenue
audit audit report. for the audited period of 2% or more, or
(b) the audit or review is being
Currently, we estimate that conducted in response to your failure to
such costs will typically be timely submit any reports required by
between $500 - $2,500 (plus your Franchise Agreement.
15
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was downloaded DisclosureAll Document
from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Type of Fee Amount Due Date Remarks
Late Fees The greater of (a) the highest Upon demand. Applies to all amounts not paid when
applicable legal rate for open due, until paid in full. We may also
account business credit, or (b) require you to pay an administrative fee
1.5% per month. of $50 for each late payment or late
report.
Penalty Fee Then-current fee charged by Upon demand. Payable only in the event you fail to
us comply with your material obligations
under your Franchise Agreement by (a)
Currently, $100 for each day permitting any instructor at your Studio
of non-compliance. to provide Pilates instruction or other
Approved Services before they
complete the Orientation Program, or
(b) offering or selling any unauthorized
products or services at your Studio. The
Penalty Fee will be incurred during each
day of non-compliance.
Cost of Enforcement or All costs including attorneys’ Upon settlement or You will reimburse us for all costs in
Defense fees conclusion of claim enforcing our obligations concerning
or action. the Franchise Agreement if we prevail.
Indemnification All costs including attorneys’ Upon settlement or You will defend suits at your own cost
fees conclusion of claim and hold us harmless against suits
or action. involving damages resulting from your
operation of the Studio.
Alternative Supplier $1,500 per day for personnel At time of request. Additionally, you must reimbursement
Approval5 engaged in evaluating a us for any travel, accommodations, and
supplier. meal expenses.
Studio Management Then-current fee charged by Payable every 4 Please see Items 8 and 11 of this Disclosure
Software Fee 6
our Approved Supplier for weeks, as agreed. Document for additional information on
such Studio management Approved Suppliers and this fee.
software
Currently, approximately
$269/month
Regional Cooperative As the Cooperative As the Cooperative We may establish regional cooperatives
determines determines comprised of Studios that are within a
given geographical area (each, a
“Cooperative”). If a Cooperative is
established where your Studio is
located, you will be required to
participate in that Cooperative and
16
©2022 Club Pilates Franchise, LLC
2022
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was downloaded DisclosureAll Document
from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Type of Fee Amount Due Date Remarks
All fees are imposed by and are payable to us, unless otherwise noted. No other fees or payments are
to be paid to us, and we do not currently impose and collect any other fees or payments for any third party. Any
fees paid to us are non-refundable unless otherwise noted. Fees payable to third parties may be refundable
based on your individual arrangements.
17
©2022 Club Pilates Franchise, LLC
2022 Franchise Disclosure Document
This document was downloaded from franchimp.com. All the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Notes to Chart for Franchise Agreement:
1
Gross Revenue. Except as provided below, the term “Gross Revenue” means the total revenues you
derive, directly or indirectly from all business conducted upon, from or in connection with the Studio, less sales
taxes or similar taxes imposed by governmental authorities. (See Section 5.3 of the Franchise Agreement for a
more complete definition.) Please note that we exclude revenue generated from the provision of the Teacher
Training Program at your Studio from the definition of Gross Revenue because you are required to pay us a flat
fee of $2,000 for each individual that received the required training (as described more fully in the Chart above).
You must participate in our then-current electronic funds transfer and reporting program(s). (See Exhibit 2 and
Exhibit 3 of the Franchise Agreement.) All fees owed and any other amounts designated by us must be received
or credited to our account by pre-authorized bank debit by 5:00 p.m. on or before the applicable due date. Your
franchised business may be located in a jurisdiction whose taxing authority will subject us to tax assessments on
payments you submit to us for the Royalty Fee and Marketing Fund contributions. Under such circumstances,
you will be required to adjust, or “gross up” your payment to us to account for these taxes. Please note that
certain franchisees that signed franchise agreements prior to the Issue Date of this Document are required to
pay a royalty amounting to six percent (6%) of Gross Revenue.
2
Brand Development Fund. We have established a brand development fund (the “Fund”) and you will
be required to make a weekly contribution towards such fund (“Fund Contribution”) beginning the date your
Studio begins collecting revenue from business operations. The Fund may be used for (among other things)
product development; signage; creation, production and distribution of marketing, advertising, public relations
and other materials in any medium, including the internet; social media; administration expenses; brand/image
campaigns; media; national, regional and other marketing programs; activities to promote current and/or future
Studios and the brand; agency and consulting services; research; and any expenses approved by us and
associated with your Studio. We will have sole discretion over all matters relating to the Marketing Fund. You
must pay for your own local advertising.
3
Insurance Policies. The minimum limits for coverage under many policies will vary depending on
several factors, including the size of your Studio, and whether you offer classes. See Item 8 of this Disclosure
Document for our minimum insurance requirements.
4
Audit Fees. You will be required to reimburse us for the cost of the audit in the event that (a) an audit
discloses an understatement of Gross Revenue for the audited period of two percent (2%) or more, or (b) the
audit or review is being conducted in response to your failure to timely submit any reports required by your
Franchise Agreement. You will also be required to pay the marketing due on the amount of such
understatement, plus late fees and interest
5
Alternative Supplier Approval. You may request the approval of an item, product, service or supplier.
We may require you to pre-pay any reasonable charges connected with our review and evaluation of any
proposal.
18
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
ITEM 7 ESTIMATED INITIAL INVESTMENT
Notes to Table A:
All amounts payable to us are nonrefundable, unless otherwise noted. Amounts payable to
suppliers/vendors are refunded according to arrangements you make with the vendor, if any. These figures are
estimates of the range of your initial costs in the first three (3) months of operation only. Leasing and financing
is available for many of the above expenses. We do not offer direct or indirect financing, but we may assist you
in obtaining working capital through other sources. See Items 5 and 6, and other parts of this Disclosure
Document, for more information regarding Initial Franchise Fees and other costs.
1
General. The initial investment table shows certain expenditures required to establish and operate a
Studio. Note that these amounts may vary widely, and the amounts you have to spend or invest may be higher
or lower than the estimated amounts, depending on location, size of the Studio, marketing conditions and other
factors. We strongly recommend that you verify actual costs in your area, and for your intended location, and
prepare a business plan and have it reviewed by your own independent adviser, like an accountant, before
making any commitments to us or anyone else. Due to legal restrictions, we will not prepare, review or comment
on any business plan for a prospective Franchisee. This Item 7 assumes and expects that you will (a) lease the
Exercise Equipment Package, and (b) timely perform all pre-opening obligations and open and commence
operations of your Studio within the time periods prescribed in your Franchise Agreement. All estimates listed
in the table above exclude tax.
2
Initial Franchise Fee. The Initial Franchise Fee is non-refundable. The Initial Franchise Fee for a single
Studio is $60,000. We do not provide financing for the Initial Franchise Fee.
3
Travel and Living Expenses While Training. As previously disclosed in Items 1 and 6 of this Disclosure
Document, you (or, if you are an entity, your Designated Operator) must attend our proprietary Initial Training
Program. We will not charge any tuition or training fee in connection with your attendance Initial Training
Program, provided all individuals attend at the same time. The estimate in the Chart above assumes that you (or
your Designated Operator) will attend the Initial Training Program, and you will be responsible for the costs and
expenses associated with attending our Initial Training Program (e.g., transportation, meals, lodging and other
expenses). The amount you will spend while training will depend on several factors, including the number of
persons attending, the distance you must travel and the type of accommodations you choose, if any are needed.
20
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
4
Real Estate/Lease. If you do not own adequate Studio space, you must lease suitable premises. These
figures assume that the leased premises will be approximately 1,500 square feet. Landlords may also vary the
base rental rate and charge rent based on a percentage of gross sales. In addition to base rent, the lease may
require you to pay common area maintenance charges (“CAM Charges”), your pro rata share of the real estate
taxes and insurance, and your pro rata share of HVAC and trash removal. The actual amount you pay under the
lease will vary depending on the size of the Studio, the types of charges that are allocated to tenants under the
lease, your ability to negotiate with landlords, and the prevailing rental rates in the geographic area. You may
also be required to pay a security deposit equal to a month’s rent. The estimate covers the first three (3) months
of operation, and one (1) month’s rent as a security deposit. Since rental, improvement and other real-estate-
related costs can vary significantly by area, it’s your responsibility to (1) independently research all applicable
laws and regulations, and real estate market conditions and costs, where you plan to locate and operate your
facility, and (2) obtain appropriate advice from your own accountant, attorney and real estate professional,
before signing any binding documents or making any investments or other commitments, whether to us or
anyone else.
This estimate is also designed to cover the legal and other professional fees associated with securing an
approved premises, including appropriate lease negotiations based on estimates we have received from a panel
of legal professionals that have experience working with our System franchisees (and those of our affiliate
franchisors) in connection with such negotiations and associated pre-opening legal work. We do not require that
you use one of the approved providers on this panel, but we recommend you do so and provide this information
as part of the System as a resource.
5
Net Leasehold Improvements. The cost of leasehold improvements will vary depending on: (i) the size
and configuration of the premises which will be approximately 1,500 square feet; (ii) pre-construction costs (e.g.,
demolition of existing walls and removal of existing improvements and fixtures); and (iii) cost or materials and
labor which may vary based on geography and location. It includes the net cost of leasehold improvements,
including floor coverings, wall treatments, ceilings, painting, electrical, carpentry, plumbing, HVAC, and similar
work, as well as materials and the cost of labor. These amounts may vary substantially based on local conditions,
including the availability and prices of labor and materials. These amounts may also vary depending on whether
certain of these costs will be incurred by the landlord and allocated over the term of the lease. In certain major
metropolitan markets such as Boston, Chicago, New York, Los Angeles, San Francisco, Seattle, and Washington,
D.C., costs could be significantly higher than the estimates provided here due to local market rates for materials
and labor. You must adapt our prototypical plans and specifications for the construction and finish-out of the
Studio, including approved flooring and other vendors or materials as designated. We highly suggest you receive
multiple general contractor bids to determine your estimated build-out costs.
This estimate also includes amounts you may expend in connection with architectural services, sound
engineer consultants, utility deposits, and expenses incurred to acquire the required local business licenses and
permits. We make no representations or assurances as to what (if any) licenses, permits, authorizations or
otherwise may be required in connection with your studio. You should investigate applicable requirements in
your area and the related costs, including receiving advice from regulatory agencies and your own lawyer, before
making any commitments, whether to us or anyone else.
For clarity, the estimates presented herein are net of tenant improvement amounts incurred and
reimbursed by the landlord. This estimate presented herein is also assuming an average landlord tenant
improvement contribution range between $15,000 and $110,000, or an average of $45,000. The actual amount
of tenant improvement allowance you will receive can vary depending on your negotiations with the landlord.
21
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
6
Signage. You will need to purchase appropriate signage for your Studio that we approve. The cost of
your signage may be more or less than this estimate, and depends on the size, type and method of installation
you choose. Each landlord has different restrictions it places on interior and exterior signage that may affect
your costs.
7
Insurance. This estimate is for three (3) months of your minimum required insurance, using our
required or approved third-party vendor. The actual cost may be more than shown here. You will need to check
with our insurance carrier for actual premium quotes and costs, and for the actual amount of deposit. Insurance
costs can vary widely, based on the area in which your business is located, your experience with the insurance
carrier, the loss experience of the carrier, the amount of deductibles and of coverage, and other factors beyond
our control. You should obtain appropriate advice from your own insurance professional before signing any
binding documents or making any investments or other commitments, whether to us or anyone else.
8
Lease-Related Payments in Connection with Pilates and Other Leased Exercise Equipment. Our
standard franchise offering assumes and expects that a new System franchisee will lease the required Pilates
and other exercise equipment necessary to open and initially commence operations. As such, the range above
is designated to capture and account for (a) the typical deposit, and (b) lease (or comparable installment)
payments you make to a third-party provider we approve (we have pre-approved several as of the Issue Date)
for to lease this equipment. The initial required amount of Pilates and other exercise equipment for a standard
Studio is typically comprised of a package that is comparable to the following: 13 Pilates Reformers, a Pilates
Ballet Bar Kit, 13 Spring Boards, 13 EXO Chairs, 13 TRX units and smaller pieces of related exercise equipment
(e.g., balls, mats, etc.) – but we may raise or lower this requirement depending on the size of your Studio.
If you determine not to follow our System-recommended practice of leasing this equipment associated
with our standard franchise offering described above, the estimated cost to purchase this equipment outright
will be substantially more (approximately $79,250 to $86,881) and will be paid to us or our designated supplier
of such equipment.
9
Retail Inventory Package for Presale and Soft Opening. This estimate is the cost associated with
acquiring the following proprietary and required items: opening stock of retail inventory which includes, but is
not limited to, presale merchandise, branded apparel made up of tops, bottoms, and accessories. The entire
package must be purchased prior to Soft Opening. Shipping is not included. If credit is not used within 180 days
of Soft Opening, credit will expire.
10
Furniture and Fixture Package. This is a range of expenses that will be incurred when decorating and
furnishing the Studio. Both the low-end and the high-end numbers represent a straight, outright purchase of the
furniture, fixtures and related items comprising this package (rather than leasing or making installment
payments on these items).
11
Computer System and Related Equipment. You must acquire a personal computer and a Point of Sale
system (“POS”) for use in the operation of the Studio. Your computer system must be equipped with a high
speed connection to the Internet and must include a local area network with a dedicated server. We will make
available to you a certain business management software program specific for the Studio to be loaded on to
your system. You will pay the third-party vendor directly for all fees associated with the use of the software.
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. Please see Item 11
of this Disclosure Document for more information on the Computer System. In addition, this estimate includes
certain related equipment (e.g. tablets, etc.), as well as the costs associated with at least one (1) surveillance
camera to be installed for use at the Studio. You may be required to purchase the camera(s) and related
22
©2022 Club Pilates Franchise, LLC
2022 Franchise Disclosure Document
This document was downloaded from franchimp.com. All the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
accessories from an Approved Supplier (see Item 8 of this Disclosure Document). The camera(s) must be web
accessible. You will use the camera to monitor instructor/teacher performance, quality assurance and safety.
We have an absolute right to also review and monitor the camera(s) for the same purposes as you, and to ensure
compliance with the System. You are responsible for ensuring customer consent and for any failure to obtain
such consent. You must indemnify us for any breaches of privacy from your use of any surveillance camera.
12
Initial Marketing Spend. You are required to expend this “Initial Marketing Spend” in coordination
with the pre-opening sales plan we approve or designate for your Studio as part of the opening support program
that our approved supplier provides in connection with your Studio, as we determine appropriate in our
discretion (the “Opening Support Program”). Typically, we expect your Opening Support Program to commence
prior to the “soft opening” of your franchised Studio through your actual opening of the Studio. These funds
must be expended on your Opening Support Program and any other pre-opening marketing and/or advertising
activities we designate. We may require that you expend any portion of these funds on services or product
supplied by one or more of our Approved Suppliers. We will have the right to modify its Opening Support
Program as we determine appropriate in our sole discretion. You must provide us with supporting
documentation evidencing these expenditures upon our request. This estimate is in addition to your required
contributions to the Fund.
13
Shipping. We arrange for the shipping of all of your equipment and furniture/fixtures. These amounts
will vary based upon the geographic location of your Studio.
14
Orientation Program Fee. Our Orientation Program or “Bridge Training” is an instructor onboarding
training. It is for all instructors you and other System franchisees engage to work at a franchised Studio location.
Bridge Training is not a Pilates certification nor is it meant to fill in gaps for non-comprehensive instructors.
Remember, our franchise offering assumes that any prospective Authorized Instructor you wish to involve in
your Studio operations will already meet the Instructor Eligibility Criteria prior to any involvement with your
Studio. The instructor will complete onboard training videos, online training, and a training manual prepared
specifically for Bridge Training. They will be required to complete a video test out that will be reviewed by us for
specific feedback about the instructor to complete the training.
15
Technology Fee(s). This estimate designed to cover our current Technology Fee obligations prior to
opening and over the first three (3) months of operation, for a total of four (4) months of payments. Please see
Items 5, 6 and 11 for additional information on this fee that, as of the Issue Date, amounts to $150/month.
16
Additional Funds. This is an estimate of certain funds needed to cover your business (not personal)
expenses during the first three (3) months of operation of the Studio. These expenses include initial personnel
wages; ongoing purchases of equipment and supplies; marketing expenses/fees and local advertising; utilities;
and repairs and maintenance. Your cost will depend upon your management skill, experience and business
acumen; local economic conditions; the prevailing wage rate; competition; and sales of the Studio during the
period. This estimate is based on: (i) the experience of opening and commencing operations of the Existing
Studios;(ii) our experience in franchising since our inception and the experience of our System franchisees based
on reports and other information they provide (iii) the experience of our sister brands in developing other fitness
concepts and information related to their respective studio investment costs; and (iv) current estimates we have
received from our Approved Suppliers and other third party vendors. The availability and terms of financing to
you will depend upon factors such as the availability of financing in general, your credit-worthiness, the collateral
security that you may have, and policies of lending institutions concerning the type of business you operate. This
estimate does not include any finance charge, interest, or debt service obligation.
17
Total Estimated Initial Investment. All of the above figures are estimates of certain initial start-up
23
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
expenses. As noted above, it is not all-inclusive, and we cannot guarantee you will not have additional expenses
in starting or operating the Studio. The total listed above does not include compensation for your time or labor
or any return on your investment. Your costs will vary depending on such factors as: how closely you follow the
System; your management and marketing skills, experience and general business ability; and local and general
economic conditions, including disposable income. You should review these figures carefully with a business
advisor (such as an accountant) before making any commitments. In preparing the figures in this chart, we relied
on the experience of: (i) us and our affiliates in owning and operating Studios utilizing the Proprietary Marks and
System over the past ten (10) years (prior to selling those units to System franchisees); (ii) our franchisees that
have developed Studios, with a particular focus on those franchisees that have opened using certain new
components and standards that were integrated into the System when our Parent acquired us; and (iii) our
affiliate franchisors’ experience with their respective brands.
24
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
TYPE OF EXPENDITURE 1 LOW HIGH METHOD OF WHEN DUE TO WHOM
PAYMENT PAYMENT IS TO BE
MADE
Initial Marketing Spend $15,000 $15,000 As arranged As arranged Approved Suppliers
(including amounts on and Vendors
Opening Support Program)13
Shipping14 $4,500 $12,000 As arranged Before Us
Opening
Installation $6,000 $8,500 As arranged Before Us
Opening
Orientation Program Fee15 $200 $1,600 As Arranged As Incurred Us
Notes to Table C:
1
General. All amounts payable to us are nonrefundable, unless otherwise noted. Amounts payable to
suppliers/vendors are refunded according to arrangements you make with the vendor, if any. These figures are
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estimates of the range of your initial costs in the first three months of operating the initial Franchised Business
you are granted under your Development Agreement only.
2
Development Fee. The Development Fee is non-refundable. The Development Fee is described in
greater detail in Item 5 of this Disclosure Document, and this Development Fee is for the right to open and
operate a total of three Franchised Businesses (provided you comply with your development obligations under
the Development Agreement). If you choose to open more than three Franchised Businesses, your Development
Fee will be calculated as follows: (i) $45,000 per Franchised Business if you are awarded the right to develop
between three and five Franchised Business; (ii) $40,000 per Studio if you are awarded the right to develop
between six and nine Franchised Businesses; and (iii) $35,000 per Franchised Business if you are awarded the
right to develop 10 or more Franchised Businesses.
3
Initial Investment for Initial Franchised Studio (from Traditional Premises). This figure represents the
total estimated initial investment required to open and commence operating the first Franchised Business you
agreed to develop under your Development Agreement. You will be required to enter into our then-current form
of franchise agreement for the initial Franchised Business you developer under your Development Agreement,
most likely once you have found a Premises for the business that we approve. The range includes all the items
outlined in Chart 7.A. of this Item, except for the $60,000 Initial Franchise Fee (because you are not required to
pay an Initial Franchise Fee for those Franchised Businesses you develop under the Development Agreement). It
does not include any of the costs you will incur in opening the additional Franchised Business(es) that you are
awarded the right to develop under your Development Agreement. Please recall that each Franchised Business
you commit to open and commence operating under your Development Agreement must be a traditional
franchised Studio (and not a Non-Traditional Studio).
You must operate all aspects of your Franchised Business in strict conformance with the methods,
standards and specifications of our System. Our methods, standards, and specifications will be communicated
to you in writing through our confidential Manuals and other proprietary guidelines and writings that we prepare
for your use in connection with the Franchised Business and System. We may periodically change our System
standards and specifications from time to time, as we deem appropriate or necessary in our sole discretion, and
you will be solely responsible for costs associated with complying with any modifications to the System.
You may only market, offer, sell and provide the Approved Services, as well as any related merchandise
and other products that Franchisor authorizes for sale in conjunction with the Approved Services (the “Approved
Products”) at your Franchised Business in a manner that meets our System standards and specifications. We will
provide you with a list of our then-current Approved Products and Services, along with their standards and
specifications, as part of the Manuals or otherwise in writing prior to the opening of your Franchised Business.
We may update or modify this list in writing at any time.
If you wish to offer any product or service in your Franchised Business other than our Approved Products
and Services, or use any item in connection with your Franchised Business that does not meet our System
standards and specifications, then you must obtain our prior written approval as described more fully in this
Item.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Approved Suppliers
We have the right to require you to purchase any items or services necessary to operate your Franchised
Business from a supplier that we approve or designate (each, an “Approved Supplier”), which may include us or
our affiliate(s). We will provide you with a list of our Approved Suppliers in writing as part of the Manuals or
otherwise in writing, and we may update or modify this list as we deem appropriate.
Currently, we have Approved Suppliers for the following items that you must purchase in connection
with the establishment and/or operation of your Franchised Business: (i) Proprietary Initial Inventory Kit; (ii) Pre-
Sale Startup Package; (ii) the Furniture and Fixture Package; (iv) the Exercise Equipment Package and certain
other equipment/supplies; (v) interior graphics and exterior signage; (vi) insurance coverage; (vii) shipping and
installation services; (viii) training materials, including the “Webinar Training” associated with the Teacher
Training Program; (ix) certain music licenses you may need in order to play certain music in connection with your
Studio operations (subject to prior disclosure regarding your sole obligation to investigate and comply with all
music licensing requirements); and (x) proprietary point-of-sale system (the “POS System”) and then-current
software we require you to use in connection with that POS System and your Studio, including, without
limitation, any software and technology we determine to provide to you as part of our System in connection
with your then-current Technology Fee.
We also have a panel of available legal professionals that our and/or our affiliate franchisors’ respective
franchisees have used in the past in connection with their lease review and related legal work associated with
securing the site you propose, and we strongly recommend that you review and contact one (1) or more of these
professionals to discuss potentially engaging them to perform such work. Regardless of whether or not your use
one of these legal professionals, you will be solely responsible for negotiating your lease terms and otherwise
securing a location that meets our then-current System criteria and/or standards that have been reduced to
writing.
We may develop proprietary products for use in your Franchised Business, including private-label
products that bear our Marks, and require you to purchase these items from us or our affiliate(s).
If you wish to purchase a product or service that we require you to purchase from an Approved Supplier
from an alternate source, then you must obtain our prior written approval as outlined more fully in this Item.
We may provide our standards and specifications for our Approved Products and Services directly to our
Approved Suppliers, and may provide these standards and specifications to an alternative supplier you propose
if: (i) we approve the supplier in writing as outlined more fully in this Item; and (ii) the alternative supplier agrees
to sign our prescribed form of non-disclosure agreement with respect to any confidential information we
disclose.
As of the date of this Disclosure Document: (i) other than the Pre-Sale Start-Up Package, Proprietary
Initial Inventory Kit, Furniture and Fixture Package (including related services) and Teacher Training materials,
neither we nor any of our affiliates are an Approved Supplier for any items you are required to purchase in
connection with your Franchised Business as part of our standard franchise offering; and (ii) none of our officers
own an interest in any of our Approved Suppliers other than us. If you determine to outright purchase your
Exercise Equipment Package rather than lease that equipment from one of our Approved Suppliers for such
leasing services, we may designate ourselves or our affiliate as the Approved Supplier for that package.
We reserve the right to designate us or any of our affiliates as an Approved Supplier with respect to any
other item you must purchase in connection with your Franchised Business in the future.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Required Purchases and Right to Derive Revenue
The products or services we require you to purchase or lease from an Approved Supplier, or purchase
or lease in accordance with our standards and specifications, are referred to collectively as your “Required
Purchases.” We estimate that your required purchases, purchases from Approved Suppliers and purchases that
must meet our specifications in total will be about 70% to 95% of your total purchases to establish the Studio
and about 10% to 20% of your purchases to continue the operation of the Studio. Please be advised that these
percentages do not include the lease payments that you make in connection with your Premises (as defined in
Item 11).
We reserve the right to derive revenue from any of the purchases (items or services) that our System
franchisees are required to make in connection with the Franchised Business. In our past fiscal year ending
December 31, 2021, we derived $20,366,611 on account of our System franchisees’ required purchases, or 38%
of the total revenue we generated over our past fiscal year amounting to $53,004,206.
We may, but are not obligated to, grant your request to: (i) offer any products or services in connection
with your Franchised Business that are not Approved Products and Services; or (ii) purchase any item or service
we require you to purchase from an Approved Supplier from an alternative supplier.
If you wish to undertake either of these actions, you must request and obtain our approval in writing
before: (i) using or offering the non-approved product or service in connection with your Franchised Business;
or (ii) purchasing from a non-approved supplier. You must pay our then-current supplier or non-approved
product evaluation fee when submitting your request, as well as cover our costs incurred in evaluating your
request. We may ask you to submit samples or information so that we can make an informed decision whether
the goods, equipment, supplies or supplier meet our specifications and quality standards. In evaluating a supplier
that you propose to us, we consider not only the quality of the particular product at issue, but also the supplier’s
production and delivery capability, overall business reputation and financial condition. We may provide any
alternate supplier you propose with a copy of our then-current specifications for any product(s) you wish the
supplier to supply, provided the supplier enters into a confidentiality and non-disclosure agreement in the form
we specify. We may also inspect a proposed supplier’s facilities and test its products and/or services, and request
that you reimburse our actual costs associated with the testing/inspection.
We will notify you in writing within 30 days after we receive all necessary information and/or complete
our inspection or testing to advise you if we approve or disapprove the proposed item and/or supplier. The
criteria we use in approving or rejecting new suppliers is proprietary, but we may (although are not required to)
make it available to you upon request. Each supplier that we approve must comply with our usual and customary
requirements regarding insurance, indemnification and non-disclosure. If we approve any supplier, we will not
guarantee your performance of any supply contract with that supplier under any circumstances. We may re-
inspect and/or revoke our approval of a supplier or item at any time and for any reason to protect the best
interests and goodwill of our System and Marks. The revocation of a previously approved product or alternative
supplier is effective immediately when you receive written notice from us of revocation and, following receipt
of our notice, you may not place any new orders for the revoked product, or with the revoked supplier.
We may, when appropriate, negotiate purchase arrangements, including price terms, with designated
and Approved Suppliers on behalf of the System. We may establish strategic alliances or preferred vendor
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
programs with suppliers that are willing to supply some products, equipment, or services to some or all of the
Studios in our System. If we do establish those types of alliances or programs, we may: (i) limit the number of
approved suppliers with whom you may deal; (ii) designate sources that you must use for some or all products,
equipment and services; and (iii) refuse to approve proposals from franchisees to add new suppliers if we believe
that approval would not be in the best interests of the System.
We and/or our affiliate(s) may receive payments or other compensation from Approved Suppliers or any
other suppliers on account of these suppliers’ dealings with us, you, or other Franchised Businesses in the
System, such as rebates, commissions or other forms of compensation. We may use any amounts that we receive
from suppliers for any purpose that we deem appropriate. We and/or our affiliates may negotiate supply
contracts with our suppliers under which we are able to purchase products, equipment, supplies, services and
other items at a price that will benefit us and our franchisees.
We reserve the right to create additional purchasing cooperatives in the future. We may negotiate
volume purchase agreements with some vendors or Approved Suppliers for the purchase of goods and
equipment needed to operate the Studio.
Franchisee Compliance
When determining whether to grant new or additional franchises, we consider many factors, including
your compliance with the requirements described in this Item 8. You do not receive any further benefit as a
result of your compliance with these requirements.
Insurance
As a franchise owner, you are required to obtain and maintain, at your sole expense, the required insurance
coverages as prescribed in your Franchise Agreement and/or our Manuals. We may amend, modify, supplement
or otherwise change the coverages or policies required below upon thirty (30) days’ written notice to you (or
such a shorter period of time that we determine appropriate if a health/safety or infringement-related issue) via
the Manuals or otherwise. While the specifications and standards for such coverages may vary depending on
the size of your Studio and/ or other factors, such as what is customary for businesses of your type in your area,
as of the Issue Date, we typically require the following in connection with a franchised Studio opened in a
traditional site:
1. Commercial General Liability insurance covering your day-to-day business operations and premises
liability exposures with limits not less than the following:
a. Each Occurrence: $1,000,000
b. General Aggregate: $5,000,000 (per location)
c. Products Completed Operations Aggregate: $5,000,000
d. Personal and Advertising Injury: $1,000,000
e. Participant Legal Liability: $1,000,000
f. Professional Liability: $1,000,000
g. Damage to Premises Rented to You: $1,000,000
h. Employee Benefits Liability (each employee): $1,000,000
i. Employee Benefits Liability (aggregate): $2,000,000
j. Medical Expense (any one person): $5,000
k. Sexual Abuse and Molestation: included (not excluded)
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Such insurance shall include coverage for contractual liability (for liability assumed under an “insured
contract”), products-completed operations, personal and advertising injury, premises liability, third
party property damage and bodily injury liability (including death).
2. Automobile Liability insurance covering liability arising out of your use, operation or maintenance of
any auto (including owned, hired, and non-owned autos, trucks or other vehicles) in connection with
your ownership and operation of the franchise, with limits not less than the minimum compulsory
requirements in your state (note: it is highly recommended to maintain a least $1,000,000 each accident
combined single limit for bodily injury and property damage). This requirement only applies to the extent
that owned, leased or hired/rented vehicles are used in the operation of the franchise.
3. Workers Compensation insurance covering all of your employees with statutory coverage and limits as
required by state law. Such insurance shall include coverage for Employer’s Liability with limits not less
than $500,000 each accident, $500,000 disease – each employee, and $500,000 disease – policy limit.
4. Property insurance written on a special causes of loss coverage form with limits not less than the current
replacement cost of the Studio’s business personal property (including furniture, fixtures and
equipment) and leasehold improvements (tenant improvements). Such Property insurance shall include
glass coverage with limits not less than $25,000, signage coverage with limits not less than $10,000, and
business interruption/extra expense coverage with limits not less than twelve months of rent.
5. Employment Practices Liability insurance with limits of not less than $1,000,000 per claim in the
aggregate, with a retention not larger than $25,000, providing defense and coverage for claims brought
by any of your employees or other personnel alleging various employment-related torts. Said policy shall
also include Third Party Employment Practices Liability coverage.
Your policies must be written by an insurance company licensed in the state in which you operate the Studio
and the insurance company must have at least an “A” Rating Classification as indicated in A.M. Best’s Key Rating
Guide. Us as well as our Parent, and subsidiaries/affiliates companies shall be included as Additional Insureds on
Studio’s Commercial General Liability policy.
Computer System
You must purchase the computer system that we specify, including computer hardware, software, point
of sale system, inventory control systems, and high-speed network connections (collectively, the “Computer
System”). The component parts of the Computer System must be purchased from approved suppliers. If we
require you to use any proprietary software or to purchase any software from a designated vendor, you must
sign any software license agreements that we or the licensor of the software require and any related software
maintenance agreements. The Computer System is described in more detail in Item 11 of this Disclosure
Document.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
ITEM 9 FRANCHISEE’S OBLIGATIONS
This table lists your principal obligations under the franchise and other agreements. It will help you
find more detailed information about your obligations in these agreements and in other items of the
Disclosure Document.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Section in Franchise Disclosure
Section in Development
Obligation Agreement or, if Document
Agreement
applicable, Addendum Item
l. Ongoing Sections 8.4 and 10.3 of Not Applicable Items 8 and 11
product/service Franchise Agreement
purchases
m. Maintenance, Sections 3.2.D. and 7.4 of Not Applicable Items 6 and 17
appearance and Franchise Agreement
remodeling
requirements
n. Insurance Section 10.4 of Franchise Not Applicable Items 6, 7 and 8
Agreement
o. Advertising and Sections 5.6 and 9 of Not Applicable Items 6 and 11
Marketing Fund Franchise Agreement
p. Indemnification Section 11.2 of Not Applicable Item 6
Franchise Agreement
q. Owner’s participation/ Sections 8.3 and 8.6 of Section 7 Item 15
management/staffing Franchise Agreement
r. Records and reports Sections 10.1 and 10.3 of Not Applicable Item 11
Franchise Agreement
s. Inspections and audits Sections 8.2 and 10.2 of Not Applicable Items 11
Franchise Agreement
t. Transfer Section 14 of Franchise Section 16 Items 6 and 17
Agreement
u. Renewal Section 3.2 of Franchise Not Applicable Item 17
Agreement
v. Post-termination Sections 13.1 and 15.3 of Sections 14, 15 Item 17
obligations Franchise Agreement
w. Non-competition Sections 12.2 and 13 of Section 11 Item 17
covenants Franchise Agreement
x. Dispute resolution Section 16 of Sections 21, 22 Item 17
Franchise Agreement
ITEM 10 FINANCING
We offer indirect financing through the third-party providers described below for certain amounts due
under the Franchise Agreement. The third-party providers listed below sponsor our annual franchise convention
which we share with our affiliate franchisors listed under the (“Franchisors” heading in Item 1) at a minimum
level of $10,000. We do not guarantee your note, lease or any other obligation. We do not offer direct financing
and as such it is not our practice or intent to sell, assign, or discount any financing arrangement. As security for
the performance of your obligations under the Franchise Agreement, including payments owed to us for
purchases by you, you must grant us a security interest in all of the assets used in the operation of the Studio.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Item Source of Down Amount Term Interest Monthly Prepay Security Liability Loss of Legal
Financed Financing Payment Financed Rate Payment Penalty Required Upon Right on Default
Default
Pre-Sales and Amerifund 0% to 20% $79,250 2 to 5 5.9% to Varies None Lien on Unpaid Lender will
Soft Opening to years 18% based on financed balance repossess
Retail $86,881 amount equipment equipment and
Inventory financed, only; no schedule
Package & down additional payment plan for
Fitness payment collateral balance due. If
Equipment , term, required lender is able to
and Other and resell equipment,
FFE Package, interest resale price will
which rate be applied to
includes balance due.
furniture,
millwork,
equipment,
and shipping.
Pre-Sales and MacroLease 0% to 20% $79,250 3 to 4 6.5% to Varies Eligible to May Lender No right of
Soft Opening to years 8.5% based on prepay require: may offset, defense or
Retail $86,881 amount after first personal reposses counterclaim of
Inventory financed, year; guaranty; s any kind against
Package & down sliding lien on equipme Macrolease; no
Fitness payment scale equipment nt and preclusion from
Equipment , term, thereafter financed; seek taking action
and Other and . lien on relief against third
FFE Package. interest Maximum business; based on parties, as long as
rate penalty of personal guarante that action does
3% assets as ed assets not impact
collateral and payment
personal obligation to
assets Macrolease.
Pre-Sales and Navitas First and $79,250 1 to 5 8.9% Varies Sliding Lien on Unpaid Lender can
Soft Opening last to years based on scale; financed balance repossess and
Retail months’ $86,881 amount total of all equipment; resell equipment
Inventory payments financed, payments personal
Package & term, in first guaranty
Fitness and year;
Equipment interest principal
and Other rate balance
FFE Package. plus 0% to
5%
thereafter
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2022
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was downloaded DisclosureAll Document
from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
ITEM 11 FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING
Except as listed below, we are not required to provide you with any assistance.
A. Pre-Opening Assistance
Franchise Agreement
1. We will provide you (or, if you are an entity, your Designated Operator), as well as your
Designated Manager (if appointed) of your Studio, with our proprietary Initial Training Program, that at least you
(or, if appropriate, your Designated Operator) will need to complete prior to opening your Studio. We will
typically provide the Initial Training Program within the thirty (30) days preceding your Studio opening, but that
timing will be subject to the availability and schedules of our training personnel. We will provide this Initial
Training Program at our corporate headquarters or other training facility we designate, and this initial training
(as well as other training provided by us in connection with your Studio) is described more fully below in this
Item under the heading “Training”. (Franchise Agreement, Section 6.3). We will also provide you or another
individual you designate as your prospective Authorized Instructor with our Orientation Program as described
more fully below in this Item. (Franchise Agreement, Section 6.3)
2. If the Authorized Location for your Studio has not been identified at the time the Franchise
Agreement is signed, we will work with you to designate a geographical area within which you must secure an
Authorized Location for your Studio (“Designated Market Area”). (Franchise Agreement, Section 1.3). We will
also comply with our obligations with respect to site selection assistance and site approval as set forth more
fully below in this Item under the heading “Site Selection Assistance and Time to Open”.
3. Concurrently with the execution of your Franchise Agreement, we will loan you one copy of the
Manual, which contains mandatory and suggested specifications, standards and procedures. The Manual is
confidential and remains our property. We may modify the Manual. (Franchise Agreement, Section 6.4). The
Table of Contents of the Manual is attached to this Disclosure Document as Exhibit E. The primary portion of the
Operations Manual currently consists of 148 pages.
4. Within 30 calendar days of execution of your Franchise Agreement, we will provide you (through
the Manual or otherwise) with specifications for the layout and design of the Studio (Franchise Agreement,
Sections 6.2, 7.1 and 7.3).
5. Within 30 calendar days of execution of your Franchise Agreement, we will provide you (through
the Manual or otherwise) with a list of the Pilates fitness equipment and gear, standard fixtures, furnishings,
supplies, and signs to be used in the Studio, as well as a list of Approved Suppliers (Franchise Agreement, Section
6.6).
6. We will provide you with the Proprietary Initial Inventory Kit, Pre-Opening Sales Kit and
Furniture and Fixture Package at the time(s) we determine appropriate prior to your opening, provided you have
timely paid for each of these items as required by your Franchise Agreement and as described more fully in this
Disclosure Document. We may also work with the Approved Supplier from which you determine to lease the
Exercise Equipment Package and our other Approved Suppliers for installing and shipping the same to provide
you with that package, or, should you elect not to purchase such equipment outright, provide you with that
package or facilitate your acquisition of the same from an Approved Supplier. (Franchise Agreement, Section 6).
34
©2022 Club Pilates Franchise, LLC
2022 Franchise Disclosure Document
This document was downloaded from franchimp.com. All the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
7. We will license you the use of our trademarks (Franchise Agreement, Section 4.2).
8. We will consult and advise you on the advertising, marketing and promotion for the Grand
Opening of the Studio, including your implementation of the Pre-Sales Marketing Package and other pre-sales
activity you conduct in coordination with the Opening Support Program provided by our then-current Approved
Supplier. (Franchise Agreement, Section 6.9).
9. If you enter a Development Agreement, we will designate your Development Area and
subsequently review and provide our approval with regards to the premises you propose for each Studio location
within the Development Area. (Development Agreement, Section 1 and Exhibit A).
We are not required to provide any other service or assistance to you before the opening of the Studio.
You must assume all costs, liabilities, expenses and responsibility in connection with: (i) locating,
obtaining and developing a Premises for your Franchised Business; and (ii) constructing, equipping, remodeling
and/or building out the Premises for use as a Franchised Business, all in accordance with our System standards
and specifications. If the Authorized Location for your Studio has not been identified at the time the Franchise
Agreement is signed, we will assign you a Designated Market Area as previously disclosed in this Item. (Franchise
Agreement, Section 1.3).
We may provide you with: (i) our current written site selection guidelines, to the extent such guidelines
are in place, and any other site selection counseling and assistance we determine is appropriate; and (ii) the
contact information of any local real estate broker that we have an existing relationship with and that is familiar
with our confidential site selection/evaluation criteria, if we know any such brokers in or around the Designated
Market Area you are assigned. (Franchise Agreement, Sections 1.2, 1.3 and 6.1).
Our guidelines for site selection may require that you conduct, at your expense, an evaluation of the
demographics of the market area for the location. Ideally, the Authorized Location of your Studio will be a major,
national-tenant, anchored commercial retail center that meets our then-current requirements for population
density, demographics, available parking, traffic flow and entrance/exit from the site. The typical Studio will be
at least 1,500 square feet and be in a rectangular shape of 25 feet by 60 feet. (Franchise Agreement, Section
6.1).
If you locate a site, we will approve or disapprove of the site within 30 days after we receive any and all
reasonably-requested information regarding your proposed site from you. (Franchise Agreement, Section 1.2).
We use a software program to evaluate the demographics of a market area for site selection approval. If we
cannot agree on a site, we may extend the time for you to obtain a site, or we may cancel the Franchise
Agreement.
We also have the right and opportunity to review any lease or purchase agreement for a proposed
location before you enter into such an agreement. We may condition our approval of a given premises as an
Authorized Location for your franchise Studio on a number of conditions, including: (i) the lease for such location
35
©2022 Club Pilates Franchise, LLC
2022
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was downloaded DisclosureAll Document
from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
including the terms outlined in Section 7.2 of the Franchise Agreement and Exhibit 5, including any Collateral
Assignment of Lease as set forth in our then-current Manuals, to the Franchise Agreement in the lease for the
location; and (ii) receiving a written representation from the landlord of the proposed premises that you will
have the right to operate the Studio, including offering and selling the Approved Products and Services,
throughout the term of your Franchise Agreement. (Franchise Agreement, Sections 2.2(C) and 7.2, and Exhibit
5).
You must secure an Authorized Location that we approve within six (6) months of executing your
Franchise Agreement for that Franchised Business or we may terminate that Franchise Agreement. (Franchise
Agreement, Section 1.2).
If you enter into a Franchise Agreement with us for the right to operate a Non-Traditional Studio, we
expect that we will be approving and designating the Non-Traditional Site as your “Authorized Location” in the
governing form of Franchise Agreement at the time it is executed. As such, you will typically be required to enter
into the appropriate form of agreement to occupy the Non-Traditional Site with the party that has the right to
license the approved space within the big box fitness/gym facility at issue at the same time you enter into the
Franchise Agreement with us to govern that Non-Traditional Studio.
We will authorize the opening of your Studio when (i) all of your pre-opening obligations have been
fulfilled, (ii) pre-opening training has been completed, (iii) all amounts due us have been paid, (iv) copies of all
insurance policies (and payment of premiums) and all other required documents have been received by us, and
(v) all permits have been approved. (Franchise Agreement, Sections 5.4, 5.5, 6.3 and 10.4).
The typical length of time between the signing of the Franchise Agreement and the time you open your
Studio is approximately three (3) to six (6) months. Your total timeframe may be shorter or longer depending on
the time necessary to obtain an acceptable Premises, to obtain financing, to obtain the permits and licenses for
the construction and operation of the Franchised Business, to complete construction or remodeling as it may be
affected by weather conditions, shortages, delivery schedules and other similar factors, to complete the interior
and exterior of the Franchised Business, including decorating, purchasing and installing fixtures, equipment and
signs, and to complete preparation for operating the Franchised Business, including purchasing any inventory or
supplies needed prior to opening.
You are required to open your Franchised Business within six (6) months of executing your Franchise
Agreement, but we may agree in writing to provide you with an additional three (3) months to open your Studio
if you (a) have already secured an approved premises for your Studio, and (b) are otherwise making diligent and
continuous efforts to buildout and otherwise prepare your Franchised Business for opening throughout the six
(6) month period following the execution of your Franchise Agreement. If you do not open your Studio within
the time period set forth in the Franchise Agreement, we will have the option to terminate your Franchise
Agreement. (Franchise Agreement, Sections 1.2 and 2.2).
Given the Non-Traditional Site will be designated at the time the Franchise Agreement is executed, you
36
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
must open your Franchised Business to offer and provide Approved Services and Approved Services from the
approve space within the Non-Traditional Site within three (3) months of signing that Franchise Agreement. We
expect that the typical length of time to open a Non-Traditional Studio will be between one (1) and three (3)
months from the date your Franchise Agreement is executed. You will be required to open and commence
operations of your Franchised Business within three (3) months of the date you execute your Franchise
Agreement, unless we agree to a requested extension request you make in writing. If you do not timely open,
we will have the right to terminate your franchise rights in connection with that Non-Traditional Studio
(Addendum, Section 3).
If you have entered into a Development Agreement to open and operate two (2) or more Franchised
Businesses, your Development Agreement will include a Development Schedule containing a deadline by which
you must have each of your Franchised Businesses open and operating. (Development Agreement, Exhibit A).
Unless we agree otherwise in a separate writing, you will be required to develop Studios at traditional sites in
order to fulfill your Development Schedule obligations.
Franchise Agreement
1. We will specify or approve certain equipment and suppliers to be used in the franchised Studio
(Franchise Agreement, Sections 6.6 and 7.1).
2. We will provide additional training to you and any of your employees at your request. You are
responsible for any and all costs associated with such additional training (Franchise Agreement, Section 6.3).
3. If you do not obtain and maintain appropriate insurance coverage, we may procure the
coverage on your behalf. We will pass the cost onto you. (Franchise Agreement, Section 10.4.D.)
4. We may institute various programs for auditing customer satisfaction and/or other quality
control measures (Franchise Agreement, Section 8.2).
1. We will maintain and administer the Fund (Franchise Agreement, Section 9.1).
Advertising Generally
You are responsible for local marketing activities to attract members to your Studio. We require you to
submit samples of all advertising and promotional materials (and any use of the Marks and/or other forms of
commercial identification) for any media, including the Internet, World Wide Web or otherwise. You must first
obtain our advanced written approval before any form of co-branding, or advertising with other brands,
products or services. (Franchise Agreement, Section 9.2)
You must strictly follow the social media guidelines, code of conduct, and etiquette as set forth in the
Manual regarding social media activities. Any use of Social Media by you pertaining to the Studio must be in
37
©2022 Club Pilates Franchise, LLC
2022
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was downloaded DisclosureAll Document
from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
good taste and not linked to controversial, unethical, immoral, illegal or inappropriate content. You will promptly
modify or remove any online communication pertaining to the Studio that does not comply with the Franchise
Agreement or the Manual. (Franchise Agreement, Section 9.3)
Brand Development Fund
The Fund was established in 2014 to promote Studios and help promote and develop our System and
brand generally. As of the Issue Date, are required to make a contribution to this Fund amounting to two percent
(2%) of your Gross Revenue (your “Fund Contribution”). Fund Contributions will be payable from the earlier of
(a) the date your Studio opens, and (b) the date the Studio receives a payment from a client in connection with
Approved Services to be provided at any point. (Franchise Agreement, Section 9.1).
As of the Issue Date, the Fund is administered by us with the advice provided by the Marketing Fund
Committee (the “MFC”) pursuant to a charter agreement among us and the members of the MFC. Under the
current charter, which is subject to change, System franchisees elect or appoint 2 members to the MFC to serve
for a one-year term corresponding to the calendar year and we select 2 members to serve for a one-year term
corresponding to the calendar year. The 4-member MFC will, by a majority vote, assist us in determining the
selection and placement of regional and national advertising. Each MFC member has one vote. If the MFC is
deadlocked, our President will break the deadlock with the deciding vote, which shall be binding. The Fund is
maintained and operated by us with the assistance of the MFC to meet the costs of conducting regional and
national advertising and promotional activities which are deemed most beneficial to the System. The MFC serves
in an advisory capacity only. With the assistance of the MFC, we will direct all public relations, advertising and
promotions with sole discretion over the message, creative concepts, materials and media used in the programs
and the placement and allocation thereof. We have the power to form, change or dissolve the MFC. We will pay
for these activities from the Fund. The Fund Contributions may be used for traditional advertising activities, such
as website development, social media, public relations, advertising campaigns (television, radio, print or other
media), or other promotions which will further develop and/or raise the awareness/visibility of our brand,
System and Studio locations. (Franchise Agreement, Sections 6.8 and 9.1).
We are not obligated to ensure that Fund activities or dollars are spent equally, on a pro rata basis,
either on your Studio, or all Studios in an area. A brief statement regarding the availability of System franchises
may be included in advertising and other items produced using the Fund, but we do not otherwise expect to use
the Fund primarily for any franchise sales or solicitations as of the Issue Date.
We will have the right to make disbursements from the Fund, as we determine appropriate to cover the
costs and expenses associated with the marketing, advertising and promotion of the brand, Marks, System,
Studio locations and/or the Approved Products and Services, including: the cost of formulating, developing and
implementing advertising and promotional campaigns; the reasonable costs of administering the Marketing
Fund, including accounting expenses and the actual costs of salaries and fringe benefits paid to our employees
engaged in administration of the Fund and/or creation, development and/or placement of any creative and/or
implementation of any campaigns associated with the same. The Marketing Fund is not a trust or escrow
account, and we have no fiduciary obligations regarding the Marketing Fund. We may retain independent
certified public accountants to prepare an annual audit of the Marketing Fund, at the expense of the Marketing
Fund, and send a copy of the audit to franchisees upon written request. Our company-owned or affiliate-owned
Studios, if and when operating, will contribute to the Fund at the rate provided in our Franchise Disclosure
Document. Should the advertising contribution for the System decrease at any time, we have the right to reduce
our contribution from company-owned or affiliate-owned Studios to the rate specified for franchised locations.
We are not required to spend all Marketing Fund contributions in the fiscal year they are received. You
agree to participate in all Marketing Fund programs. The Marketing Fund may furnish you with marketing,
38
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2022
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from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
advertising and promotional materials; however, we may require that you pay the cost of producing, shipping
and handling for such materials.
During the fiscal year ended on December 31, 2021, the Fund Contributions were expended as follows:
1% on production, 23% on administrative and implementation expenses, 1% on media and public relations,
72% on Internet-related matters and 3% on other expenses.
As part of your material obligations under your Franchise Agreement, you must expend at least $1,500
per month on marketing and advertising materials that we approve in connection with the promotion of your
Studio within your Designated Territory (your “Local Advertising Requirement”). Upon our request, you must
provide us with an accounting of your monthly expenditures associated with your Local Advertising
Requirement, along with invoices and other relevant documentation to support those expenditures. Please be
advised that the Local Advertising Requirement is only the minimum amount you must expend each month, and
we encourage you to expend additional amounts on the local promotion of your Studio.
We have not yet established a local or regional advertising cooperative. We may, in the future, decide
to form one or more associations and/or sub-associations of Club Pilates Studios to conduct various marketing-
related activities on a cooperative basis (a “Co-Op”). If one or more Co-Ops (local, regional and/or national) are
formed covering your area, then you must join and actively participate. You may be required to contribute such
amounts as are determined from time to time by such Co-Ops. (Franchise Agreement, Section 9.4)
In addition to the Local Advertising Requirement, you will be required to expend a minimum of $15,000
in connection with pre-opening sales activities and other initial launch promotional activities designed to
increase visibility of your Franchised Business within your Designated Territory. You may be required to expend
all or some portion of these funds on products/services received from an Approved Supplier we designated or
approve, and all materials used in connection with your grand opening campaign must be approved by us if not
previously designated for use. We expect that you will typically be required to expend these amounts in the 30-
60 days prior to opening and in the 30-day period following opening. (Franchise Agreement, Section 9.2).
Once your real estate lease is signed, you must being undertaking the “pre-sale” phase of opening your
Studio wherein you will develop a plan in coordination with us (and that we approve) for implementation in
connection with your “Opening Support Program” that is designed to generate Studio clientele or other sales
prior to the opening of your Studio, as well as generating prospective leads for sales at your Studio. The Opening
Support Program is provided by our third-party Approved Supplier and is currently overseen by our internal
marketing and sales departments. Participation in the Opening Support Program is mandatory, and we may
require you to expend certain amounts on services or content that is supplied by one (1) or more of our Approved
Supplier(s).
D. Training
Prior to opening your Franchised Business, you must ensure that: (i) you (or, if you are an entity, your
Designated Operator) completes our Initial Training Program, which will typically last 2-3 business days at our
corporate headquarters or another training facility we designate (most likely in California); and (ii) your
39
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2022
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from franchimp.com. the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the completeness, reliability, and
accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Designated Manager (if appointed) attend and complete the Designated Manager Training Program. While there
is no specific deadline by which the training above must be completed, you you’re your instructors) must
complete all of your training obligations prior to opening your Studio.
In the event you are the owner of multiple Studios or otherwise wish to appoint a third-party individual
to manage the day-to-day operations of your Franchised Business, then that individual (a “Designated Manager”)
must (a) attend and complete at least the Owner/Operator Module (and, if he/she meets the Instructor Eligibility
Criteria and wishes to provide the Approved Services, the Orientation Program described below in this Item),
and (b) otherwise be approved by us, before assuming any management responsibility at your Franchised
Business. (Franchise Agreement, Sections 5.5 and 6.3).
We do not charge a tuition or training fee for you or your designated trainees (Designated Operator,
Designated Manager (if appropriate) to attend the appropriate training program(s) below, provided these
individuals attend or otherwise complete such training prior to the opening of your Studio. You will be
responsible for the costs and expenses associated with these individuals attending our Initial Training Program.
(Franchise Agreement, Section 5.5).
Our primary initial training programs as of the Issue Date of this Disclosure Document are described
below:
TRAINING PROGRAMS
In addition to completing the training program(s) as appropriate, you must ensure that one (1) or more
individuals that (a) meet the Instructor Eligibility Criteria, and (b) are expected to provide the “Authorized
Instructors” initially providing Approved Services at your Studio, participate in and complete the Orientation
Program that, as of the Issue Date, is provided remotely via an online learning management system that we
designate and require you to utilize to participate in and complete such training, which (a) is designed to provide
instruction of the provision of the Approved Services in accordance without System Standards and Studio
equipment, and (b) we estimate will typically include between nine (9) and twelve (12) hours of instruction.
Our Orientation Program or “Bridge Training” is an instructor onboarding training. It is for all instructors
you and other System franchisees engage to work at a franchised Studio location. Bridge Training is not a Pilates
certification nor is it meant to fill in gaps for non-comprehensive instructors. Remember, our franchise offering
assumes that any prospective Authorized Instructor you wish to involve in your Studio operations will already
meet the Instructor Eligibility Criteria prior to any involvement with your Studio.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Our primary instruction materials include videos, online training, and a training manual prepared
specifically for Bridge Training.
Tianna Strateman, whose biography is listed in Item 2, will oversee the portions of the initial training
described above that are not provided remotely. Ms. Strateman has 4 years of experience with us and our brand,
and she has over 14 years of experience in the fitness industry and topics of instruction above generally.
We may substitute other instructors to provide certain parts of the Owner/Operator Module or
Orientation Program, but these individuals will have all completed the appropriate portion of the Initial Training
Program on which they provide instruction.
Around the time you first open your Studio, we may send one (1) or more representatives to your Studio
to (a) provide assistance and recommendations regarding your opening and initial operations, and/or (b) provide
additional or refresher training associated with any required initial training described above in this Item, as we
deem appropriate in our discretion. If we determine to provide such on-site assistance, it will typically last
between 1-2 business days and we may require that you cover the costs our representatives incur in connection
with such assistance.
We do not generally expect or intend to provide any kind of On-Site Opening Assistance in connection
with a Non-Traditional Studio given such Studio rights would only be awarded after you have commenced
operations of the standard franchised Studio that has a Territory encompassing the Non-Traditional Site from
which this kind of Non-Traditional Studio is opened and operated.
As part of the Approved Services, we will permit you to provide the Teacher Training Program at your
Franchised Business, provided you have an individual that meets the Instructor Eligibility Criteria and has (a)
completed our Orientation Program, and (b) otherwise met our then-current criteria to serve as a “Master
Instructor” of the Teacher Training Program (which, as previously disclosed, will be set forth in the Operations
Manual or supplementary Manuals). The Teacher Training Program typically involves 500 hours of instruction,
including: (i) 150 hours of online “classroom/webinar” training (the “Webinar Training”) that can be completed
remotely (at home or at your Franchised Business or other local Studio that is authorized to provide the Teacher
Training Program); and (ii) approximately 350 hours of practical, “hands-on” training, some of which can be
completed at home and some of which must be completed at a Studio that is authorized to provide the Teacher
Training Program. (Franchise Agreement, Section 6.3).
Presently, the Studios in our System typically charge a fee of $4,750 for an individual that signs up to
attend the Teacher Training Program. As disclosed in Item 6, we receive $2,000 of that $4,750 fee as
consideration for that individual to have access to our proprietary Webinar Training (and any other materials we
determine appropriate in connection with the Teacher Training Program). The remaining $2,750 is paid to the
Studio where the individual obtains the rest of the Teacher Training Program instruction, which may be your
Franchised Business (provided we have approved one of your instructors as a “Master Instructor” or you retain
the services of a Club Pilates “Master Instructor” in your areas to conduct Teacher Training at your Studio).
(Franchise Agreement, Section 5.5).
While you could technically hire individuals to serve as instructors and have them go through the entire
Teacher Training Program, we expect and strongly recommend that you instead hire only individuals that already
42
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
meet the Instructor Eligibility Criteria and that will only need to complete our Orientation Program before they
can begin providing the Approved Services at your Studio.
Our standard franchise offering assumes that your initial Authorized Instructors will already meet the
Instructor Eligibility Criteria at the time they commence working with the Studio and prior to attending our
Orientation Program. Please note, however, that: (i) we will describe the proprietary Teacher Training Program
that can be provided as part of a Studio’s Approved Services in our Operations Manual or other written materials
that we provide to you; and (ii) we may permit you to have one (1) or more instructors complete the Teacher
Training Program while you are securing an approved premises for your Studio and otherwise developing that
Studio for opening (but this may involve a higher investment than our standard franchise offering described in
Item 7).
Additional Training in Connection with Operation of the Franchised Business; Orientation Program for Instructors
– Ongoing
We may also provide, and require that you (and your Designated Operator and Designated Manager, as
appropriate) attend, up to five (5) days of additional training each year at our designated training facility. We
will not charge any training fee in connection with such training that we require you to attend. (Franchise
Agreement, Section 6.3).
You may request that we provide certain additional or refresher training to you, either at one (1) of our
designated training facilities or on-site at your Franchised Business. We reserve the right to charge you our then-
current training fee based on the number of days of such training that we provide at your request (regardless of
location). (Franchise Agreement, Section 6.3).
In the event you have instructors hired over time, they must complete the Orientation Program prior to
providing any classes or otherwise performing any Approved Services at your franchised Studio.
You will be responsible for the costs and expenses associated with you and your designated personnel
attending any such additional training described in this Item. (Franchise Agreement, Sections 5.5 and 6.3).
You must acquire a computer for use in the operation of the Studio. You must record all of your receipts,
expenses, invoices, member lists, class and employee schedules, and other business information promptly in the
computer system and use the software that we specify or otherwise approve. Currently, we have a designated
business management software that must be used in connection with your Studio operations, which is an
online/web-based program designed for use in connection with class scheduling, processing member credit and
debit card payments, keeping your business records and generating business reports among other things. At this
time, we have approved no other compatible program but we reserve the right to do so at our sole discretion.
If the approved supplier for the required software changes, you must migrate your operations to the new
required software at our direction. The details of these standards and requirements will be described in the
Manual or otherwise in writing and may be modified in response to changes in marketing conditions, business
operating needs, or technology. (Franchise Agreement, Sections 5.4, 5.7 and 10.3).
You must allow our approved supplier to upgrade the proprietary database configuration of the required
software for the computer in your Studio as we determine necessary. Our approved supplier may provide you
periodic updates to maintain the software and may charge a fee for preparing the updates and maintaining the
software. There are no limitations on the frequency and cost of the updates. The system is designed to enable
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
us to have immediate, independent access to the information monitored by the system, and there is no
contractual limitation on our independent access or use of the information we obtain. (Franchise Agreement,
Sections 5.4 and 10.3).
You must purchase or lease, and thereafter maintain, such computer hardware and software, dedicated
high speed communications equipment and services, dedicated telephone and power lines, modem(s), speakers,
and other computer-related accessories or peripheral equipment as we may specify, for the purpose of, among
other functions, recording Studio sales, scheduling classes, and other functions that we require. You must
provide such assistance as may be required to connect your computer system with a computer system used by
us. We will have the right, on an occasional or regular basis, to retrieve such data and information from your
computer system as we, in our sole and exclusive discretion, consistent with consumer privacy laws, deem
necessary. You must operate your computer system in compliance with certain security standards specified by
us, which may be modified at our discretion from time to time. In view of the interconnection of computer
systems and the necessity that such systems be compatible with each other, you expressly agree that you will
strictly comply with our standards and specifications for all item(s) associated with your computer system, and
will otherwise operate your computer system in accordance with our standards and specifications. (Franchise
Agreement, Sections 5.4 and 10.3).
To ensure full operational efficiency and optimal communication capability between and among
computer systems installed by you, us, and other Club Pilates franchisees, you agree, at your expense, to keep
your computer system in good maintenance and repair, and following our determination that it will be
economical or otherwise beneficial to the System to promptly install such additions, changes, modifications,
substitutions and/or replacement to your computer hardware, software, communications equipment and
services, telephone and power lines, and other computer-related facilities, as we direct.
We reserve the right to require you to update or upgrade any computer hardware or software during
the term of the franchise, and if we choose to do so, there are no limitations on the cost and frequency of this
obligation.
The approximate cost of the Computer System including a computer or tablet computer, hardware and
software is approximately $2,500 to $3,500, which we may require you acquire from one (1) or more of our
Approved Suppliers. There is no initial fee to obtain the software. The approximate cost of any annual
maintenance upgrades or updates or maintenance support contracts varies widely from $0 to $800, which does
not include (a) our then-current Technology Fee (currently, $150/month), or (b) the then-current fee charged by
our Approved Supplier for the Studio management software (currently, $269/month), or (c) the fees associated
with any other Required Software we designate in the future for use in connection with your Studio. We have
no obligation to provide ongoing maintenance, repairs, upgrades or updates, and any such obligations would be
those of the software licensors.
The Computer System components and ongoing requirements associated with that system will be the
same for a Non-Traditional Studio, and you will be required to ensure that the Gross Sales and other financial
information associated with that Non-Traditional Studio must be reported separately and distinctly from any
other Franchised Business.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
ITEM 12 TERRITORY
Franchise Agreement
You will operate the Studio at a specific location approved by us (referred to as your “Authorized
Location”). Once you have secured your Authorized Location, we will provide you a Designated Territory within
which you will have certain protected rights.
You will not be permitted to relocate your Studio without our prior written approval, which may be
withheld in our discretion. You will be assessed a relocation fee of $5,000 at the time you submit the proposed
location for your relocated Studio. Generally, we do not approve requests to relocate your Studio after a site
selection has been made and you have opened for business unless (a) it is due to extreme or unusual events
beyond your control, and (b) you are not in default of your Franchise Agreement. If we approve your relocation
request, we retain the right to approve your new site location in the same manner and under the same terms
that are applied to your first site selection. Your Designated Territory will typically contain a maximum of 50,000
people which will be approximately a two-mile radius around your Studio, unless your Studio is located in a
major metropolitan downtown area or similarly situated/populated central business district (a “Central Business
District”). If your Studio is located in a Central Business District, your Designated Territory will typically contain
up to 50,000 people but may be limited to a geographic area comprised of anywhere from a radius of two blocks
to two miles around your Studio, as we deem appropriate in our discretion. The size of your Designated Territory
may vary from the territory granted to other franchisees based on the location and demographics surrounding
your Studio.
The boundaries of your Designated Territory may be described in terms of zip codes, streets, landmarks
(both natural and man-made) or county lines, or otherwise delineated on a map. If we determine, in our
discretion, to base your Designated Territory on population, then the sources we use to determine the
population within your Designated Territory will be supplied by (a) the territory mapping software we determine
to license or otherwise use, or (b) publicly available population information (such as data published by the U.S.
Census Bureau or other governmental agencies and commercial sources).
You will not be permitted to relocate your Studio without our prior written approval, which may be
withheld in our discretion. You will be assessed a relocation fee of $5,000 at the time you submit the proposed
location for your relocated Studio. Generally, we do not approve requests to relocate your Studio after a site
selection has been made and you have opened for business unless (a) it is due to extreme or unusual events
beyond your control, and (b) you are not in default of your Franchise Agreement. If we approve your relocation
request, we retain the right to approve your new site location in the same manner and under the same terms
that are applied to your first site selection.
If and when you are granted a Designated Territory, then we will not open or locate, or license any third
party the right to open or locate, another Studio from a physical location within that Designated Territory, until
such time that your Franchise Agreement expires or is terminated. For this reason, your territory is deemed
“exclusive” for purposes of pre-sale disclosure under applicable law.
Except as expressly provided in the Franchise Agreement, you have no right to exclude, control or
impose conditions on the location, operation or otherwise of present or future Studios, using any of the other
brands or Marks that we now, or in the future, may offer, and we may operate or license Studios or distribution
channels of any type, licensed, franchised or company-owned, regardless of their location or proximity to the
45
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Premises and whether or not they provide services similar to those that you offer. You do not have any rights
with respect to other and/or related businesses, products and/or services, in which we may be involved, now or
in the future. Your Designated Territory will not be modified by Franchisor for any reason so long as you are not
in default of your Franchise Agreement, except in cases where (a) your requested relocation of your Studio is
approved and you relocate, and/or (b) at the time of any requested renewal or proposed assignment of the
franchise, the population of the Designated Territory is over 50,000. In such cases, we may move or modify the
size of your Designated Territory.
If you are awarded the right to operate a Non-Traditional Studio, your Authorized Location will be your
Non-Traditional Site; and (ii) you will not receive a Designated Territory beyond the space within the Non-
Traditional Site where the Franchised Business is being operated.
While you and other System Studios will be able to provide the Approved Services to any potential client
that visits or otherwise reaches out to your Studio, you will not be permitted to actively solicit or recruit clients
outside your Designated Territory, unless we provide our prior written consent.
You will not be permitted to advertise and promote your Franchised Business via advertising that is
directed at those outside your Designated Territory without our prior written consent, which we will not
unreasonably withhold provided (a) the area you wish to advertise in is contiguous to your Designated Territory,
and (b) that area has not been granted to any third party in connection with a Club Pilates Studio (or
Development Agreement) of any kind.
We may choose, in our sole discretion, to evaluate your Studio for compliance with the System Standards
using various methods (including, but not limited to, inspections, field service visits, surveillance camera
monitoring, member comments/surveys, and secret shopper reports). You must meet minimum standards for
cleanliness, equipment condition, repair and function, and customer service. Your employees, including
independent contractors, must meet minimum standards for courteousness and customer service. (Franchise
Agreement, Section 8.8A)
Unless waived by Franchisor due to unique market conditions, Franchisee must meet a certain Minimum
Monthly Gross Revenue Quota. If Franchisee fails to achieve and maintain average monthly gross revenues of
$30,000 by the 1st year anniversary of the opening of the Studio and average monthly gross revenues of $40,000
by the end of the 2nd year anniversary and each succeeding year thereafter, Franchisor may institute a corrective
training program and/or require Franchisee to perform additional local marketing. If Franchisee fails to meet the
Minimum Monthly Gross Revenue Quota for 36 consecutive months at any time during the term of the Franchise
Agreement, Franchisor may institute a mandatory corrective training program or terminate the Franchise
Agreement upon notice to you.
Under the Non-Traditional Studio offering in this Disclosure Document, we do not impose a minimum
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Gross Revenue Quota in connection with your operations and we do not condition your territorial rights on your
Non-Traditional Studio meeting certain revenue levels. As previously disclosed in this Item, your Designated
Territory rights in connection with a Non-Traditional Studio will only extend to the space within the non-
traditional venue where the Non-Traditional Studio has the right to operate.
Development Agreement
If you are awarded the right to develop multiple Franchised Businesses under our form of Development
Agreement, then we will provide you with a Development Area upon execution of this agreement. The size of
your Development Area will substantially vary from other System developers based on: (i) the number of
Franchised Businesses we grant you the right to open and operate; and (ii) the location and demographics of the
general area where we mutually agree you will be opening these locations. The boundaries of your Development
Area may be described in terms of zip codes, streets, landmarks (both natural and man-made) or county lines,
or otherwise delineated on a map attached to the Data Sheet.
Each Franchised Business you timely open and commence operating under our then-current form of
franchise agreement will be operated: (i) from a distinct site located within the Development Area; and (ii) within
its own Designated Territory that we will define once the site for that Franchised Business has been approved.
We will not own or operate, or license a third party the right to own or operate, a Studio utilizing the
Marks and System within the Development Area until the earlier of: (i) the date we define the Designated
Territory of the final Franchised Business you were granted the right to operate under the Development
Agreement; or (ii) the expiration or termination of the Development Agreement for any reason. Your
Development Area will be exclusive during this time period.
Upon the occurrence of any one of the events described in the preceding paragraph, your territorial
rights within the Development Area will be terminated, except that each Franchised Business that you have
opened and are continuously operating as of the date of such occurrence will continue to enjoy the territorial
rights within their respective Designated Territories that were granted under the franchise agreement(s) you
entered into for those Franchised Business(es).
You must comply with your development obligations under the Development Agreement, including your
Development Schedule, in order to maintain your exclusive rights within the Development Area. If you do not
comply with your Development Schedule, we may terminate your Development Agreement and any further
development rights you have under that agreement. Otherwise, we will not modify the size of your Development
Area except by mutual written agreement signed by both parties.
Reserved Rights
We and our parents/affiliates reserve the exclusive right to conduct the following activities under the
Franchise Agreement and/or Development Agreement (as appropriate): (i) establish and operate, and license
any third party the right to establish and operate, other Studios and Franchised Businesses using the Marks and
System at any location outside of your Designated Territory(ies) and, if applicable, Development Area; (ii)
market, offer and sell products and services that are similar to the products and services offered by the
Franchised Business under a different trademark or trademarks at any location, within or outside the Designated
Territory(ies) and, if applicable, the Development Area; (iii) use the Marks and System, as well as other such
marks we designate, to distribute any Approved Products and/or Approved Services in any alternative channel
of distribution, within or outside the Territory(ies) and Development Area (including the Internet and other e-
commerce channels and streaming platforms; wholesale stores, retail stores, catalog sales, etc.) as further
47
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
described below; (iv) to acquire, merge with, or otherwise affiliate with, and after that own and operate, and
franchise or license others to own and operate, any business of any kind, including, without limitation, any
business that offers products or services the same as or similar to the Approved Products and Services (but under
different marks), within or outside your Designated Territory(ies) and, if applicable, Development Area; (v) use
the Marks and System, and license others to use the Marks and System, to engage in any other activities not
expressly prohibited in your Franchise Agreement and, if applicable, your Development Agreement; and (vi)
establish and operate Non-Traditional Studios from non-traditional venues or locations such as “big box” gym or
fitness facilities, airports, academic institutions, military bases, stadium(s) and/or similar captive venues, within
and outside your Designated Territory and, if applicable, Development Area.
Neither the Franchise Agreement nor Development Agreement grants you any right to engage in any of
the activities outlined in the preceding paragraph, or to share in any of the proceeds received by us, our
parent/affiliates or any third party from these activities, unless we otherwise agree in writing. Further, we have
no obligation to provide you any compensation for soliciting or accepting orders (via alternate channels of
distribution) within your Territory.
We may sell products and services to members located anywhere, even if such products and services
are similar to what we sell to you and what you offer at your Studio. We may use the internet or alternative
channels of commerce to sell products and services branded with the Proprietary Marks. You may only sell the
products and services from your approved Studio location, and may only use the internet or alternative channels
of commerce to offer or sell the products and services, as permitted by us, in order to register members for
classes. We may require you to submit samples of all advertising and promotional materials (and any use of the
Marks and/or other forms of commercial identification) for any media, including the Internet, World Wide Web
or otherwise. We retain the right to approve or disapprove of such advertising, in our sole discretion. Any use of
social media by you pertaining to the Studio must be in good taste and not linked to controversial, unethical,
immoral, illegal or inappropriate content. We reserve the right to "occupy" any social media websites/pages and
be the sole provider of information regarding the Studio on such websites/pages (e.g., a system-wide Facebook
page). At our request, you will promptly modify or remove any online communication pertaining to the Studio
that does not comply with the Franchise Agreement or the Manual. You are not prohibited from obtaining
members over the Internet provided your Internet presence and content comply with the requirements of the
Franchise Agreement.
Additional Disclosures
Neither the Franchise Agreement nor the Development Agreement provides you with any right or option
to open and operate additional Franchised Businesses (other than as specifically provided for in your
Development Agreement if you are granted multi-unit development rights). Regardless, each Franchised
Business you are granted the right to open and operate must be governed by its own specific form of Franchise
Agreement.
We have not established other franchises or company-owned outlets or another distribution channel
offering or selling similar products or services under a different trademark. We have not established, nor do we
presently intend to establish, other franchised or company-owned businesses that are similar to the Franchised
Business and that sell our Approved Products and Services under a different trade name or trademark, but we
reserve the right to do so in the future without your consent. Certain of our affiliates are involved with
franchising and other activities as previously disclosed in Item 1 of this Disclosure Document, and such affiliates
reserve the right to continue conducting franchising and other activities.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
ITEM 13 TRADEMARKS
We grant you the right to use the Marks we designate for use in connection with your Studio as part of
the license rights you are granted under each Franchise Agreement you enter into with us, provided you only
use the Marks in connection with your franchised Studio operations and in strict accordance with the terms of
your Franchise Agreement and any Manual or other written directives from us. The following Marks are
registered and owned by us on the Principal Register of the United States Patent and Trademark Office
(“USPTO”):
CLUB PILATES Reg. No. 5304311 Reg. Date: October 10, 2017
(Word Mark)
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Mark Registration Number Registration Date
DO PILATES. DO LIFE. Reg. No. 5337925 Reg. Date: November 21, 2017
(Word Mark)
We expect and intend to submit all affidavits and other filings necessary to maintain the registrations
above. There are no presently effective determinations of the United States Patent and Trademark Office, the
trademark administrator of any State, or any court, nor any pending material litigation involving any of the Marks
which are relevant to their use in any State. There are no pending interference actions or opposition or
cancellation proceedings that significantly limit our rights to use or license the use of the Marks in any manner
material to the System. We have filed all required affidavits for the Marks and will continue to do so. None of
the Marks’ registrations have come up for renewal at this point so we have not yet renewed any of the Marks’
registrations.
You must follow our rules when you use the Marks. You cannot use our name or any of the Marks as
part of a corporate name or with modifying words, designs or symbols except for those which we license to you.
You may not use the Marks in connection with the sale of an unauthorized product or service or in a manner not
authorized in writing by us. You must not use any other trade names or trademarks in the operation of the Studio
without first obtaining our written consent. You must not establish a website on the Internet using any domain
name containing the Marks or any variation thereof without our written consent. We retain the sole right to
advertise on the Internet and create a website using the Marks as domain names.
If it becomes advisable, in our sole discretion, for us to modify or discontinue use of any of the Marks,
or use one or more additional or substitute Mark, you must comply with our directions to modify or otherwise
discontinue the use of such Mark within a reasonable time after notice by us. We will not be obligated to
compensate you for any costs you incur in connection with any such modification or discontinuance.
You cannot seek to register, re-register, assert claim to ownership of, license or allow others to use or
otherwise appropriate to itself any of the Marks or any mark or name confusingly similar to them, except insofar
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
as such action inures to the benefit of Franchisor and has our prior written approval. Upon the termination or
cancellation of the Franchise Agreement, you must discontinue use of the Marks, remove copies, replicas,
reproductions or simulations thereof from the premises and take all necessary steps to assign, transfer, or
surrender to us all Marks which you may have used in connection with the Franchise Agreement.
You must immediately notify us of any apparent infringement of or challenge to your use of the mark.
Although not obligated to do so, we will take any action deemed appropriate and will control any litigation or
proceeding. You must cooperate with any litigation relating to the Marks which we or our affiliates, or the
Licensor, might undertake.
We are not aware of any prior superior rights or infringing uses that would materially affect your use of
the Marks. But, there is always a possibility that there might be one or more businesses, similar to the business
covered by the Franchise, operating in or near the area(s) where you may do business, using a name, trademark
and/or trade dress similar to the Marks and with superior rights to the name and/or trademark. We strongly
urge you to research this possibility, using telephone directories, local filings and other means, before you pay
any money, sign any documents or make any binding commitments. If you do not research the possibility of
other trademarks in this business, you may be at risk.
There are no agreements currently in effect, which significantly limit our rights to use or license the use
of the Marks.
You do not receive the right to use any item covered by a patent or copyright, but you can use the
proprietary information in the Manual. The Manuals are described in Item 11. Item 11 also describes the
limitations on the use of the Manual by you and your employees.
We have no registered copyrights, nor are there any pending patent applications that are material to
the franchise. However, we claim copyrights on certain forms, advertisements, promotional materials, software
source code and other Confidential Information as defined below.
There currently are no effective determinations of the Copyright Office (or any court regarding any of
the copyrighted materials. There are no agreements in effect which significantly limit our right to use or license
the copyrighted materials. Finally, there are no infringing uses actually known to us that could materially affect
your use of the copyrighted materials in any state. No agreement requires us to protect or defend any copyrights
or you in connection with any copyrights.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Both during and after the term of your Franchise Agreement, you must use the Confidential Information
only for the operation of your Studio under a Club Pilates Franchise Agreement; maintain the confidentiality of
the Confidential Information; not make or distribute, or permit to be made or distributed, any unauthorized
copies of any portion of the Confidential Information; and (iii) follow all prescribed procedures for prevention of
unauthorized use or disclosure of the Confidential Information. (Franchise Agreement, Section 12)
We have the right to use and authorize others to use all ideas, techniques, methods and processes
relating to the Studio that you or your employees conceive or develop.
You also agree to fully and promptly disclose all ideas, techniques and other similar information relating
to the franchise business that are conceived or developed by you and/or your employees. We will have a
perpetual right to use, and to authorize others to use, those ideas, etc. without compensation or other
obligation.
Under the Franchise Agreement, we do not require, but do recommend, that you (or the Designated
Operator) personally supervise the Studio. You may appoint a Designated Manager we approve to manage daily
operations of your Studio. We will not unreasonably withhold our approval of any Designated Manager you
propose, provided the individual has successfully completed the Owner/Operator Module of our Initial Training
Program and, if that individual will be providing any Approved Services, the Orientation Program (or, if necessary,
the full Teacher Training Program). Once approved, your Designated Manager may assist in the direct, day-to-
day supervision of the operations of the Studio, or to be the on-premises supervisor if you choose not to
personally supervise the Studio. If you are a business entity, your Designated Manager need not hold an
ownership interest in the business to be the on-premises supervisor.
You are solely responsible for the hiring and management of the Studio employees, for the terms of
their employment and for ensuring their compliance with any training or other requirements established by us.
You will keep us advised, in writing, of any Designated Manager involved in the operation of the Studio and their
contact information. Your Franchised Business must, at all times, be managed by and staffed with at least one
(1) individual who has successfully completed the Owner/Operator Module of our Initial Training Program.
You and your managers and employees must comply with the confidentiality provisions described in
Item 14. You must execute a personal guaranty concurrently with the signing of the Franchise Agreement. If you
are a legal entity, having more than one owner, all owners, shareholders, partners, joint venturers, and any other
person who directly or indirectly owns a 10% or greater interest in the franchised business must execute a
personal guaranty.
You will be solely responsible for all employment-related decisions associated with your franchised
Studio personnel, including hiring, firing, scheduling and compensation. Nothing in the Franchise Agreement or
Development Agreement is intended, or may be construed to, establish or create any kind of employer-
employee or joint employer relationship between (a) us, and (b) you and your personnel.
You must offer for sale and sell, only and all those Approved Products and Services, and deal only with
those suppliers, that we authorize or require, and have authorized (See Item 8). Principally, this means you must
purchase the amount and type of equipment, including Pilates Reformers, a Pilates Ballet Bar, Spring Boards,
EXO Chairs, TRX equipment and other Pilates apparatuses and exercise equipment, and offer only those types
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
of Pilates and exercise classes that we authorize. Failure to comply with our purchasing restrictions may result
in the termination of your Franchise Agreement. We may supplement, revise and/or modify our Approved
Products and/or Approved Services as we deem appropriate from time to time, as well as our System standards
and specifications associated with the provision of these products/services. These changes will be outlined in
our Manuals or otherwise in writing, and there are no contractual limitations on our right to make these types
of changes.
You must ensure that only Authorized Instructors that have completed all appropriate training provide
the classes and other Approved Services at your franchised Studio, and that no individual that has not received
proper training does not provide any Approved Services until such training is completed.
If we discontinue any Approved Product or Approved Service offered by the Franchised Business, then
you must cease offering or selling such product/service within a reasonable time, unless such product/service
represents a health or safety hazard (in which case you must immediately comply upon receipt of notice from
us). You may not use the location of your Franchised Business for any other business purpose other than the
operation of your Franchised Business.
You may not advertise, offer for sale or sell, any products and/or services that we have not authorized.
We reserve the right to change the types of authorized products and services at any time in our discretion. You
agree to promptly undertake all changes as we require from time to time, without limit, except we will not
require you to thoroughly modernize or remodel the Studio any more often than once every 5 years. You will
not make any material alterations to your Studio or its appearance as originally approved by us without our prior
written approval.
You must refrain from any merchandising, advertising, or promotional practice that is unethical or may
be injurious to our business and/or other franchised businesses or to the goodwill associated with the Marks
(Franchise Agreement, Section 4.2).
You must ensure that your and your Studio personnel are aware of all then-current System policies and
procedures related to Member reciprocity amongst (a) other Studios that are part of our franchise system,
and/or (b) the Studios operated as part of the franchise system owned and administered by our affiliate
franchisors.
A. Franchise Agreement
This table lists certain important provisions of the franchise and related agreements. You should read
these provisions in the agreements attached to this Disclosure Document.
Paragraph In
Provision Summary
Agreement
a. Length of the franchise Franchise Agreement: The term is 10 years from the date the Franchise
term Paragraph 3.1 Agreement is signed.
b. Renewal or extension of Franchise Agreement: You have the option to extend the term for two
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Paragraph In
Provision Summary
Agreement
term Paragraph 3.2 consecutive 5 year periods.
c. Requirements for renewal Franchise Agreement: You have complied with all of the Franchise
or extension Paragraphs 3.2, 3.3, and Agreement provisions; you are not in default of
3.4 the Franchise Agreement; you have brought the
Studio into compliance with our current
standards; you have given us notice of renewal
no less than 90 days nor more than 180 days
prior to the end of the initial term; you have
signed a then-current form of Franchise
Agreement, which may contain materially
different terms than the ones contained in your
Franchise Agreement; you have signed a general
release in substantially the form of Exhibit F to
this Disclosure Document; and you pay us a
renewal fee equal to $10,000.
d. Termination by franchisee Franchise Agreement: Not applicable.
Not Applicable
e. Termination by franchisor Franchise Agreement: The Franchise Agreement does not provide for
without cause Not Applicable termination without cause.
f. Termination by franchisor Franchise Agreement: We may terminate the Franchise Agreement
with cause Paragraph 15.1 upon delivery of notice to you if you default
under the terms of the Franchise Agreement, as
further outlined below.
g. “Cause” defined – curable Franchise Agreement: The following constitute curable defaults: you
defaults Paragraph 15.1B fail to comply with the Performance Standards;
or refuse to make payments due and do not cure
within 10 business days; or fail to comply with
any provision of the Franchise Agreement not
otherwise mentioned in (h.) below or any
mandatory specification and do not cure within
the applicable cure period. Some defaults have
10 calendar day cure periods and some have 30
calendar day cure periods.
h. “Cause” defined – Franchise Agreement: The following events constitute non-curable
non-curable defaults Paragraph 15.1A defaults: failure to properly establish and equip
the premises; failure to complete training; make
a material misrepresentation or omission in the
application for the franchise; conviction or plea
of no contest to a felony, or other crime or
offense that can adversely affect the reputation
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Paragraph In
Provision Summary
Agreement
of you, us or the Studio; make unauthorized
disclosure of confidential information;
abandonment of the business for 5 consecutive
days unless otherwise approved; surrender of
control of the business; unauthorized transfer;
you are adjudicated bankrupt, insolvent or make
a general assignment for the benefit of
creditors; your misuse of the Marks; failure on 3
occasions within any 12 consecutive month
period, or 4 occasions in any 24 consecutive
month period to pay amounts due, or otherwise
to comply with the Franchise Agreement; violate
any health, safety or sanitation law or conduct
your operation in a manner creating a safety
hazard; or violating the rights and restrictions of
your territory; operating a competing business.
i. Franchisee’s obligation on Franchise Agreement: Your obligations include: stop operations of the
termination/non-renewal Paragraphs 12, 13 and Studio; stop using the Marks and items bearing
15.3 the Marks; stop using “CLUB PILATES” in any
form as part of your corporate name; assign any
assumed names to Company; de-identify the
premises from any confusingly similar
decoration, design or other imitation of a Studio;
stop advertising as a Club Pilates franchise; pay
all sums owed; pay all damages and costs we
incur in enforcing the termination provisions of
the Franchise Agreement; return the Manual
and other confidential information to us; return
all signs to us; assign your telephone and
facsimile numbers, electronic mail and internet
addresses to us; sell to us, at our option, all
assets of the Studio, including inventory,
equipment, supplies and items bearing the
Marks; and comply with the covenants not to
compete.
j. Assignment of contract by Franchise Agreement: We may sell or assign some or all of our business
franchisor Paragraph 14.6 to any subsidiary or affiliate of Club Pilates, any
purchaser of Club Pilates, or any purchaser of
the Marks and related business.
k. “Transfer” by franchisee Franchise Agreement: You may sell or assign your business, but only
definition Paragraph 14.1 with our approval. We have sole discretion over
whether to approve or disapprove an
assignment.
l. Franchisor approval of Franchise Agreement: We have the right to approve all your transfers.
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Paragraph In
Provision Summary
Agreement
transfer by franchisee Paragraphs 14.1 and 14.2 We may place reasonable conditions on our
approval of any transfer.
m. Conditions for franchisor Franchise Agreement: You must be in compliance with all agreements,
approval of transfer Section 14.2 the Manual, all contracts with any part;,
transferee must, at our option, (a) assume all
obligations under these agreements, or (b) sign
our then-current form of franchise agreement to
govern the franchise moving forward, which
may contain materially different terms than
your Franchise Agreement; transferee meet our
then-current requirements and complete or
agree to complete our training program for new
franchisees; all sums due must be paid; all
obligations to third parties must be satisfied; the
Studio must be in full compliance with the
Manual and standards and specifications for
new Club Pilates Studios; the transferee must
satisfactorily complete training; and the
transferor must pay a $10,000 transfer fee.
n. Franchisor’s right to acquire None There is no right for us to acquire your Studio
franchisee’s business except as outlined below.
o. Franchisor’s option to Franchise Agreement: We have the option, exercisable by giving 30
purchase franchisee’s Section 15.3.I. days written notice to purchase any and all
business inventory, equipment, furniture, fixtures, signs,
sundries and supplies owned by you and used in
the Studio, at the lesser of (i) your cost less
depreciation computed on a reasonable straight
line basis (as determined in accordance with
generally accepted accounting principles and
consistent with industry standards and customs)
or (ii) fair market value of such assets, less (in
either case) any outstanding liabilities of the
Studio. In addition, we have the option to
assume your lease for the lease location of the
Studio, or if an assignment is prohibited, a
sublease for the full remaining term on the same
terms and conditions as your lease.
p. Death or disability of Franchise Agreement: Must be transferred within six (6) months.
franchisee Paragraph 14.4
q. Non-competition covenants Franchise Agreement: You must not have any interest in any
during the term of the Paragraph 13 competitive business specializing, in whole or in
franchise part, in the sale of franchises or products that
are the same as or similar to any product or
service provided through the Studio.
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Paragraph In
Provision Summary
Agreement
Additionally, you must not employ or seek to
employ any person employed by us or by any of
our other franchisees, or otherwise directly or
indirectly induce or seek to induce such person
to leave his or her employment during the term
of the Franchise Agreement, without first
obtaining our consent or any other franchisee.
r. Non-competition covenants Franchise Agreement: You must not operate a retail Studio similar to
after the franchise is Paragraph 13 the CLUB PILATES Studio from the premises for
terminated or expires 2 years after termination within a 10 mile radius
of Studio. Additionally, for a period of 2 years
after termination of the Franchise Agreement,
you must not shall not (i) solicit business from
customers of your former Studio, (ii) contact any
of our suppliers or vendors for any competitive
business purpose, or (iii) subject and to the
extent permitted by applicable law where the
Studio and/or employee at issue are located,
solicit any of our other employees, or the
employees of Franchisor’s affiliates or any other
System franchisee, to discontinue employment.
s. Modification of the Franchise Agreement: The Franchise Agreement can be modified only
Franchise Agreement Paragraph 19 by written agreement between us and you. We
can modify or change the System through
changes in the Manual.
t. Integration/merger clause Franchise Agreement: Only the terms of the Franchise Agreement are
Paragraph 19 binding (subject to applicable state law) and may
only be modified to the extent required by an
appropriate court to make the Franchise
Agreement enforceable. Any representations or
promises outside of this Disclosure Document
and other agreements may not be enforceable.
u. Dispute resolution by Franchise Agreement: You must first submit all dispute and
arbitration or mediation Paragraph 16 controversies arising under the Franchise
Agreement to our management and make every
effort to resolve the dispute internally.
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Paragraph In
Provision Summary
Agreement
of the mediation.
B. DEVELOPMENT AGREEMENT
This table lists certain important provisions of the Development Agreement and related agreements.
You should read these provisions in the agreements attached to this disclosure document.
SECTION IN
DEVELOPMENT
PROVISION SUMMARY
AGREEMENT OR
OTHER AGREEMENTS
a. Length of the term of the Section 1(B), Exhibit B The Development Schedule will dictate the
Development Agreement amount of time you have to open a specific
number of franchises, which will differ for each
58
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
SECTION IN
DEVELOPMENT
PROVISION SUMMARY
AGREEMENT OR
OTHER AGREEMENTS
Developer and will be specified in Exhibit B of
the Development Agreement.
b. Renewal or extension of the Not Applicable Not Applicable
term
c. Requirements for developer to Not Applicable Not Applicable
renew or extend
d. Termination by developer Not Applicable Not Applicable
e. Termination by franchisor Not Applicable Not Applicable
without cause
f. Termination by franchisor with Section 14 We may terminate your Development
cause Agreement with cause as described in (g)-(h) of
this Item 17 Chart.
g. “Cause” defined – curable Section 14(B) We may terminate your Development
defaults Agreement after providing notice and a 30-day
cure period (unless a different cure period is
specified below) if: you fail to meet the
Development Schedule; you fail to develop,
open, and operate each Studio and execute
each Franchise Agreement in compliance with
the Development Agreement; you
misappropriate or misuse the Marks or impair
the goodwill of the Marks or System; fail to
make monetary payment under the
Development Agreement or any Franchise
Agreement to us or our affiliate, and fail to cure
within 14 days of receiving written notice from
us; fail to correct a deficiency of a health,
sanitation, or safety issue identified by a local,
state or federal agency or regulatory authority;
or you fail to comply with any other material
term or material condition of the Development
Agreement or any Franchise Agreement.
h. “Cause” defined – non-curable Section 14(A) We may terminate your Development
defaults Agreement automatically upon written notice if:
you become insolvent or make a general
assignment for the benefit of creditors; file a
bankruptcy petition or are adjudicated
bankrupt; a bill in equity or appointment of
receivership is filed in connection with you; a
receiver or custodian of your assets of property
is appointed; a proceeding for a composition of
creditors is initiated against you; a final
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
SECTION IN
DEVELOPMENT
PROVISION SUMMARY
AGREEMENT OR
OTHER AGREEMENTS
judgment is entered against you and not
satisfied within 30 days; if you are dissolved,
execution is levied against you; a suit to
foreclose any lien or mortgage against any of
your Studios is levied; the real or personal
property of a Studio is sold after being levied
upon; you fail to comply with the non-
competition covenants of the Development
Agreement; you or your principal discloses the
contents of the Manuals or other confidential
information; an immediate threat or danger to
public health or safety results from the
operation of a Studio operated by you; you or
your Principal has made a material
misrepresentation in the franchise application;
you fail on 3 or more occasions within a one (1)
year period to comply with a provision of the
Development Agreement; or you fail to comply
with the transfer conditions of the Development
Agreement.
i. Developer’s obligations on Section 14(D), Section Upon termination, you have no right to establish
termination/ non-renewal 15 or operate any Studio for which an individual
Franchise Agreement has not been executed by
us and delivered to you at the time of
termination. All of your obligations under the
Development Agreement which expressly or by
their nature survive the expiration or
termination of the Agreement (including the
non-competition covenants of Section 11),
continue in full force and effect until they are
satisfied or by their nature expire.
j. Assignment of contract by Section 16(A) We have the absolute right to transfer or assign
franchisor the Development Agreement and all or any part
of its rights, duties or obligations to any person
or legal entity without your consent.
k. “Transfer” by developer - Section 16(B) A transfer includes voluntarily, involuntarily,
defined directly or indirectly, assigning, selling,
conveying, pledging, sub-franchising or
otherwise transferring any of the rights created
by the Development Agreement or any
ownership interest in you.
l. Franchisor approval of transfer Section 16(C) We must approve all transfers, but we will not
60
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
SECTION IN
DEVELOPMENT
PROVISION SUMMARY
AGREEMENT OR
OTHER AGREEMENTS
by developer unreasonable withhold our approval if you meet
our conditions.
m. Conditions for franchisor Section 16(C) Our conditions for approving a transfer include:
approval of transfer all of you and your affiliates’ money obligations
must be satisfied; you and your affiliates must
not be in material default of the Development
Agreement or any Franchise Agreement; you
must execute a general release in our favor; the
transferee must meet our then-current criteria
for Developers; at our option, the transferee
must (a) sign a written assumption agreement
assuming your liabilities under the
Development Agreement, or (b) execute our
then-current form of development agreement
to govern the remainder of your Development
Schedule; you must our then-current Transfer
Fee; and you must pay any referral fees or
commissions that may be due to any franchise
broker, sales agent, or any other third party.
n. Franchisor’s right of first refusal Section 16(E) Except in certain circumstances
to acquire developer’s business (death/disability or transfer from individual
franchisee to business entity), you must provide
us with a period of 30 days to match any third-
party offer to purchase any ownership interest
in the Development Agreement. If we do not
exercise this right, then you will have 60 days to
effectuate the transfer to the third party that
made the offer on those exact terms – if the
transfer does not occur or the proposed terms
of the offer change in any way, then we will have
another 30 days to exercise our right of first
refusal.
o. Franchisor’s option to purchase Not Applicable Not Applicable
developer’s business
p. Death or disability of developer Section 16(F) You will have a period of 90 days to find a
suitable legal representative that we approve to
continue the operation of your Franchised
Business, provided that person completes our
training program and executes either a personal
guaranty or a new Development Agreement.
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SECTION IN
DEVELOPMENT
PROVISION SUMMARY
AGREEMENT OR
OTHER AGREEMENTS
operate the Franchised Business on your behalf
and pay ourselves a reasonable amount to
reimburse our costs associated with this
operation on your behalf. We are not under any
obligation to step in and operate your business
during this period.
q. Non-competition covenants Section 11(B)(1) Neither you, your principals, guarantors, owners
during the term of the franchise or key employees, nor any immediate family
member of you, your principals, guarantors,
owners or key employees, may: (i) own,
operate, or otherwise be involved with,
Competing Business (as defined in the
Development Agreement); (ii) employ or seek to
employ any employees of us, our affiliates or
any other System franchisee/developer or
induce such persons to leave their employment;
or (iii) divert, or attempt to divert, any
prospective customer to a Competing Business.
r. Non-competition covenants Section 11(B)(2) For a period of two (2) years after the
after the franchise is terminated termination/expiration/transfer of your
or expires Development Agreement, neither you, your
principals, guarantors, owners, nor any
immediate family member of you, your
principals, guarantors, owners, may own,
operate or otherwise be involved with any
business that competes with us and is involved
in the licensing or franchising, or establishing of
joint ventures for the operation, of Competing
Businesses.
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SECTION IN
DEVELOPMENT
PROVISION SUMMARY
AGREEMENT OR
OTHER AGREEMENTS
establishment of the fair market value of assets
of the Studio will be resolved in binding
arbitration before a single arbitrator in Orange
County, California (subject to applicable state
law).
v. Choice of forum Section 22(A) Any action that is not subject to arbitration must
be brought in state or federal court in Orange
County, California (subject to applicable state
law).
w. Choice of law Section 21(A) The Development Agreement is governed by the
laws of the state of California without reference
to this state’s conflict of laws principles (subject
to state law), except that: (i) any disputes or
actions involving any non-competition
covenants, including the interpretation and
enforcement thereof, must be governed by the
law of the state where the Studio is located; and
(ii) any franchise laws and/or regulations of
California will not apply to the franchise
awarded under the Agreement unless the
transaction details meet and satisfy all criteria
set forth therein for such laws to apply absent
and independent of any reference to this choice
of law provision. (subject to state law)
Applicable state law may require additional disclosures related to the information in this Disclosure Document.
These additional disclosures appear in Exhibit G, entitled State Specific Addenda, to this Disclosure Document.
We do not currently use any public figure or personality to promote the franchise being offered in this Disclosure
Document.
The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial
performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information,
and if the information is included in the disclosure document. Financial performance information that differs
from that included in Item 19 may be given only if (1) a franchisor provides the actual records of an existing
outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for
example, by providing information about possible performance at a particular location or under particular
circumstances.
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BACKGROUND
At the outset, it is important to note and highlight that: (i) all of the historical performance information
disclosed in this Item below were generated by traditional franchised Studios that meet the eligibility criteria
set forth below under this Background portion of Item 19; and (ii) as of the Issue Date of this Disclosure
Document, we do not have any Non-Traditional Studios that our System franchisees have opened and
operated – and, as such, nothing in this Item provides any kind of financial performance representation or
earnings claim regarding any Non-Traditional Studios that are operating from within an agreed-upon space
within a Non-Traditional Site.
In this Item, we disclose the average, median and certain other monthly Gross Revenue generated in each
calendar month comprising the 2021 calendar year and first calendar month of 2022 (each, a “Calendar Month”
and collectively, the “Measurement Period”) amongst the franchised Studios that were: (i) owned and operated
by a System franchisee over the entirety of the Measurement Period; and (ii) operating for at least 6 months
beyond their soft opening date as of the end of that Calendar Month (the “Disclosed Studios”).
The Applicable Subset for a given Calendar Month excludes any Studio that was not open for at least 6 months
beyond its soft opening date as of the end of that Calendar Month (the “Excluded Studios”).
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Average and Median and Other Reported Gross Revenue Information Amongst the Applicable Subset of all Disclosed Studios for each Calendar
Month Comprising the Measurement Period
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22
Average Reported
$30,392 $32,304 $39,006 $41,578 $44,711 $48,042 $48,915 $49,514 $50,642 $51,901 $54,787 $52,911 $53,659
# Studios in
Applicable Subset 580 584 593 596 596 599 603 608 611 616 617 621 626
High Reported $76,801 $79,878 $148,856 $107,970 $118,452 $123,915 $123,523 $130,592 $132,098 $122,874 $145,836 $132,643 $128,953
Median Reported $30,687 $32,884 $38,150 $40,838 $43,868 $47,668 $47,805 $48,683 $49,023 $50,558 $53,365 $51,512 $52,823
Low Reported $0 ($127) ($1,303) ($142) $0 ($525) $0 $0 $0 $0 $0 $0 $0
# of Studios in
Applicable Subset
that Met or Exceeded 300 302 280 286 285 291 284 291 285 287 289 297 299
Average Reported (52%) (52%) (47%) (48%) (48%) (49%) (47%) (48%) (47%) (47%) (47%) (48%) (48%)
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Explanatory Note to Chart
1. The term “Gross Revenue” means the total revenue generated by a given Disclosed Studio over the
Measurement Period, including all revenue generated from the sale and provision of any and all
Approved Services at, from, or otherwise through, that Studio.
Please note that the term “Gross Revenue” (i) excludes sales tax (that Studio owner must pay directly to
the appropriate taxing authority), and (ii) does not account for revenue the Disclosed Studios may have
generated by providing the Teacher Training Program.
2. The “Average Gross Revenue” or “Average Reported” figure was calculated by taking the sum of all the
Gross Revenue generated by the Disclosed Studios and dividing that amount by the number of Disclosed
Studios in the appropriate subset at issue.
3. The “Median Gross Revenue” figure was determined by taking the middle reported Gross Revenue value
amongst the Gross Revenue values reported by the appropriate subset of Disclosed Studios once those
values are sorted from highest to lowest dollar amount.
1. The financial performance representations contained in this Item 19 are historical representations
based on past performance of the Disclosed Studios. The following representations are based on
monthly profit and loss reports provided by the franchisee owner of the Disclosed Studios. Written
substantiation for the financial performance representation will be made available to prospective
franchisees upon request.
2. The Studios disclosed in the Charts above sold these amounts. Your individual results may differ.
There is no assurance that you’ll sell as much.
3. When reviewing this Item 19 and evaluating our franchise offering generally, it is particularly
important to note the following characteristics of Existing Studios described in this Item 19 (as
compared to a new Franchised Business):
a. Each of the Disclosed Studios utilizes the Marks and System in a manner similar to how you
will be required to use such intellectual property in the operation of the Franchised Business
that is being offered under this Disclosure Document;
b. Certain of the more mature Disclosed Studios incurred the various other pre-opening costs
and expenses over the Measurement Period that you are likely to incur in connection with
the development of a new Franchised Business because such Disclosed Studios were all
open and operating for some time as of the date the Measurement Period commenced; and
c. Some aspects of certain Disclosed Studios are primarily managed on a day-to-day basis by a
single individual that manages such matters for both locations. While this engagement
would be similar to you engaging a “Designated Manager” or other third party to assist in
managing certain aspects of your Franchised Business, we do not expect that you will be
engaging such a third party at the outset of operating your new Franchised Business (unless
you are a multi-unit owner).
5. The revenues and expenses of your business will be directly affected by many factors, such as: (a)
your Designated Territory’s geographic location and population demographics; (b) advertising
effectiveness based on market saturation; (c) whether you operate the business personally or hire
a third party to serve as your Designated Manager; (d) your product and service pricing; (e) vendor
prices on materials, supplies and inventory; (f) personnel salaries and benefits (life and health
insurance, etc.); (g) insurance costs; (h) weather conditions; (i) ability to generate customers; (j)
customer loyalty; (k) employment conditions in the market; and (l) the efforts you and your
personnel put into your Franchised Business.
Other than the preceding financial performance representation, we do not make any financial performance
representations. We also do not authorize our employees or representatives to make any such representations
either orally or in writing. If you are purchasing an existing Studio, however, we may provide you with the actual
records of that outlet. If you receive any other financial performance information or projections of your future
income, you should report it to the our management by contacting Mike Gray at Club Pilates Franchise, LLC,
17877 Von Karman Ave., Suite 100, Irvine, CA 92614, or via telephone at (949) 543-0145.
TABLE 1
SYSTEMWIDE OUTLET SUMMARY
FOR YEARS 2019 TO 2021
TABLE 2
TRANSFER OF OUTLETS FROM FRANCHISEES TO NEW OWNERS
(OTHER THAN CLUB PILATES FRANCHISE, LLC)
FOR THE YEARS 2019 TO 2021
TABLE 3
STATUS OF SINGLE UNIT FRANCHISE OUTLETS
FOR YEARS 2019 TO 2021
CEASED
OUTLETS REACQUIRED OUTLETS
OUTLETS TERMI- NON- OPERATIONS-
STATE YEAR AT START BY AT END OF
OPENED NATIONS RENEWALS OTHER
OF YEAR FRANCHISOR THE YEAR
REASONS
2019 5 2 0 0 0 0 7
AL 2020 7 0 0 0 0 0 7
2021 7 0 0 0 0 0 7
2019 0 1 0 0 0 0 1
AR 2020 1 1 0 0 0 0 2
2021 2 1 0 0 0 0 3
2019 14 5 0 0 0 0 19
AZ 2020 19 1 0 0 0 0 20
2021 20 0 0 0 0 0 20
2019 80 19 0 0 0 0 99
CA 2020 99 7 0 0 0 0 106
2021 106 5 0 0 0 0 111
2019 15 7 0 0 0 0 22
CO 2020 22 1 0 0 0 0 23
2021 23 0 0 0 0 0 23
CT 2019 3 3 0 0 0 0 6
TABLE 4
STATUS OF COMPANY-OWNED OUTLETS
FOR YEARS 2019 TO 2021
TABLE 5
PROJECTED OPENINGS AS OF DECEMBER 31, 2021
A list of the names, addresses and telephone numbers of our current franchisees as of the Issuance Date of this
Disclosure Document is attached as Exhibit H.
A list of the names, addresses and telephone numbers of our franchisees who have had a franchise terminated,
canceled, not renewed or otherwise voluntarily or involuntarily ceased to do business under the franchise
agreement during the most recently completed fiscal year or who have not communicated with us within 10
weeks of the issuance date of this franchise disclosure document, is attached as Exhibit I.
In the last three fiscal years, some of our franchisees have entered any confidentiality agreements that restrict
their ability to speak openly about their experience with our franchise system.
The Association of Boutique Fitness Franchise Owners (the “Association”) is an independent franchisee
organization that has asked to be included in this Disclosure Document.
Except as disclosed in this Item, there are no other trademark-specific franchisee organizations associated with
our franchise system that require disclosure in this Item. If you buy the franchise offered in this disclosure
document, your contact information may be disclosed to other buyers when you leave the franchise system.
Attached to this disclosure document as Exhibit C are our audited financials for our fiscal years ending
December 31, 2021, December 31, 2020, and December 31, 2019. Our fiscal year ends on December 31 of each
year.
ITEM 22 CONTRACTS
ITEM 23 RECEIPTS
EXHIBITS
In a number of places in this Franchise Agreement, you are asked to initial certain items to show that
they have been fully discussed with you, and read, understood and agreed to by you. Initialing those
areas does not lessen the importance of other areas or mean they are not fully enforceable.
This Club Pilates Franchise Agreement (this “Agreement”) is entered into as of the ____ day of
______________________, 20___ between Club Pilates Franchise, LLC, a Delaware limited liability
company, doing business as “Club Pilates” ("Franchisor") and
_________________________________________, or his/her/their assignee, if a partnership, corporation
or limited liability company is later formed (“Franchisee”), upon the following terms, conditions, covenants
and agreements:
RECITALS
A. Club Pilates Franchise, LLC, a Delaware limited liability company (“Licensor”), owns and has
developed and administers a system and franchise opportunity, including various fitness and exercise
techniques and methods, trade secrets, copyrights, confidential and proprietary information and other
intellectual property rights (collectively, the “System”) for the establishment and operation of Pilates fitness
studios (“Club Pilates Studios”) identified by the “Club Pilates” trade name and other trademarks and
service marks licensed hereunder (the “Marks”).
B. The System includes the Marks and trade secrets, proprietary methods and information and
procedures for the establishment and operation of Club Pilates Studios, including, without limitation,
confidential manuals (collectively, the “Manual”), training methods, fitness equipment, furniture and
fixtures, marketing, advertising and sales promotions, cost controls, accounting and reporting procedures,
personnel management, distinctive interior design and display procedures, and color scheme and décor
(collectively, the “Trade Dress”).
C. Franchisor grants to qualified persons who are willing to undertake the required investment and
effort, a franchise to own and operate a Club Pilates Studio offering (a) Pilates instruction and related
services that Franchisor authorizes (collectively, the “Approved Services”), and (b) certain merchandise
and other products Franchisor authorizes for sale in conjunction with the Approved Services and Studio
operations (collectively, the “Approved Products”), all while utilizing the System and Marks.
D. Franchisee desires to obtain a franchise to use the System and Marks in the development and
operation of a Club Pilates Studio at the location specified in this Agreement (the “Studio”).
E. Franchisee has independently investigated the business contemplated by this Agreement, and
recognizes that the nature of the business may change over time, that an investment in a Club Pilates brand
Studio involves business risks, and that the venture’s success depends primarily upon Franchisee’s business
abilities and efforts.
NOW, THEREFORE, in consideration of the foregoing, the fees and other sums payable by
Franchisee and of the mutual covenants contained in this Agreement, the parties agree as follows:
1.1 Grant. You agree at all times faithfully, honestly and diligently to perform your obligations under
this Agreement and to use your best efforts to promote Club Pilates and your Studio. Accordingly,
Franchisor grants to Franchisee the non-exclusive right and license to:
A. Establish and operate a single Club Pilates Studio utilizing only the System and the Club
Pilates Marks, at a location that has been authorized by Franchisor (the “Authorized Location”), in
accordance with the provisions and for the term specified in this Agreement;
B. Use only the Marks of Franchisor under the terms of this Agreement to identify and
promote the Studio offered hereunder; and
C. Use the proprietary fitness and exercise methods and know-how, as set forth periodically
in Franchisor’s operations manual, other manuals, training programs, or otherwise communicated to
Franchisee.
1.2 Site Approval Process. Franchisor will assist Franchisee in connection with site selection by: (i)
providing Franchisee with its then-current site selection criteria, to the extent such criteria has been reduced
to writing; and (ii) providing Franchisee with access to a local real estate broker that is familiar with
Franchisor’s confidential site evaluation criteria, to the extent Franchisor has established relationships with
such brokers in or around the Designated Market Area (as defined in Section 1.3 below). Franchisor will
use commercially reasonable efforts to approve or reject a proposal for an Authorized Location within thirty
(30) days of the date Franchisor receives all reasonably-requested information regarding the proposed site.
Franchisor’s approval of the proposed site shall be deemed to be a binding addendum to this Agreement
upon Franchisor and Franchisee’s execution of Exhibit 1, which is attached hereto and incorporated herein
by reference, and which will set forth the Authorized Location. Franchisor agrees not to unreasonably
withhold approval of a site that meets its site criteria. Franchisee acknowledges that Franchisor’s approval
of a proposed site is permission only and not an assurance or guaranty to Franchisee of the availability,
suitability or success of a location, and cannot create a liability for Franchisor. While Franchisor will
provide site selection assistance as specified in Section 6.1 herein, Franchisee alone is ultimately
responsible for selecting and developing an acceptable location for the Studio. Franchisee agrees to hold
Franchisor harmless with respect to the selection of the Authorized Location by Franchisee. Franchisee
must obtain lawful possession of an Authorized Location by lease, purchase or other method and open for
regular, continuous business within six (6) months of the date that Franchisor accepts this Agreement. The
opening date may be extended an additional three (3) months in certain instances, as explained in Section
2.2D, below. Franchisor has the right to terminate this Agreement if Franchisee fails to select a site for the
Studio that meets Franchisor’s approval, within the time period allotted above.
1.3 Authorized Location & Designated Territory. If the Authorized Location has not been identified
at the time this Agreement is signed, Franchisee must identify a site approved by Franchisor within the
following geographical area:
_______________________________________________________________________
(“Designated Market Area”). Once the Authorized Location for the Studio has been identified in the
Authorized Location Addendum, attached hereto as Exhibit 1, Franchisor agrees that, so long as Franchisee
is in good standing, neither it nor its affiliates will operate or establish, or authorize another Club Pilates
franchisee to operate or establish, a Studio from a physical location using the Club Pilates System or Marks
within a certain geographical area surrounding the Authorized Location (“Designated Territory”). The
Designated Territory, if any, will be defined in Exhibit 1, hereto. Franchisor will have the right to modify
the boundaries of the Designated Territory if (a) Franchisee relocates the Franchised Business, or (b) at the
time of any requested renewal or proposed assignment of the franchise, the population of the Designated
2. ACCEPTANCE BY FRANCHISEE
2.1 Acceptance by Franchisee. Franchisee accepts this Agreement and the license granted herein and
agrees to develop and operate the Studio on the terms and conditions specified herein. Franchisee agrees
to follow the System requirements in the operation of its Studio, including, without limitation, its facilities,
staff, advertising, operations, and all other aspects of Franchisor’s business and the System now in effect
and changed periodically. Franchisee (or, if Franchisee is an entity, one of its operating principals) and its
proposed Designated Manager (as defined in Section 5.5(B) of this Agreement) must attend and complete
the appropriate initial training to Franchisor’s satisfaction, as set forth in Section 6.3 of this Agreement.
2.2 Conditions. The rights being licensed herein are subject, without limitation, to the following
conditions:
A. Franchisee’s business and the Studio shall be identified only by those Marks approved in
writing by Franchisor with at least one exterior sign as designated by Franchisor.
B. Concurrently, with the signing of this Agreement, Franchisee must execute a personal
guaranty in the form attached hereto as Exhibit 4 (“Personal Guaranty”). In the event Franchisee is a legal
entity having more than one owner, all owners, shareholders, partners, joint venturers, and any other person
C. Franchisee shall submit the lease for the Studio to Franchisor for its written consent before
Franchisee executes the lease for the Authorized Location. The lease must contain the provisions outlined
in Section 7.2 and Exhibit 5 (“Lease Addendum”)..
D. Franchisee agrees that it shall open the Studio for regular, continuous business no later than
six (6) months after this Agreement is signed by Franchisor. If, through no fault of Franchisee, the Studio
has not opened after six (6) months, Franchisor may agree in writing to provide Franchisee with an
additional three (3) months to open its Studio if Franchisee (a) has already secured an approved premises
for its Studio, and (b) is otherwise making diligent and continuous efforts to buildout and otherwise prepare
its Franchised Business for opening throughout the six (6) month period following the execution of this
Agreement. Franchisor reserves the right to charge Franchisee a fee amounting to $2,500 as a condition to
granting any extension under this Section.
E. Franchisee agrees at all times to comply with the Manual, standards, operating systems,
and other aspects of the System (collectively, the “System Standards”) prescribed by Franchisor, which are
subject to change at Franchisor’s discretion.
3.1 Term. The term of this Agreement shall be for a period of ten (10) years beginning on the date
this Agreement is accepted by Franchisor, unless sooner terminated under Section 15. The conditions to
obtain a renewal Club Pilates franchise agreement are those stated below in Section 3.2.
3.2 Renewal. Unless terminated at an earlier date, upon the expiration of the initial term, Franchisee
shall have the right to renew this Agreement for two (2) consecutive additional five (5) year terms, subject
to satisfaction of each of the following conditions:
A. Prior to each such renewal, Franchisee shall execute Franchisor’s standard form of
franchise agreement being offered at the time of each such renewal. The provisions of each such renewal
franchise agreement may differ from and shall supersede this Agreement in all respects, including, without
limitation, changes in royalty and advertising fees, except that Franchisee shall pay the renewal fee specified
in Section 3.2.F., instead of the initial franchise fee. Franchisee’s failure or refusal to execute and return
Franchisor’s then-current standard form Franchise Agreement to Franchisor within thirty (30) days after
receipt by Franchisee shall constitute Franchisee’s election not to renew;
B. Franchisee shall demonstrate that it has the right to remain in possession of the Authorized
Location for the duration of the renewal term, or that it has been able to secure and develop an alternative
site acceptable to Franchisor;
E. Franchisee, during the term of this Agreement, shall have substantially complied with all
of the provisions of this Agreement and all other agreements with Franchisor, and shall be in compliance
with the Manual and with Franchisor’s policies, standards and specifications on the date of the notice of
renewal and at the expiration of the initial term;
F. Franchisee shall pay to Franchisor a renewal fee equal to $10,000 for a successor franchise;
and
G. Franchisee shall have given Franchisor written notice of renewal no less than 90 days or
more than 180 days before expiration of the initial term.
3.3 Franchisor’s Refusal to Renew Franchise. Franchisor may refuse to renew the franchise if
Franchisee is in default under this Agreement, or any other agreement with Franchisor or an affiliate of
Franchisor, or if Franchisee fails to satisfy any of the foregoing conditions. Subject to the above, Franchisor
will not unreasonably deny renewal of a Franchise.
3.4 Notice of Expiration Required by Law. If applicable law requires that Franchisor give a longer
period of notice to Franchisee than herein provided prior to the expiration of the initial term or any
additional term, Franchisor will give such additional required notice. If Franchisor does not give such
required additional notice, this Agreement shall remain in effect on a month-to-month basis until Franchisee
has received such required notice.
I have read Article 3, understand it, and agree to comply
with each of its Sections.
Your Initials: __________ / __________
4. TRADEMARK STANDARDS
4.1 Name and Ownership. Franchisee acknowledges the validity of the Mark “Club Pilates” and all
other Marks that now or in the future are or will be part of the System and agrees and recognizes that the
Marks are the sole and exclusive property of Franchisor and/or the affiliates of Franchisor. Franchisee
further acknowledges that Franchisee’s right to use the Marks is derived solely from this Agreement and is
limited to the conduct of a Studio pursuant to and in compliance with this Agreement and all applicable
standards, specifications and operating procedures prescribed by Franchisor from time to time. Any
unauthorized use of the Marks by Franchisee shall be a breach of this Agreement and an infringement of
the rights of Franchisor and its affiliates. Franchisee’s use of the Marks inures to the benefit of Franchisor,
which owns all goodwill now and hereafter associated with the Marks. Franchisee agrees not to contest
ownership or registration of the Marks. Franchisor (and/or its affiliates) owns all right, title and interest in
and to the Marks, and Franchisee has and acquires hereby only the qualified license granted in this
Agreement. Franchisor agrees to indemnify Franchisee from any claims, costs or fees associated with
4.2 Use.
A. Franchisee shall not use any Mark as part of any corporate or business name with
any prefix, suffix or other modifying words, terms, designs or symbols, or in any modified form. Franchisee
shall display and use the Marks only in the manner and form prescribed or authorized by Franchisor and
shall conduct no other business than that prescribed by Franchisor. Franchisee shall not use any other mark,
name, commercial symbol or logotype in connection with the operation of the Studio and shall not market
any product relating to the Studio without Franchisor’s written consent, and if such consent is granted, such
product must be marketed in a manner acceptable to Franchisor. Franchisor may also permit Franchisee to
use from time to time other trademarks, service marks, trade names and commercial symbols as may be
designated by Franchisor in writing.
B. Franchisee agrees to give such notices of trademark and service mark registrations
and copyrights as Franchisor specifies and to obtain such fictitious or assumed name registrations as may
be required under applicable law.
4.3 Litigation. Franchisee agrees to notify Franchisor immediately in writing if it becomes aware that
any person who is not a licensee of Franchisor is using or infringing upon any of the Marks. Franchisee
may not communicate with any person other than Franchisor and its counsel in connection with any such
use or infringement. Franchisor will have discretion to determine what steps, if any, are to be taken in any
instance of unauthorized use or infringement of any of its Marks and will have complete control of any
litigation or settlement in connection with any claim of an infringement or unfair competition or
unauthorized use with respect to the Marks. Franchisee will execute any and all instruments and documents
and will assist and cooperate with any suit or other action undertaken by Franchisor with respect to such
unauthorized use or infringement such as by giving testimony or furnishing documents or other evidence.
Franchisor will be responsible for legal expenses incurred by Franchisor in connection with any litigation
or other legal proceeding involving such third party. Franchisor shall not be liable for any legal expenses
of Franchisee unless (a) pre-approved in writing by Franchisor in its discretion, and (b) the action proceeds
or arises out of Franchisees authorized use of the Marks hereunder.
4.5 Franchisor’s Revenues. Franchisor and its affiliates may offer to sell to Franchisee at a reasonable
profit various goods and services, and reserve the right to receive fees or other consideration in connection
with sales promotion and advertising programs associated with the Marks or from System vendors.
5. FEES
5.1 Initial Franchise Fee. Franchisee agrees to pay Franchisor an initial franchise fee in the sum of
Sixty Thousand Dollars ($60,000) for a single Studio upon execution of this Agreement (the “Initial
Franchise Fee”) in the form of a cashier’s check or bank wire. The Initial Franchise Fee shall be fully
earned by Franchisor upon payment and is not refundable under any circumstance.
5.2 Royalty Fee. Beginning on the day the Studio starts generating revenue from its business
operations, and continuing during the Term of this Agreement, Franchisee agrees to pay Franchisor, weekly,
without setoff, credit or deduction of any nature, a royalty fee equal to seven percent (7%) of the Gross
Sales (as that term is defined in Section 5.3, below) generated by the Studio over the immediately preceding
week (the “Royalty” or “Royalty Fee”).
5.3 Gross Sales. Gross Sales means the total revenue generated by the Studio, including all revenue
generated from the sale and provision of any and all gift cards and other approved products and services at
or through the Studio and all proceeds from any business interruption insurance related to the non-operation
of the Studio, whether such revenues are evidenced by cash, check, credit, charge, account, barter or
exchange. “Gross Sales” does not include (a) any sales tax and equivalent taxes that are collected by
Franchisee for or on behalf of any governmental taxing authority and paid thereto, (b) the value of any
allowance issued or granted to any client of the Studio that is credited in good faith by Franchisee in full or
partial satisfaction of the price of the approved products or services offered in connection with the Studio,
or (c) the provision of the Teacher Training Program at the Studio.
5.4 Furniture and Fixture Package and Proprietary Initial Inventory Kit; Pre-Sale Start-Up
Kit and Pre-Sales Phase Expenditures; Studio Management Software.
A. Prior to opening the Studio governed by this Agreement, Franchisee must purchase or
lease: (i) an initial package of (a) Pilates and other exercise equipment that the parties agree and
acknowledge the standard franchise offering assumes and expect Franchisee will acquire via a lease-to-own
or comparable agreement entered into with a third-party provider of such programs, and (b) other furniture,
fixtures and equipment that is designed to provide Franchisee with certain items, as needed in connection
with outfitting, equipping and otherwise building out of the Studio (collectively, the packages described in
subparts (a)-(b) above may, at times, be referred to as the “Furniture, Fixtures and Related Supplies”); and
(ii) opening inventory comprised of certain branded and other inventory that may be resold at the Studio
(the “Initial Inventory Kit”). Over the term of this Agreement, Franchisee will be responsible for (1)
maintaining and/or replacing the items comprising the Furniture and Fixture Package, and (2) maintaining
certain levels of inventory with respect to those items comprising the Initial Inventory Kit, as set forth more
fully in this Agreement.
B. As part of the Initial Inventory Kit, Franchisee will acquire and must utilize certain pre-
sales start-up package materials in coordination with the pre-opening sales plan that Franchisee is required
to commence conducting at least sixty (60) days prior to the opening of the Studio (the “Pre-Sales Phase”).
Franchisee agrees and acknowledges that Franchisee must: (i) develop the foregoing plan in coordination
C. Franchisee further agrees to install at its expense and use the membership accounting, cost
control, point of sale (“POS”) and inventory control systems through the supplier Franchisor designates.
The designated, or approved, supplier(s) for these services will be updated in the Manuals as changes are
made. Over the term of this Agreement, Franchisee will also be required to pay Franchisor’s then-current
designated provider for the software that Franchisor prescribes for use in connection with the Studio and
the POS (the “Software Fee”), which may be modified upon reasonable written notice to Franchisee.
5.5 Overview of Training Programs and Fees. The parties agree and acknowledge that: (i)
Franchisee or, if Franchisee is an entity, at least one (1) of Franchisee’s operating principals (an “Operating
Principal”) must complete the “Owner/Operator” Module and Franchisor’s proprietary initial training
program (the “Initial Training Program”), as described more fully in Section 6.3.A below; and (ii) each
instructor that Franchisee engages to provide any of the Approved Services at its Studio must (a) have at
least 450 hours of Pilates instruction and meet certain other standard criteria in the industry to become a
Pilates instructor (the “Instructor Eligibility Criteria”), and (b) complete Franchisor’s proprietary
“Orientation Program” – also known as “Bridge Training Program” – that is designed to provide instructors
with additional guidelines and instruction for providing the Approved Services in accordance with the
System (the “Bridge Training Program”). The following fees are associated with the foregoing training and
any additional training that Franchisor or its designee might provide in connection with the Studio.
A. Initial Training Program. Except as provided below, Franchisee will not be required to pay
any training fee or tuition in connection with individuals that attend the Initial Training Program prior to
the opening of the Studio, provided such individuals all attend at the same time. For those individuals that
wish to complete the Initial Training Program at a time other than when Franchisee (or, if applicable, its
Operating Principal) attends the Initial Training Program, Franchisor may charge such individuals its then-
current training fee (the “Training Fee”). Franchisor may also designate a third-party individual that it
approves to manage the day-to-day operations of the Studio (a “Designated Manager”), but any such
individual must at least complete the Owner/Operator Module of the Initial Training Program prior to
assuming any management responsibilities at the Studio (with Franchisee paying the Training Fees
associated therewith, if any). If Franchisee is acquiring and assuming an existing franchise from another
System franchisee, it will be required to pay the then-current Training Fee associated with Franchisor
providing the initial training program to Franchisee.
(1) If Franchisee (or one of its operating principals) is not going to be on-site at the
Studio during normal business hours to manage the day to day operations of its Studio, then Franchisee
must appoint an individual to serve as the designated manager of the Studio (“Designated Manager”). If
Franchisee is the owner of multiple open Studios, then Franchisee must ensure that either (a) Franchisee
(or one of its operating principals), or (b) a Designated Manager, is on-site at the Studio during business
hours to manage the day to day operations of each such Studio.
(2) The Designated Manager must attend and complete, to Franchisor’s satisfaction,
the designated manager training program that takes place at Franchisor’s corporate office prior to the
opening of the Studio (the “Designated Manager Training Program”). Franchisee is responsible for all costs
C. Bridge Training Program. Each and every instructor that provides any of the Approved
Services at Franchisee’s Studio must: (i) meet the Instructor Eligibility Requirements; and (ii) subsequently
complete the Bridge Training Program, which may be completed (a) at the Initial Training Program if the
instructor is in attendance (at no additional cost to Franchisee or instructor), or (b) at any time after
Franchisee (or, if appropriate, its Operating Principal or Designated Manager) attends the Initial Training
Program via remote instruction (video or webinar) or, if determined appropriate by the parties, via in-person
instruction at Franchisor’s headquarters or the Studio. There are no training or other fees associated with
the Bridge Training Program other than the costs and expenses, including instructor wages, that Franchisee
will be responsible for in connection with ensuring that its instructors attend and complete such Bridge
Training Program prior to providing any Approved Services at the Studio (whether as part of the Initial
Training Program or otherwise).
D. Teacher Training Program. Franchisee will have the option of providing a full “teacher
training” course to clientele of the Studio which includes both: (i) the instruction necessary to comply with
the Instructor Eligibility Requirements; and (ii) the Bridge Training Program (collectively, the “Teacher
Training Program”). If an individual wishes to attend the Teacher Training Program at the Studio, then: (a)
that individual will pay the then-current System tuition for that Teacher Training Program; and (b) the
tuition fees collected will be remitted to (1) Franchisor for certain materials that it provides in connection
with this training, and (b) the balance of each such tuition funds being remitted to the System owner that
provides the “Master Instructor” that is eligible to provide the Teacher Training Program. In order to
provide the Teacher Training Program at Franchisee’s Studio, Franchisee will need to ensure that such
training will need to be provided by an instructor that (a) meets the Instructor Eligibility Requirements and
has completed the Bridge Training Program, and (b) is otherwise approved by Franchisor as a “Master
Instructor” (the criteria for which will be set forth in the Manual or otherwise in writing by Franchisor).
E. Ongoing/Refresher and Oher Additional Training. Franchisor may provide or request that
Franchisee and certain of its management personnel attend and complete up to five (5) days of
additional/refresher training each year, but Franchisor will not charge Franchisee any Training Fee in
connection with such required training (but Franchisee will be responsible for the costs associated with
attending training at Franchisor’s designated training facility).
F. No Training Fee for Minor, Day-to-Day Assistance. Franchisor will not charge Franchisee
any fees in connection with minor, day-to-day assistance that Franchisor provides remotely over the phone,
via email/fax or other electronic channel of communication, which Franchisee understands and
acknowledges will be provided subject to the availability of Franchisor’s personnel.
G. Costs and Expenses. Franchisee will be required to pay all costs and expenses incurred in
connection with any training that Franchisee or its personnel attends in connection with Studio, including
those costs related to travel, lodging, meals and (if appropriate) wages.
H. Training Fee for Certain Training. Franchisor reserves the right to charge its then-current
training fee in connection with training that (a) Franchisee requests Franchisor provide (other than in
connection with Bridge Training that is provided by Franchisor personnel at Franchisor’s headquarters), or
(b) Franchisor provides on-site at Franchisee’s Studio (“Training Fee”).
5.6 Fund Contribution. Franchisor has established a creative brand development fund to promote the
System, Marks and Franchisor’s brand generally (the “Fund”), Franchisee shall and must contribute up to
two percent (2%) of the Gross Sales of its franchised Studio to this Fund (the “Fund Contribution”),
5.7 Technology Fee. Franchisor reserves the right to charge Franchisee its then-current and ongoing
technology fee to pay for certain aspects of Franchisee’s computer system and/or software (“Technology
Fee”). Franchisor reserves the right to designate and/or change the amount, scope, or manner of payment
of the Technology Fee, including the party to whom payment is made, at any time upon providing
reasonable written notice to Franchisee. The Technology Fee may be collected by Franchisor at the same
time as the Royalty Fees due hereunder.
5.8 Other Amounts Due in Connection with Franchised Business. Franchisee will also be
responsible for timely payment of any other required fees or amounts necessary to purchase ongoing
marketing materials, inventory, supplies and/or other items from Franchisor, its affiliates or other third-
party suppliers as described in this Agreement.
A. The Royalty Fee, Fund Contribution and any other fees owed to Franchisor or its affiliates,
will be automatically debited from Franchisee’s point-of-sale operating account administered by the
designated supplier of point-of-sale services on a weekly basis throughout the Term, unless Franchisor
provides reasonable written notice that Franchisor is modifying the collection interval (e.g., notifying
Franchisee that Franchisor will be collecting Royalty Fee, Fund Contribution and other recurring amounts
due on a monthly rather than weekly basis, with such monthly fees based on the Gross Sales of the Studio
over the preceding calendar month).
B. All amounts due to Franchisor for the purchase of products, services or otherwise are due
upon receipt of an invoice from Franchisor. Any payment or report not actually received by Franchisor on
or before the due date is overdue.
D. Franchisee is required to use only the POS system provided by the designated supplier and
will pay the designated provider directly for all fees associated with the use of the designated provider’s
software. Franchisee is not allowed to use an unapproved external terminal to process transactions.
5.10 Interest and Late Charges. Amounts due to Franchisor (except interest on unpaid amounts due)
not paid when due shall bear interest from the date due until paid at the lesser of one and one-half percent
(1.5%) per month, or the highest rate of interest allowed by law. Franchisor may also recover its reasonable
attorneys’ fees, costs and other expenses incurred in collecting amounts owed by Franchisee.
6. FRANCHISOR SERVICES
6.2 Unit Development. Franchisor shall consult and advise Franchisee on the proper display of the
Marks, layout and design, procurement of Pilates/fitness equipment, reformers, spring boards, chairs and
other equipment, furniture, fixtures, surveillance cameras with audio, initial inventories, recruiting
personnel, and managing construction or remodeling of the Studio. After Franchisee has executed a lease
for the Authorized Location, Franchisor shall deliver to Franchisee specifications and standards for
building, equipment, furnishings, fixtures, surveillance cameras with audio, layout, design and signs
relating to the Authorized Location and shall provide reasonable consultation in connection with the
development of the Studio. Franchisee’s architect must make any layout, design and specifications
provided by Franchisor site-specific. Franchisee agrees to make no changes, alterations or modifications
whatsoever to the selected layout and design without obtaining prior written consent from Franchisor.
6.3 Training-Related Programs and Obligations. Franchisee agrees and acknowledges that the
following training obligations and requirements must be strictly complied with and adhered to at all times
during the Term:
1. Prior to opening the Studio, Franchisee must ensure that: (i) Franchisee (or, if an
entity, its Operating Principal) completes the owner/operator module of Franchisor’s proprietary Initial
Training Program (the “Owner/Operator Module”), which will typically last three (3) business days at
Franchisor’s corporate headquarters or another training facility Franchisor designates; and (ii) at Franchisee’s
option, one (1) or more individuals that meet the Instructor Eligibility Requirements and that will be
responsible for providing the Approved Services at Studio participate and complete the Bridge Training
Program component of the Initial Training Program.
4. If any of the individuals described in this Section fail to successfully complete the
applicable training required by this Section before the time Franchisee is required to open the Studio
hereunder, Franchisor may terminate this Agreement.
B. Instructor Training.
(2) Franchisee may elect to have certain of its initial instructors and any subsequent
instructors that wish to provide the Approved Services at the Studio participate in completing the Bridge
Training Program component of our Initial Training Program remotely via webinar/video instruction, but
Franchisor strongly recommends that at least one (1) of Franchisee’s initial instructors come to the Initial
Training Program with Franchisee (or Franchisee’s Operating Principal, as applicable) and complete the entire
Initial Training Program (including the Bridge Training Program component).
(3) In the event an individual wishes to complete the Bridge Training Program at the
Studio rather than as part of the Initial Training Program, then Franchisee (or its Designated Manager) will be
responsible for accurately grading the test and ensuring that the individual at issue passed the test in
accordance with System standards.
(4) The Studio must have at least one (1) individual that meets the Instructor Eligibility
Requirements and has completed the Bridge Training Program on-site at the Studio at all times when any
Approved Services are being provided.
(5) Once an individual who meets the Instructor Eligibility Requirements has
successfully completed the Bridge Training Program, that individual may assist in the provision of the Bridge
Training Program to other individuals at the Studio in the future (as well as provide the other Approved
Services). It is up to Franchisee whether or not it will charge individuals who meet the Instructor Eligibility
Requirements that wish to obtain the Bridge Training Program, but Franchisee must ensure that Franchisee
does not disclose or otherwise use the Bridge Training Program materials that Franchisor provides (including
the test itself) for any purpose other than the Bridge Training Program that is held on-site at the Studio.
(6) Franchisee must otherwise ensure that: (i) any Bridge Training n Program held at
the Studio is performed in accordance with System standards and specifications; (ii) any individual that
participates in the Bridge Training Program successfully completes that program and passes any test that is
provided in connection with the program; and (iii) no personnel provides Pilates instruction or other Approved
Services at the Studio unless and until such personnel successfully completes the Bridge Training Program
and passes the corresponding test. Franchisee agrees that Franchisor, as part of its right to inspect and audit
the operations of the Franchised Business on an ongoing basis, may require that Franchisee demonstrate that
all required personnel has participated in and successfully completed the Bridge Training Program and
corresponding test.
C. Discretionary On-Site Assistance. Around the time the Studio is opening, Franchisor may
send one (1) or more representatives to the Studio to (i) provide assistance and recommendations regarding
the opening and initial operations of the Studio, and/or (ii) provide additional or refresher training
associated with the Owner/Operator Module and/or the Bridge Training Program, all as Franchisor
determines appropriate in its discretion (collectively, the “Discretionary On-Site Assistance”). In the event
Franchisor notifies Franchisee that it will be providing the Discretionary On-Site Assistance, such
(1) The Teacher Training Program typically involves approximately 450 to 500 hours
of instruction, including: (i) certain online “classroom/webinar” training (the “Webinar Training”) that can
be completed remotely (at home, at Franchisee’s Studio, or at another local Studio that is authorized to
provide the Teacher Training Program); and (ii) approximately 40 days of practical, “hands-on” training,
some of which can be completed at home and some of which must be completed at a Studio that is
authorized to provide the Teacher Training Program. The Teacher Training Program also includes the
Bridge Training Program remote orientation materials.
(2)
Any individuals that wish to provide Approved Services at the Studio that have not
completed the Instructor Eligibility Requirements will be required to (a) attend and complete the Teacher
Training Program, or (b) otherwise take steps to meet the Instructor Eligibility Requirements and complete
the Bridge Training Program (as described in Section 6.3.B(1) of this Agreement), all before that individual
can provide any Approved Services at the Studio. Any violation of this Section will be grounds for
termination of this Agreement upon written notice by Franchisor.
(3) Franchisee agrees and acknowledges that Franchisor is entitled to and will receive
the amounts described in Section 5.5.C in connection with each individual that attends the Teacher Training
Program at Franchisee’s Studio, which is consideration for the Webinar Training materials and proprietary
content developed therein. This amount, once remitted to Franchisor, is deemed fully earned and is not
refundable under any circumstances.
E. Ongoing/Refresher Training. Franchisor may provide, and require that Franchisee, as well
as any of its management personnel attend, up to five (5) days of additional training each year at a training
facility that Franchisor designates (without charging Franchisee any Training Fee as described in Section 5.5
of this Agreement). Franchisee may also request that Franchisor provide certain additional or refresher training
to Franchisee, either at one (1) of Franchisor’s designated training facilities or on-site at Franchisee’s Studio,
but Franchisor reserves the right to charge Franchisee its then-current Training Fee based on the number of
days of such training that Franchisor provides at Franchisee’s request.
G. Costs and Expenses. Franchisee will be responsible for the costs and expenses associated
with Franchisee and its personnel attending and completing all of the training described in this Section,
including without limitation, any costs related to travel, lodging, meals and (if appropriate)
wages/compensation for personnel.
6.4 Operations Manual. Franchisor will grant Franchisee online access to an electronic version of
the Manual during the term of this Agreement. The Manual is anticipated to codify existing mandatory and
suggested specifications, standards and operating procedures currently prescribed by Franchisor.
Franchisee acknowledges that Franchisor may from time to time revise its Systems as well as the contents
of the Manual, and Franchisee agrees to comply with each new or changed standard and specification upon
notice from Franchisor. The Manual shall remain the sole property of Franchisor and shall be kept
confidential by Franchisee both during the Term of this Agreement and subsequent to the termination,
expiration, or non-renewal of this Agreement. If Franchisee, intentionally or otherwise through its gross
negligence, compromises the secure access to the online version of the Manual (or any hard copy of the
Manual), including, but not limited to, allowing unauthorized users access to the Manual and its confidential
contents, Franchisee will be required to pay Franchisor liquidated damages in the amount of $10,000, to
compensate Franchisor for the breach and related damage to the System.
6.5 Continuing Services. Franchisor shall provide such continuing advisory assistance and
information to Franchisee in the development and operation of the Studio as Franchisor deems advisable in
its discretion. Such assistance may be provided, in Franchisor’s discretion, by Franchisor’s directives,
System bulletins, meetings and seminars, telephone, computer, e-mail, fax, personal visits, newsletters or
manuals.
6.6 Approved Lists. Franchisor shall provide and from time to time, add to, alter or delete, at
Franchisor’s discretion, lists of specifications, approved distributors and suppliers, approved services and
products, including, but not limited to, Pilates fitness equipment and gear, and other materials and supplies
used in the operation of the Studio. Franchisor, or an affiliate of Franchisor, may be a designated or
approved supplier of certain equipment, gear, merchandise, apparel and supplies.
6.7 Pricing. Club Pilates has developed an image that is based in part on affordable prices for Pilates
classes offered by the System. To promote a consistent consumer experience, and to maximize the value
of the products and services Studios offer, Franchisor may require fixed minimum prices for any products
or services offered by the System and Franchisee. Franchisee is obligated to use the pricing required by
Franchisor, unless Franchisor consents to changes in local pricing offered by Franchisee in order to (i) allow
Franchisee to respond to unique, local, marketing conditions, competition, or expenses; or (ii) comply with
changes or interpretations in state or federal anti-trust laws. Consistent with state or federal law, Franchisor
reserves the right to change or eliminate its pricing program in the future, or to move from a required to
recommended pricing structure.
6.8 Fund. As detailed in Section 9.1 of this Agreement, the Fund is currently maintained and
administered by Franchisor with the assistance of the marketing fund committee (“MFC”) to meet the costs
of conducting regional and national advertising and promotional activities (including the cost of advertising
6.9 Approving Pre-Opening Support Program. Franchisor and/or its approved provider will provide
Franchisee with advice and consultation with respect to establishing a pre-opening sales plan that
Franchisee must: (i) prepare in connection with its own business advisors and Franchisor, and (ii) get
approved by Franchisor prior to implementing as part of Franchisee’s pre-opening support program
designed to (i) generate initial clientele for the Studio prior to its opening, and (ii) otherwise market and
promote the Studio (the “Pre-Opening Support Program”). The components of Franchisee’s Pre-Opening
Support Program must be approved by Franchisor prior to implementation, including the relevant timelines
for certain pre-opening sales and marketing activities.
7.1 Facility Specifications. Franchisee’s Studio shall meet the following conditions:
A. The Studio shall be laid out, designed, constructed or improved, equipped and furnished in
accordance with Franchisor’s standards and specifications. Equipment, furnishings, fixtures, surveillance
cameras with audio, decor and signs for the Studio shall be purchased from suppliers approved or designated
by Franchisor. Franchisee may remodel or alter the Studio, or change its equipment, furniture or fixtures,
only with Franchisor’s consent. Franchisee must obtain necessary permits, licenses and other legal or
architectural requirements. The Studio shall contain or display only signage that has been specifically
approved or designed by Franchisor.
B. The Studio and all fitness equipment shall be maintained in accordance with standards and
specifications established by Franchisor or prescribed after inspection of the Studio. Franchisee shall
promptly repair or replace defective or obsolete equipment, signage, fixtures or any other item of the interior
or exterior that is in need of repair, refurbishing or redecorating in accordance with such standards
established (and updated from time to time) by Franchisor or as may be required by Franchisee’s lease.
C. Franchisee recognizes that the System will evolve. The fitness industry must respond to
new fads, new forms of exercise, new equipment and new training techniques. The System must change to
meet customer demands. Franchisee further understands that Pilates fitness equipment and other equipment
wears out, breaks down, or becomes obsolete. Consequently, from time to time, as Franchisor requires,
Franchisee must modernize and/or replace items of the Trade Dress or Studio equipment as may be
necessary for the Studio to conform to the standards for new Studios. Further, Franchisee will be required
to thoroughly modernize or remodel the Studio when requested by Franchisor, but no more than once every
5 years. This may include replacing Pilates/fitness equipment and gear, and other updates and
improvements. Franchisee acknowledges that this obligation could result in Franchisee making extensive
structural changes to, and significantly remodeling and renovating the Studio, and Franchisee agrees to
incur, without limitation, any capital expenditures required in order to comply with this obligation and
Franchisor’s requirements. Within 60 days after receiving written notice from Franchisor, Franchisee shall
have plans prepared according to the standards and specifications that Franchisor prescribes and Franchisee
must submit those plans to Franchisor for its approval. Franchisee agrees to complete all work according
to the plans that Franchisor approves within the time period that Franchisor reasonably specifies and in
accordance with this Agreement. Franchisor, or its Affiliate, will hold themselves, and the Studios they
E. The Studio must have a surveillance camera with audio purchased from a designated
approved supplier installed at the Studio. The camera(s) must be web accessible. The camera(s) will be
used by Franchisee to monitor teacher performance, quality assurance and safety. Franchisor has an
absolute right to also review and monitor the camera(s) for the same purposes as Franchisee, and to ensure
compliance with the Club Pilates System. Franchisee is responsible for ensuring customer consent and for
any failure to obtain such consent. Franchisee agrees to indemnify Franchisor for any breaches of privacy
from Franchisee’s use of any surveillance camera.
7.2 Lease. Franchisee is solely responsible for purchasing or leasing a suitable site for the
Studio. Franchisee may be required to use one (1) of the designated retail real estate attorneys listed in the
Manual, or otherwise communicated to Franchisee, to review and negotiate the lease for the Studio.
Franchisee must submit the lease for the Studio to Franchisor for its written consent before Franchisee
executes the lease for the Authorized Location. Franchisor will not withhold consent arbitrarily; however,
any lease must contain substantially the following provisions: (1) “The leased premises will be used only
for the operation of a Club Pilates Franchise;” (2) “The employees of Franchisor will have the right to enter
the leased premises to make any modifications necessary to protect the System and proprietary marks
thereof;” (3) “Lessee agrees that Lessor may, upon request of Franchisor disclose to said Franchisor all
reports, information or data in Lessor’s possession with respect to sales made in, upon or from the leased
premises;” and (4) a conditional assignment clause to be contained in a lease rider in a form approved by
Franchisor, which shall provide that Franchisor (or its designee) may, upon termination, expiration, non-
renewal or proposed assignment of this Agreement, at Franchisor’s sole option, take an assignment of
Franchisee’s interest thereunder, without the consent of the Lessor or property owner, without liability for
accrued obligations, payment of additional consideration or increase in rent, and at any time thereafter,
reassign the lease to a new franchisee. Franchisor’s execution of this Agreement is conditioned upon the
above-referenced lease addendum in the form attached hereto, as Exhibit 5 (“Lease Addendum”), which
shall be signed by Franchisee and attached and made part of the lease for the Studio. Franchisee
acknowledges that it has been advised to have any lease reviewed by Franchisee’s own legal counsel.
7.3 Unit Development. Franchisee agrees that after obtaining possession of the Authorized Location,
Franchisee will promptly, at Franchisee’s sole expense:
B. Employ a qualified licensed architect, as required by state or local codes, to prepare all
drawings, designs, plans and specifications for the Studio, and submit same to Franchisor for review and
approval prior to commencing construction;
C. Complete the construction or remodeling of the Studio in full and strict compliance with
plans and specifications approved by Franchisor, and in compliance with all applicable ordinances, building
codes and permit requirements;
D. Purchase or lease, in accordance with Franchisor’s standards and specifications, all fitness
equipment, fixtures, inventory, supplies and signs required for the Studio;
E. Hire and train the initial operating personnel according to Franchisor’s standards and
F. Complete development of and have the Studio open for business not later than six (6)
months after the date that Franchisor accepts this Agreement.
7.4 Franchisee’s Responsibility. Although Franchisor may provide Franchisee with various standard
or sample plans and specifications with respect to constructing and equipping the Studio, it is Franchisee’s
sole responsibility to construct and equip the Studio in compliance with all applicable federal, state and
local laws and regulations, including, without limitation, all building codes, fire and safety codes,
environmental laws, Occupational Safety and Health Administration laws, health laws, sanitation laws,
Americans with Disabilities Act, and all other requirements that may be prescribed by any federal, state or
local governmental agency. Franchisee further acknowledges and agrees that Franchisee is, and will
continue to be at all times during the Term, solely responsible for all employment decisions and to comply
with all state, federal, and local hiring laws and functions of the Studio, including without limitation, those
related to hiring, firing, training, wage and hour requirements, compensation, promotion, record-keeping,
supervision, and discipline of employees, paid or unpaid, full or part-time. Franchisee’s employees must be
competent, conscientious, and properly trained. Franchisee acknowledges that nothing in this Agreement
shall, or may be construed to, create any type of employer or joint employer relationship between (a)
Franchisee or any of Franchisee’s personnel, and (b) Franchisor in any matter.
8.1 Compliance. Franchisee acknowledges and agrees that every detail regarding the appearance and
operation of the Studio is important to Franchisor, Franchisee, the System and other Club Pilates franchisees
in order to maintain high and uniform operating standards, to increase demand for the classes sold by all
franchisees, and to protect Franchisor’s reputation and goodwill, and, accordingly, Franchisee agrees to
comply strictly at all times with the requirements of this Agreement and Franchisor’s standards and
specifications (whether contained in the Manual or any other written or oral communication to Franchisee
by Franchisor) relating to the appearance or operation of the Studio. Franchisee acknowledges that other
Studios may operate under different forms of agreement with Franchisor, and that the rights and obligations
of the parties to other agreements may differ from those hereunder.
8.2 Franchisor’s Right to Inspection. To determine whether Franchisee is complying with this
Agreement and Franchisor’s standards and specifications, Franchisor reserves the right to supervise,
determine and approve the standards of appearance, quality and service pertinent to the Studio including,
without limitation, the right at any reasonable time and without prior notice to Franchisee to: (1) inspect
and examine the business premises, fitness equipment, facilities and operation of the Studio in person or by
web accessible surveillance cameras with audio, which are required to be installed in each classroom in the
Studio; (2) interview Franchisee and Franchisee’s employees, including any independent contractors; (3)
interview Franchisee’s members and customers, suppliers and any other person with whom Franchisee does
business; (4) confer with members and staff of government agencies with authority over Franchisee about
matters relevant to the Studio; and (5) use “mystery shoppers,” who may pose as customers and evaluate
Franchisee and Franchisee’s operations.
A. Approved Services and Approved Products Generally. Franchisee acknowledges that the
presentation of a uniform image to the public and the offering of uniform services and products is an
essential element of a successful franchise system. In order to insure consistency, quality and uniformity
throughout the System, Franchisee agrees (1) to sell or offer for sale only the services or products that have
been expressly approved for sale by Franchisor; (2) to sell or offer for sale all services and products required
by Franchisor; (3) not to deviate from Franchisor’s standards and specifications; and (4) to discontinue
selling and offering for sale any services or products that Franchisor may, in its discretion, disapprove at
any time. Franchisor shall supply Franchisee with a list of suppliers from which Franchisee is required to
purchase fitness equipment, Pilates items, products or services for the Studio. Franchisor may change this
list from time to time, and upon notification to Franchisee, Franchisee shall only purchase fitness
equipment, Pilates items, products or services from approved suppliers as specified on the changed list.
Franchisor, or an affiliate of Franchisor, may be a designated or approved supplier of certain equipment,
gear, merchandise, apparel and supplies. Franchisee agrees to keep the Studio and fitness equipment in
clean condition, with all equipment well-maintained and operational, and be able at all times during
business hours to provide members with all services and products specified by Franchisor.
B. Required Use of Approved Suppliers. Franchisee agrees that all exercise equipment must
be purchased exclusively from approved suppliers, must be maintained according to manufacturer or
Franchisor specifications, as applicable; and (ii) Franchisee must, if required by Franchisor as a condition
to site selection approval, use real estate attorney from the panel recommended by Franchisor to review and
negotiate the lease for the Studio.
E. Franchisor Rights. Franchisee acknowledges and agrees that Franchisor is (or may at any
time in future become) an approved or designated supplier for certain Pilates/fitness equipment, other
equipment, products, logo items, signage and artwork; that Franchisor may derive income from the sale of
such items, and that the price charged by Franchisor may reflect an ordinary and reasonable profit consistent
with a business of the kind that produces and/or supplies such items. Franchisee acknowledges and agrees
that Franchisor may sell products and services to members located anywhere, even if such products and
services are similar to what Franchisor sells to Franchisee and what Franchisee offers at the Studio.
Franchisor may use the internet or alternative channels of commerce to sell Club Pilates brand products and
services. Franchisee may only sell the products and services from the Studio’s approved location, and may
only use the internet or alternative channels of commerce to offer or sell the products and services, as
permitted by Franchisor, in order to register members for classes. Nothing in the foregoing shall prohibit
Franchisee from obtaining members over the Internet provided Franchisee’s internet presence and content
comply with the requirements of this Agreement.
H. Penalty Fee. Franchisor reserves the right to charge its then-current per day Penalty Fee
for each day Franchisee offers or sells unauthorized products or services from the Studio.
8.5 Compliance with Laws. Franchisee agrees to comply with all federal, state and local laws, rules,
and regulations and shall as soon as practicable, but in any event prior to the opening for business of the
Studio, obtain all municipal and state permits, certificates or licenses necessary to operate the Studio and
shall file and publish, if required by applicable law, a certificate of doing business (whether under a
fictitious name or otherwise). Franchisee acknowledges and agrees that it has the sole responsibility to
8.6 Operational Efforts. Franchisee may appoint a Designated Manager to assist in the direct, day-
to-day, supervision of the operations of the Studio, provided that Designated Manager successfully
completes the Designated Manager Training Program prior to commencing any management
responsibilities at the Studio. Franchisee agrees to keep Franchisor advised, in writing, of any manager and
all teachers involved in the operation of the franchised business and their contact information. Franchisee
agrees to keep the Studio open for the hours stated in the Manual and as deemed appropriate by Franchisor.
If Franchisee does not have a Designated Manager, then Franchisee (or its Operating Principal, as
applicable) must be on-site at the Studio during normal business hours to manage day to day operations.
8.7 Good Standing. Franchisee will be considered in “Good Standing” if Franchisee is not in default
of any obligation to Franchisor or any of Franchisor’s affiliates, whether arising under this Agreement or
any other agreement between Franchisee and Franchisor (or any of Franchisor’s affiliates), the Manual or
other System requirements.
8.8 Performance Standards. Franchisee and Franchisor have a shared interest in the Studio
performing at or above the System Standards. Franchisor would not have entered into this franchise
relationship if Franchisor had anticipated that Franchisee would not meet these Performance Standards.
A. System Standards. Franchisor may choose, in its sole discretion, to evaluate the Studio for
compliance with the System Standards using various methods (including, but not limited to, inspections,
field service visits, surveillance camera monitoring, member comments/surveys, and secret shopper
reports.) Franchisee must meet minimum standards for cleanliness, equipment condition, repair and
function, and customer service. Franchisee’s employees, including any independent contractors, must meet
minimum standards for courteousness and customer service.
B. Minimum Monthly Gross Revenue Quota. Unless waived by Franchisor due to unique
market conditions, Franchisee must meet a certain Minimum Monthly Gross Revenue Quota. If Franchisee
fails to achieve and maintain average monthly gross revenues of $30,000 by the 1 st year anniversary of the
opening of the Studio and average monthly gross revenues of $40,000 by the end of the 2nd year anniversary
9.1 Fund.
B. The Fund is administered by Franchisor with the assistance and advice provided by the
Fund Committee (the “MFC”) pursuant to a charter agreement among Franchisor and the members of the
MFC, which serves in an advisory capacity only. Under the current charter, which is subject to change,
Franchisor franchisees elect two (2) members to the MFC to serve for a one-year term corresponding to the
calendar year and Franchisor selects two (2) members to serve for a one-year term corresponding to the
calendar year. The 4-member MFC will, by a majority vote, assist us in determining the selection and
placement of regional and national advertising. Each MFC member has one vote. If the MFC is
deadlocked, our President will break the deadlock with the deciding vote, which shall be binding. The Fund
is maintained and operated by Franchisor with the assistance of the MFC to meet the costs of conducting
regional and national advertising and promotional activities which are deemed most beneficial to the
System.
C. The MFC shall represent Franchisee and advise Franchisor with regard to all advertising,
marketing and public relations programs and activities financed by the Fund, including the creative
concepts, materials and endorsements used and the geographic market, media placement and allocation.
The MFC will be purely advisory in nature and will have no operational or ultimate decision-making
authority. You agree that the Fund may be used to pay the costs of preparing and producing associated
materials and programs as Franchisor may determine, including the use of social media; formulating,
developing and implementing advertising and promotional campaigns; video, audio and written advertising
materials employing advertising agencies; sponsorship of sporting, charitable or similar events;
administering regional, national and multi-regional advertising programs including purchasing direct mail
and other media advertising, website development/operation and to pay Internet, Intranet, URL, 800 or
similar number, and other charges, fees and/or expenses, including employing advertising agencies to assist
with marketing efforts; supporting public relations, market research and other advertising, promotional and
marketing activities; the reasonable costs of administering the Fund, including accounting expenses and the
actual costs of salaries and fringe benefits paid to our employees engaged in administration of the Fund
and/or creation, development and/or placement of any creative and/or implementation of any campaigns
associated with the same. A brief statement regarding the availability of Club Pilates franchises may be
included in advertising and other items produced using the Fund.
F. The Fund will be accounted for separately from Franchisor’s other funds and Franchisor
will not use the Fund for its general operating expenses. All taxes of any kind incurred in connection with
or related to the Fund, its activities, contributions to the Fund and/or any other Fund aspect, whether
imposed on Franchisor, the Fund or any other related party, will be the sole responsibility of the Fund.
Franchisor will not be required to audit the Fund, but will provide an annual accounting of the Fund at the
written request of Franchisee that is made 120 days after the fiscal year at issue. All interest earned on
monies contributed to, or held in, the Fund will be remitted to the Fund and will be subject to the restrictions
of the relevant Franchise Agreement(s).
G. You acknowledge that the Fund Contributions are intended to maximize general public
recognition of and the acceptance of the Intellectual Property for the benefit of the System as a whole.
Notwithstanding the foregoing, Franchisor undertakes no obligation, in administering the Fund
Contributions to make expenditures for you that are equivalent or proportionate to your contribution, or to
insure that any particular Club Pilates business benefits directly or pro rata from advertising or promotion
conducted with the Fund Contributions.
H. Franchisor maintains the right to terminate the collection and disbursement of the Fund
Contributions and the Fund. Upon termination, Franchisor will disburse the remaining funds for the
purposes authorized under this Agreement.
I. In the event Franchisor or any Affiliate of Franchisor owns and operates a Studio utilizing
the System, these “company-owned” Studios will contribute to the Fund on the same basis that franchised
Studios in the System are required to contribute.
A. Initial Marketing Spend. Franchisee must spend a minimum of $15,000 (“the “Initial
Marketing Spend”) in connection with the pre-opening sales and marketing activities set forth in connection
with (i) Franchisee’s approved Opening Support Program, and (ii) other marketing and promotional
activities that Franchisor approves or designates. Franchisor may also require that Franchisee expend all or
any portion of the Initial Marketing Spend on initial marketing/advertising and/or public relations materials
or services that are purchased from an Approved Supplier.
D. Approval. Franchisor must approve any form of co-branding, or advertising with other
brands, products or services, in writing, in advance.
E. Franchisee must also expend all required amounts that Franchisor prescribes or otherwise
approves as part of Franchisee’s Pre-Sales Phase plan, including any amounts due Franchisor’s approved
supplier for the Opening Support Program.
9.3 Social Media Activities. As used in this Agreement, the term “Social Media” is defined as a
network of services, including, but not limited to, blogs, microblogs, and social networking sites (such as
Facebook, LinkedIn and MySpace), video-sharing and photo-sharing sites (such as YouTube and Flickr),
review sites (such as Yelp and Urbanspoon), marketplace sites (such as eBay and Craigslist), Wikis, chat
rooms and virtual worlds, that allows participants to communicate online and form communities around
shared interests and experiences. While it can be a very effective tool for building brand awareness, it can
also be devastating to a brand if used improperly. Therefore, Franchisee must strictly follow the Social
Media guidelines, code of conduct, and etiquette as set forth in the Manual. Any use of Social Media by
Franchisee pertaining to the Studio must be in good taste and not linked to controversial, unethical, immoral,
illegal or inappropriate content. Franchisor reserves the right to "occupy" any Social Media websites/pages
and be the sole provider of information regarding the Studio on such websites/pages (e.g., a system-wide
Facebook page). At Franchisor’s request, Franchisee will promptly modify or remove any online
communication pertaining to the Studio that does not comply with this Agreement or the Manual.
9.4 Franchisee Marketing Group(s) (“Co-Ops”). Franchisor may decide to form one or more
associations and/or sub-associations of Club Pilates Studios to conduct various marketing-related activities
on a cooperative basis (a “Co-Op”). If one or more Co-Ops (local, regional and/or national) are formed
covering Franchisee’s area, then Franchisee must join and actively participate. Each Studio will be entitled
to one (1) vote, but in order to vote the Studio must be in Good Standing. Franchisee may be required to
contribute such amounts as are determined from time to time by such Co-Ops.
10.1 Records and Reports. Franchisee shall maintain and preserve for four (4) years or such period as
may be required by law (whichever is greater) from the date of their preparation such financial information
relating to the Studio as Franchisor may periodically require, including without limitation, Franchisee’s
sales and use tax returns, register tapes and reports, sales reports, purchase records, and full, complete and
accurate books, records and accounts prepared in accordance with generally accepted accounting principles
and in the form and manner prescribed by Franchisor. Franchisee agrees that its financial records shall be
10.2 Right to Conduct Audit or Review. Franchisor shall have the right, in its sole determination, to
require a review by such representative(s) as Franchisor shall choose, of all information pertaining to the
Studio including, without limitation financial records, books, tax returns, papers, and business management
software programs of Franchisee at any time during normal business hours without prior notice for the
purpose of accurately tracking unit and System-wide sales, sales increases or decreases, effectiveness of
advertising and promotions, and for other reasonable business purposes. Such review will take place at the
Studio or Franchisee’s head office (if different), or both, and Franchisee agrees to provide all information
pertaining to the Studio requested by Franchisor during its review. If (a) the audit is conducted because of
a failure by Franchisee to furnish reports, supporting records or other required information or to furnish the
reports and information on a timely basis, or (b) the audit otherwise reveals an underreporting of two percent
(2%) or more by Franchisee, then Franchisee shall reimburse Franchisor for all costs of the audit or review
including, without limitation, travel, lodging, wage expense and reasonable accounting and legal expense.
The foregoing remedies shall be in addition to any other remedies Franchisor may have under this
Agreement or applicable law.
10.3 Computer System and Software. Franchisee must acquire a computer for use in the operation of
the Studio. Franchisee agrees to record all of its receipts, expenses, invoices, member lists, class and
employee schedules and other business information promptly in the computer system and use the software
that Franchisor specifies or otherwise approves. Franchisor reserves the right to change the computer
system, and the accounting, business operations, customer service and other software at any time. Data,
including names, addresses, contact information, and credit card or payment information of members of the
Studio will be captured on the required software, and will become the joint property of Franchisee and
Franchisor during the Term of this Agreement. Franchisee will provide Franchisor with any passwords
necessary to access the business information for the Studio that is stored on the required software and
online. Franchisor may use such information to communicate directly to the members of the Studio, and
to provide updates, information, newsletters, and special offers to the members. Franchisee must upgrade
and maintain the computer system and software in the Studio, as required by Franchisor from time to time,
and pay any fees associated with such upgrades. Upon expiration or termination of this Agreement,
Franchisee shall have no further access or rights to the member information and Franchisor shall be the sole
owner of such information.
10.4 Insurance.
A. Prior to opening the Studio for business and throughout the entire term of this Agreement,
Franchisee will keep in force at Franchisee’s own expense and by advance payment of the premium, the
following insurance coverages:
(1) Workers’ Compensation and Employer’s Liability Insurance as well as such other
insurance, with statutory limits, as required by law in the jurisdiction where the franchised business is
located. Employers Liability or “Stop Gap” insurance, with limits of not less than $1,000,000 each accident;
(3) “ALL RISK” or special form property coverage of no less than current
replacement cost of the Studio’s equipment, fixtures and leasehold improvements (tenant improvements)
sufficient in the amount to restore the Studio to full operations. Glass coverage no less than a limit of
$25,000 and sign coverage no less than a limit of $10,000 in addition to equipment, fixtures and leasehold
improvements;
(4) Business interruption insurance with coverage for at least twelve (12) months for
actual losses. (For purposes of this Agreement, “Gross Sales” shall include any proceeds received by
Franchisee in connection with a “business interruption” insurance claim);
(5) Auto Liability (Hired and Non-owned autos) with a $1,000,000 Combined Single
Limit Each Accident for Bodily Injury and Property Damage, if Franchisee utilizes a vehicle in connection
with the operation of the Studio; and
(6) Employment Practices Liability with a limit no less than $1,000,000 per claim and
$1,000,000 aggregate per location. The retention may not exceed $25,000.
B. All insurance policies must be written by an insurance company licensed in the state in
which Franchisee operates its Studio. The insurance company must have at least an “A” Rating
Classification as indicated in A.M. Best’s Key Rating Guide. Franchisor, as well as its parent and
subsidiaries/affiliates, shall be included as Additional Insured’s on Studio’s Commercial General Liability
policy.
C. Franchisor reserves the right, from time to time, in its discretion, to upgrade the insurance
requirements or lower the required amounts as to policy limits, deductibles, scope of coverage, or rating of
carriers in response to current industry standards, market conditions and/or landlord requirements. Within
sixty (60) days of receipt of notice from Franchisor, Franchisee agrees to revise its coverage, as specified
in any notice from Franchisor.
D. Franchisor reserves the right to designate, or require pre-approval of, the provider of any
insurance required in connection with the Studio.
E. Franchisee’s obligation to obtain and maintain insurance shall not be limited by reason of
any insurance that may be maintained by Franchisor nor relieve Franchisee of liability under the indemnity
provisions set forth in this Agreement. All insurance policies and coverage must name Franchisor as an
11.1 Independent Contractor. The only relationship between Franchisor and Franchisee created by
this Agreement is that of independent contractor. The business conducted by Franchisee is completely
separate and apart from any business that may be operated by Franchisor and nothing in this Agreement
shall create a fiduciary relationship between them or constitute either party as agent, legal representative,
subsidiary, joint venturer, partner, employee, servant or fiduciary of the other party for any purpose
whatsoever. Franchisee shall hold itself out to the public as an independent contractor operating the
business pursuant to a license from Franchisor, and Franchisee agrees to take such action including
exhibiting a notice to that effect in such content, form and place as Franchisor may specify. It is further
specifically agreed that Franchisee is not an affiliate of Franchisor and that neither party shall have authority
to act for the other in any manner to create any obligations or indebtedness that would be binding upon the
other party. Neither party shall be in any way responsible for any acts and/or omissions of the other, its
agents, servants or employees and no representation to anyone will be made by either party that would
create an implied or apparent agency or other similar relationship by and between the parties.
A. Franchisee acknowledges and agrees that all information relating to the System and to the
development and operation of the Studio, including, without limitation, the Manual, Franchisor’s training
program, members and supplier lists, or other information or know-how distinctive to a Club Pilates
Franchise (all of the preceding information is referred to herein as the “Confidential Information”) are
considered to be proprietary and trade secrets of Franchisor. Franchisee agrees that all Confidential
Information is to be held in the strictest of confidence during and after the term of this Agreement and is
not to be divulged to anyone directly or indirectly at any time, except to Franchisee’s Studio employees,
including any independent contractors, with a need to know the information in order to operate the Studio.
Upon Franchisor’s request, Franchisee shall require the Studio’s employees and any independent
contractors to execute a nondisclosure and non-competition agreement in a form satisfactory to Franchisor.
Franchisee shall not acquire any interest in the Confidential Information other than the right to utilize it in
the Studio and agrees not to copy, duplicate, record or otherwise reproduce any Confidential Information,
in whole or in part, nor otherwise make them available to any unauthorized person, nor use them in any
other business or in any manner not specifically authorized or approved in writing by Franchisor.
Franchisee shall adopt and implement all reasonable procedures to prevent unauthorized use, duplication
or disclosure of Franchisor’s Confidential Information. If Franchisee or Franchisee’s employees or any
independent contractors learn about an unauthorized use of any trade secret or confidential materials,
Franchisee must promptly notify Franchisor. Franchisor is not obligated to take any action, but will respond
to the information as it deems appropriate. If Franchisee at any time conducts, owns, consults with, is
employed by or otherwise assists a similar or competitive business to that franchised hereunder, the doctrine
of “inevitable disclosure” will apply, and it will be presumed that Franchisee is in violation of this covenant;
and in such case, it shall be Franchisee’s burden to prove that Franchisee is not in violation of this covenant.
B. Franchisee agrees that any new concept, process or improvement in the operation or
promotion of the Studio developed by or on behalf of Franchisee that relates to or enhances the Club Pilates
Operating System, or any aspect of Franchisor’s business, shall be the sole property of Franchisor, and
Franchisee shall promptly notify Franchisor and shall provide Franchisor with all necessary information
and execute all necessary documents to memorialize said ownership, or, if necessary, Franchisee’s
assignment of such ownership to Franchisor, without compensation. Franchisee acknowledges that
Franchisor may utilize or disclose such information to other Franchisees.
12.2 No Other Interests. Franchisee further acknowledges that Franchisor would be unable to protect
its Confidential Information against unauthorized use or disclosure and would be unable to encourage a
free exchange of ideas and information among Club Pilates franchisees if its franchisees were permitted to
hold an interest in other fitness or Pilates Studio businesses and otherwise to compete with Franchisor.
Therefore, during the term of this Agreement, Franchisee must comply with the competitive covenant
provisions of Article 13 herein.
12.3 Injunctive Relief. Franchisee expressly agrees that the existence of any claims it may have against
Franchisor, whether or not arising out of this Agreement, shall not constitute a defense to the enforcement
A. During the Term of this Agreement. Neither Franchisee, its principals, owners, or
guarantors, nor any immediate family of Franchisee, its principals, owners, or guarantors (“Restricted
Parties”), may, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any
other person, partnership or corporation own, maintain, engage in, be employed or serve as an officer,
director, or principal of, lend money or extend credit to, lease/sublease space to, or have any interest in or
involvement with any fitness or exercise business, any fitness or exercise marketing or consulting business,
any business offering products of a similar nature to those of the Studio, or in any business or entity which
franchises, licenses or otherwise grants to others the right to operate such aforementioned businesses
(“Competing Business”). Furthermore, the Restricted Parties shall not divert, or attempt to divert, any
prospective customer to a Competing Business in any manner.
(1) Prohibition on Franchising Activities. For a period of two (2) years after the
expiration and nonrenewal, transfer or termination of this Agreement, regardless of the cause, neither
Franchisee, its principals, owners and guarantors, nor any member of the immediate family of Franchisee,
its principals, owners or guarantors, may, directly or indirectly, for themselves or through, on behalf of, or
in conjunction with any other person, partnership or corporation, be involved with any business that
competes in whole or in part with Franchisor by offering or granting licenses or franchises, or establishing
joint ventures, for the ownership or operation of a Competing Business. The geographic scope of the
covenant contained in this Section is any location where Franchisor can demonstrate it has offered or sold
franchises as of the date this Agreement is terminated or expires.
(2) Prohibition on Competing Businesses. For two (2) years after the expiration,
termination or non-renewal (by Franchisor or by Franchisee for any reason) of this Agreement or after
Franchisee has assigned its interest in this Agreement, the Restricted Parties shall not own, maintain, engage
in, be employed as an officer, director, or principal of, lend money to, extend credit to, lease/sublease space
to, or have any interest in or involvement with, any other Competing Business: (i) at the Authorized
Location; or (ii) within a ten (10) mile radius of (a) the Authorized Location, or (b) any other Franchised
Studio or Corporate Studio that is open, under lease or otherwise under development as of the date this
Agreement expires or is terminated.
A. During the Term of this Agreement. Franchisee represents and warrants that it will not: (i)
divert or seek to divert customers from another Studio or System franchisee; or (ii) employ or seek to
employ any person employed by Franchisor or by any other franchisee of Franchisor, or otherwise directly
or indirectly induce or seek to induce such person to leave his or her employment during the term of this
Agreement (subject to applicable laws), without first obtaining the consent of Franchisor or any other
franchisee of Franchisor. Instructors and sales staff may work at more than one Studio. Franchisee
acknowledges that Franchisor has the right to offer to sell or to sell a System franchise to any employee of
Franchisee.
B. After the Term of this Agreement. For two (2) years after the expiration, termination or non-
renewal (by Franchisor or by Franchisee for any reason) of this Agreement or after Franchisee has assigned
its interest in this Agreement, the Restricted Parties shall not (i) solicit business from customers of
Franchisee’s former Studio, (ii) contact any of Franchisor’s suppliers or vendors for any competitive
business purpose, or (iii) subject and to the extent permitted by applicable law where the Studio and/or
employee at issue are located, solicit any of Franchisor’s other employees, or the employees of Franchisor’s
affiliates or any other System franchisee, to discontinue employment.
A. Franchisee expressly agrees that the existence of any claims it may have against Franchisor,
whether or not arising out of this Agreement, shall not constitute a defense to the enforcement of the
covenants in this Article 13. Franchisee acknowledges and agrees that in view of the nature of the System
and the business of Franchisor, the restrictions contained in this Article 13 are reasonable and necessary to
protect the legitimate interests of the System and Franchisor. Franchisee further acknowledges and agrees
that Franchisee’s violation of the terms of this Article 13 will cause irreparable injury to Franchisor for
which no adequate remedy at law is available, and Franchisee accordingly agrees that Franchisor shall be
entitled to preliminary and permanent injunctive relief and damages, as well as, an equitable accounting of
all earnings, profits, and other benefits arising from such violation, which remedies shall be cumulative and
in addition to any other rights or remedies to which Franchisor shall be entitled. Franchisee agrees to waive
any bond that may be required or imposed in connection with the issuance of any preliminary or provisional
relief. Franchisee shall pay all costs and expenses, including, without limitation, reasonable attorneys’ fees,
incurred by Franchisor in connection with the enforcement of this Article 13. If Franchisee violates any
restriction contained in this Article 13, and it is necessary for Franchisor to seek equitable relief, the
restrictions contained herein shall remain in effect until two (2) years after such relief is granted. If
Franchisee contests the enforcement of Article 13 and enforcement is delayed pending litigation, and if
Franchisor prevails, the period of non-competition shall be extended for an additional period equal to the
period of time that enforcement of this Article 13 is delayed.
B. Franchisee agrees that the provisions of this covenant not to compete are reasonable. If,
however, any court should find this Article 13 or any portion of this Article 13 to be unenforceable and/or
unreasonable, the court is authorized and directed to reduce the scope or duration (or both) of the
provision(s) in issue to the extent necessary to render it enforceable and/or reasonable and to enforce the
provision so revised.
C. Franchisor shall have the right, in Franchisor’s discretion, to reduce the scope of any
covenant not to compete set forth in this Agreement, or any portion thereof, without Franchisee’s consent,
effective immediately upon receipt by Franchisee of written notice thereof, and Franchisee shall comply
with any covenant as so modified.
14.1 Franchisor’s Approval Required. All rights and interests of Franchisee arising from this
Agreement are personal to Franchisee and except as otherwise provided in this Article 14, Franchisee shall
not, without Franchisor’s prior written consent, voluntarily or involuntarily, by operation of law or
otherwise, sell, assign, transfer, pledge or encumber its interest in this Agreement, in the license granted
hereby, in the assets of the Studio, any of its rights hereunder, or in the lease for the premises at which the
Studio is located, and any purported sale, assignment, transfer, pledge or encumbrances shall be null and
void. If Franchisee is a corporation, limited liability, partnership, or an individual or group of individuals,
any assignment (or new issuance), directly or indirectly, occurring as a result of a single transaction or a
series of transactions that alters the Percentage of Ownership Interest reflected in Section 17.5 of this
Agreement must promptly be reported to Franchisor and is a “transfer” within the meaning of this Article
14.
14.2 Conditions for Approval of Transfer. Franchisor shall not unreasonably withhold its approval
of a proposed transfer, provided that the prospective transferee, in Franchisor’s reasonable judgment, is of
good moral character and reputation, has no conflicting interests, has a good credit rating and sufficient and
competent business experience, aptitude and financial resources acceptable to Franchisor’s then-current
standards for franchisees; and that the following conditions are met: (1) Franchisee pays Franchisor a
transfer fee in an amount equal to $10,000 (except in those cases set forth at the end of this Section where
only an administrative fee is charged), as well as any applicable broker fees due in connection with the
transaction; (2) Franchisee signs a prescribed form of general release in favor of Franchisor and related
parties; (3) the proposed transferee (and, if appropriate, it owners) must: (i) pay the applicable Training Fee
of $30,000; and (ii) at Franchisor’s option, either (a) execute Franchisor’s then-current form of franchise
agreement that will then govern the balance of the term of this Agreement, or (b) enter into a form of
assignment and consent to transfer whereby transferee (and, if appropriate, its owners) agree to assume all
of Franchisee’s obligations and covenants under this Agreement; (3) the Studio and equipment must be
upgraded, refurbished or repaired if Franchisor, in its sole discretion, decides it is necessary; and (4) the
transferee (a) completes (or has its Operating Principal complete) the Owner/Operator Module and has its
Designated Manager complete the Designated Manager Training Program, and (b) has at least one (1)
Authorized Instructor prior to reopening, and/or resuming the provision of Approved Services at, the Studio.
Instead of the standard transfer fee, Franchisee must pay an administrative fee at the time of proposing any
transfer or assignment amounting to (a) $500 if Franchisee is an individual (or individuals) and the transfer
is from Franchisee to an entity that is wholly owned by such individual(s), or (b) $1,500 if the transfer is
from Franchisee to an immediate family member.
14.5 Relocation. Franchisee may not relocate the Studio from the Authorized Location without
Franchisor’s prior written approval, which Franchisor may provide in its sole discretion. Franchisee agrees
and acknowledges that: (i) it must pay Franchisor a $5,000 relocation fee at the time Franchisee makes any
relocation request; and (ii) Franchisor is not likely to approve any relocation request unless (a) due to
extreme circumstances that are beyond Franchisee’s control, and (b) Franchisee is in full compliance with
this Agreement.
14.6 Transfer by Franchisor. Franchisor shall have the right to transfer or assign all or any part of its
rights or obligations herein to any person or legal entity, directly or indirectly, by merger, assignment,
pledge or other means.
15.1 Termination of Franchise by Franchisor. Franchisor shall have the right to terminate this
Agreement for “good cause” upon delivering notice of termination to Franchisee. For purposes of this
Agreement, “good cause” shall include, without limitation: (i) a material breach of this Agreement or any
other agreement between Franchisee and Franchisor or any of Franchisor’s affiliates, (ii) intentional,
repeated or continuous breach of any provision of this Agreement or any other agreement between
Franchisee and Franchisor or any of Franchisor’s affiliates, and (iii) the breaches (and, if applicable, failure
to cure such breaches) described below in this Section 15 set forth below.
(4) Franchisee voluntarily or otherwise abandons the Studio. For purposes of this
Agreement, the term “abandon” means: (i) failure to actively operate the Studio for more than two (2)
business days without Franchisor’s prior written consent; or (ii) any other conduct on the part of Franchisee
or its principals that Franchisor determines indicates a desire or intent to discontinue operating the Studio
in accordance with this Agreement or the Manual;
(5) Franchisee or any of its principal officers, directors, partners or managing members
is convicted of or pleads no contest to a felony or other crime or offense that adversely affect the reputation
of the System or the goodwill associated with the Marks;
(8) Franchisee’s: (i) disclosure, utilization, or duplication of any portion of the System,
the Manual or other proprietary or Confidential Information relating to the Studio that is contrary to the
provisions of this Agreement; or (ii) material misuse of the Marks in any manner not expressly authorized
by Franchisor;
(9) Franchisee violates any health or safety law, ordinance or regulation or operates
the Studio in a manner that presents a health or safety hazard to its members or to the public;
(10) Franchisee fails to obtain lawful possession of an acceptable location and to open
for business as a franchised Studio within six (6) months after this Agreement is accepted by Franchisor,
unless Franchisor agrees otherwise in writing;
(11) Franchisee defaults under the lease agreement or otherwise loses the right to
possess the premises at the location at which the Studio is located;
(12) Franchisee fails to comply with the covenants not to compete as required in Article
13 herein; or
(13) Franchisee, after curing a default pursuant to Section 15.1B herein, commits the
same act of default again within any twelve (12) consecutive month period whether or not such default is
cured after notice thereof is delivered to Franchisee, or if Franchisee received three (3) or more default
notices from Franchisor within any twelve (12) consecutive monthly period whether or not such defaults
were related to the same problem or were cured after notice thereof was delivered to Franchisee.
(2) Franchisee’s failure to comply with any provision of this Agreement that does not
otherwise provide for immediate termination, or Franchisee’s bad faith in carrying out the terms of this
Agreement;
(3) Failure by Franchisee to maintain books and financial records for the Studio
suitable for proper financial audit or failure by Franchisee to permit Franchisor to carry out its rights to
conduct an inspection or audit as provided in this Agreement or failure by Franchisee to submit as required
by this Agreement all reports, records and information of the Club Pilates franchised business;
(4) Franchisee, or if Franchisee has elected not to directly supervise “on-premises” the
day-to-day Studio operations, then Franchisee’s management employee, fails to complete, to Franchisor’s
satisfaction, the initial training program as provided in this Agreement;
(5) Franchisee fails to pay when due any amount owing to Franchisor or its affiliates
under this Agreement or any other agreement, or is unable to obtain adequate financing to cover all costs
of developing, opening and operating the Studio;
(6) Franchisee fails to pay when due any amounts owing to any person or entity in
connection with the construction, leasing, financing, operation or supply of the Studio;
(7) Franchisee closes any bank account without completing all of the following after
such closing: (i) immediately notifying Franchisor in writing, (ii) immediately establishing another bank
account, and (iii) executing and delivering to Franchisor all documents necessary for Franchisor to begin
and continue making withdrawals from such bank account by electronic funds transfer as Exhibit 2 to this
Agreement permits;
(11) Franchisee offers in conjunction with the operation of the Studio products or
services that have not been approved by Franchisor;
(12) Franchisee fails to abide by the pertinent marketing and advertising requirements
and procedures and participate in marketing programs for the business as established by Franchisor;
(13) Franchisee fails to comply with the Performance Standards as set forth in the
provisions of this Agreement, as prescribed by Franchisor, or in the Manual, including, but not limited to,
the Minimum Monthly Gross Revenue Quota for a period of 36 consecutive months, System Standards for
cleanliness, customer service, equipment maintenance, and any other System Standards which effect or
enhance the member experience at the Studio; or
15.2 Cross-Default. If there are now, or hereafter shall be, other franchise agreements or any other
agreements in effect between Franchisee and Franchisor and/or any of Franchisor’s affiliates, a default by
Franchisee under the terms and conditions of this or any other such agreement, shall at the option of
Franchisor, constitute a default under all such agreements.
A. All rights, privileges and licenses granted by Franchisor to Franchisee shall immediately
cease and be null and void and of no further force and effect, and all such rights, privileges and licenses
shall immediately revert to Franchisor;
B. Franchisee shall cease to be an authorized Club Pilates franchise owner, and shall
immediately, at its own expense, remove all signs, obliterate or remove all letterheads, labels or any other
item or form of identification that would in any way link or associate Franchisee, its goods and/or services
with Franchisor, and shall immediately cease to use, in any manner, the Marks, System and any other
copyrighted information or materials or any confidential information Franchisee obtained as a result of the
franchise granted to Franchisee;
C. Franchisee shall immediately terminate all advertising and promotional efforts and any
other act that would in any way indicate that Franchisee is or was ever an authorized Club Pilates franchisee;
E. Franchisee agrees not to use any reproduction, counterfeit, copy, or colorable imitation of
the Marks that is likely to cause confusion, mistake or deception, or that is likely to dilute Franchisor’s
rights in and to the Marks, and further agrees not to use any trade dress or designation of origin or
description or representation that falsely suggests or represents an association or connection with
Franchisor;
F. Franchisee shall pay all sums owing to Franchisor and its approved suppliers for
outstanding amounts owed under the Franchise Agreement and otherwise in connection with the Studio. In
the event of termination for any default of Franchisee, such sums shall include all damages, costs and
expenses, including reasonable legal fees, incurred by Franchisor as a result of the default;
G. Franchisee shall comply with the covenants set forth in Articles 12 and 13 of this
Agreement; and
H. Franchisee shall, at Franchisor’s option, assign to Franchisor any interest that Franchisee
has in any lease for the premises of the Studio;
I. Franchisor shall have the option, exercisable by giving written notice thereof within thirty
(30) days from the date of such termination, expiration or non-renewal to purchase any and all equipment,
furniture, fixtures, signs, sundries and supplies owned by Franchisee and used in the Studio, at the lesser of
(i) Franchisee’s cost less depreciation computed on a reasonable straight line basis (as determined in
accordance with generally accepted accounting principles and consistent with industry standards and
customs) or (ii) fair market value of such assets, less(in either case) any outstanding liabilities of the Studio.
In addition, Franchisor shall have the option to assume Franchisee’s lease for the lease location of the
Studio, or if an assignment is prohibited, a sublease for the full remaining term on the same terms and
conditions as Franchisee’s lease. No value will be attributed to the value of the Marks or the System or to
the assignment of the lease (or sublease) for the premises or the assignment of any other assets used in
conjunction with the Studio, and Franchisor will not be required to pay any separate consideration for any
such assignment or sublease.
If the parties cannot agree on fair market value within thirty (30) days of Franchisor’s
notice of intent to purchase, fair market value shall be determined by an experienced, professional and
impartial third party appraiser without regard to goodwill or going concern value, designated by Franchisor
and acceptable to Franchisee, whose determination shall be final and binding on both parties. The cost of
such appraisal shall be borne equally by Franchisor and Franchisee. If the parties cannot agree upon an
appraiser one shall be appointed by the American Arbitration Association, upon petition of either party.
Franchisor shall have the right to withhold from the purchase price funds sufficient to pay
all outstanding debts and liabilities of Franchisee and the Studio and to pay such debts and liabilities from
such funds.
A. If Franchisee shall be in default in the performance of any of its obligations or breach any
term or condition of this Agreement, in addition to Franchisor’s right to terminate this Agreement, and
without limiting any other rights or remedies to which Franchisor may be entitled at law or in equity,
Franchisor may, at its election, immediately or at any time thereafter, and without notice to Franchisee cure
such default for the account of and on behalf of Franchisee including, without limitation, entering upon and
taking possession of the Studio and to taking in the name of Franchisee, all other actions necessary to effect
the provisions of this Agreement and any such entry or other action shall not be deemed a trespass or other
illegal act, and Franchisor shall not be liable in any manner to Franchisee for so doing, and Franchisee shall
pay the entire cost thereof to Franchisor on demand, including reasonable compensation to Franchisor for
the management of the Studio.
B. As an alternative to Franchisor’s exercising its rights under Section 15.4A, above, and only
in the event of a premature termination of this Agreement, Franchisee shall pay Franchisor liquidated
damages in an amount equal to: (i) the sum of the royalties paid to Franchisor over the greater of (A) the
36 calendar months wherein the franchised Studio was actively operating proceeding the termination date,
or (B) if Franchisee’s Studio has not been actively operating for 36 months then the months that Studio has
had active in-Studio operations; or (ii) if Franchisee has failed to develop and open the franchised Studio,
36 times the average royalty fee paid to Franchisor by System franchisees with actively operating franchised
Studios over the 12-month period preceding the termination; provided, however exercise of this right shall
not preclude Franchisor’s right to seek injunctive relief as outlined in Section 16.5. Franchisee’s payment
to Franchisor would not be a penalty for breaching this Franchise Agreement, but rather a reasonable
estimate of the losses Franchisor would incur in the event of the closure of Franchisee’s franchised business.
Should Franchisor elect to enforce its right to liquidated damages under this Section, Franchisee’s
obligation to pay such damages would be in addition to Franchisee’s obligations to (i) pay all amounts still
owed to Franchisor, and (ii) adhere to Franchisee’s other post-termination obligations. Franchisor’s right
to payment of liquidated damages would be in addition to all other post-termination remedies available to
Franchisor under the law.
16.1 Governing Law. This Agreement is governed by the laws of the state of California without
reference to this state’s conflict of laws principles (subject to state law), except that: (i) any disputes or
actions involving any non-competition covenants set forth in this Agreement or any other Franchise
Agreement, including the interpretation and enforcement thereof, shall be governed by the law of the state
where the Studio is located; and (ii) any franchise-specific or franchise-applicable laws of California,
including those related to pre-sale disclosure and the franchise relationship generally, will not apply to this
Agreement or franchise awarded hereunder unless the awarding of said franchise meets all jurisdictional
and other requirements to specifically fall within the scope of such California laws, regulations or statutes
without reference to and independent of any reference to this choice of law provision.
16.2 Internal Dispute Resolution. Franchisee must first bring any claim or dispute between Franchisee
and Franchisor to Franchisor’s management and make every effort to resolve the dispute internally.
Franchisee must exhaust this internal dispute resolution procedure before Franchisee may bring
16.3 Mediation. At Franchisor’s option, all claims or disputes between Franchisee and Franchisor (or
its affiliates) arising out of, or in any way relating to, this Agreement or any other agreement by and between
Franchisee and Franchisor (or its affiliates), or any of the parties’ respective rights and obligations arising
from such agreement, which are not first resolved through the internal dispute resolution procedure set forth
in Section 16.1 above, will be submitted first to mediation to take place at Franchisor’s then-current
corporate headquarters under the auspices of the American Arbitration Association (“AAA”), in accordance
with AAA’s Commercial Mediation Rules then in effect. Before commencing any legal action against
Franchisor or its affiliates with respect to any such claim or dispute, Franchisee must submit a notice to
Franchisor, which specifies, in detail, the precise nature and grounds of such claim or dispute. Franchisor
will have a period of thirty (30) days following receipt of such notice within which to notify Franchisee as
to whether Franchisor or its affiliates elects to exercise its option to submit such claim or dispute to
mediation. Franchisee may not commence any action against Franchisor or its affiliates with respect to any
such claim or dispute in any court unless Franchisor fails to exercise its option to submit such claim or
dispute to mediation, or such mediation proceedings have been terminated either: (i) as the result of a written
declaration of the mediator(s) that further mediation efforts are not worthwhile; or (ii) as a result of a written
declaration by Franchisor. Franchisor’s rights to mediation, as set forth herein, may be specifically enforced
by Franchisor. Each party will bear its own cost of mediation and Franchisor and Franchisee will share
mediator fees equally. This agreement to mediate will survive any termination or expiration of this
Agreement. The parties will not be required to first attempt to mediate a controversy, dispute, or claim
through mediation if such controversy, dispute, or claim concerns an allegation that a party has violated (or
threatens to violate, or poses an imminent risk of violating): (a) any federally protected intellectual property
rights in the Marks, the System, or in any Confidential Information or other confidential information; (b)
any of the restrictive covenants contained in this Agreement; and (c) any of Franchisee’s payment
obligations under this Agreement.
16.4 Mandatory Binding Arbitration. Except as provided in Section 16.5 of this Agreement,
Franchisee and Franchisor agree that any claim, dispute, suit, action, controversy, or proceeding of any type
whatsoever including any claim for equitable relief and/or where either party is acting as a “private attorney
general,” suing pursuant to a statutory claim or otherwise, between or involving Franchisee and Franchisor
on whatever theory and/or facts based, and whether or not arising out of this Agreement (each, a “Claim”)
will be processed in the following manner:
A. Franchisee and Franchisor each expressly waives all rights to any court proceeding, except
as expressly provided in Section 16.5 below;
B. All Claims shall be submitted to and resolved by binding arbitration that will take place at
Franchisor’s headquarters or other location that Franchisor designates in Orange County, California, before
and in accordance with the arbitration rules of the American Arbitration Association. Judgment upon the
award rendered by the arbitrator shall be entered in any Court having jurisdiction thereof.
C. Franchisor and Franchisee agree that any arbitration between Franchisor and Franchisee
shall be of Franchisee’s individual claim and that the claim subject to arbitration shall not be arbitrated on
a class-wide basis.
D. This arbitration provision shall be deemed to be self-executing, and in the event either party
fails to appear at any properly noticed arbitration proceeding, an award may be entered against such party
notwithstanding said failure to appear.
F. Any arbitration proceeding involving this Agreement or the Studio generally, including all
demands, other filings and evidence submitted in connection with such proceeding, must be kept strictly
confidential by Franchisee and its representatives, unless Franchisor agrees otherwise in writing.
16.5 Other Proceedings (Right to Injunctive Relief). Franchisee acknowledges and agrees that
irreparable harm could be caused to Franchisor by Franchisee’s violation of certain provisions of this
Agreement and, as such, in addition to any other relief available at law or equity, Franchisor shall be entitled
to obtain in any court of competent jurisdiction, without bond, restraining orders or temporary or permanent
injunctions in order to enforce, among other items, the provisions of this Agreement relating to: (i)
Franchisee’s use of the Marks and Confidential Information (including any proprietary software used in
connection with the Studio); (ii) the in-term covenant not to compete, as well as any other violations of the
restrictive covenants set forth in this Agreement; (iii) Franchisee’s obligations on termination or expiration
of this Agreement; (iv) disputes and controversies based on or arising under the Lanham Act, or otherwise
involving the Marks, as now or hereafter amended; (v) disputes and controversies involving enforcement
of the Franchisor’s rights with respect to confidentiality under this Agreement; and (vi) the prohibition of
any act or omission by Franchisee or its employees that constitutes a violation of applicable law, threatens
Franchisor’s franchise system or threatens other franchisees of Franchisor. Franchisee’s only remedy if
such an injunction is entered will be the dissolution of the injunction, if appropriate, and Franchisee waives
all damage claims if the injunction is wrongfully issued.
A. Franchisee acknowledges and agrees that this Agreement is entered into in California and
that, except for those actions described in Section 16.5 above, any action brought by either party against
the other for the purpose of enforcing the terms and provisions of this Agreement (provided such action is
not subject to the arbitration proceeding pursuant to the terms of this Agreement or applicable law) shall be
instituted solely in a state or federal court having subject matter jurisdiction thereof only in California in
the judicial district in which Franchisor has its principal place of business and in no other court and that
Franchisee irrevocably waives any objection Franchisee may have to the exclusive jurisdiction or the
exclusive venue of such court.
B. If Franchisee institutes any arbitration or other legal proceedings in any venue or other
court other than those specified, Franchisee shall assume all of Franchisor’s costs in connection therewith,
including, without limitation, reasonable attorney fees regardless of the outcome of such arbitration or legal
proceedings.
C. Franchisee acknowledges that Franchisor may bring an action in any other court of
competent jurisdiction to seek and obtain injunctive relief as set forth in Section 16.5 above, including to
enforce Franchisee’s non-compete obligations hereunder.
16.7 Waiver of Punitive Damages. Franchisee hereby waives to the fullest extent permitted by law,
any right to or claim for any punitive, exemplary, incidental, indirect, special or consequential damages
(including, without limitation, lost profits) against Franchisor arising out of any cause whatsoever (whether
such cause be based in contract, negligence, strict liability, other tort or otherwise) and agrees that in the
event of a dispute, that Franchisee’s recovery is limited to actual damages. If any other term of this
Agreement is found or determined to be unconscionable or unenforceable for any reason, the foregoing
provisions shall continue in full force and effect, including, without limitation, the waiver of any right to
claim any consequential damages. Nothing in this Section or any other provision of this Agreement shall
16.8 WAIVER OF JURY TRIAL. THE PARTIES HEREBY AGREE TO WAIVE TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR EQUITY,
REGARDLESS OF WHICH PARTY BRINGS SUIT. THIS WAIVER SHALL APPLY TO ANY
MATTER WHATSOEVER BETWEEN THE PARTIES HERETO WHICH ARISES OUT OF OR IS
RELATED IN ANY WAY TO THIS AGREEMENT, THE PERFORMANCE OF EITHER PARTY,
AND/OR FRANCHISEE’S PURCHASE FROM FRANCHISOR OF THE FRANCHISE AND/OR ANY
GOODS OR SERVICES.
16.9 WAIVER OF CLASS ACTIONS. THE PARTIES AGREE THAT ALL PROCEEDINGS
ARISING OUT OF OR RELATED TO THIS AGREEMENT, OR THE SALE OF THE FRANCHISED
BUSINESS, WILL BE CONDUCTED ON AN INDIVIDUAL, NOT A CLASS-WIDE BASIS, AND
THAT ANY PROCEEDING BETWEEN FRANCHISEE, FRANCHISEE’S GUARANTORS AND
FRANCHISOR OR ITS AFFILIATES/OFFICERS/EMPLOYEES MAY NOT BE CONSOLIDATED
WITH ANY OTHER PROCEEDING BETWEEN FRANCHISOR AND ANY OTHER THIRD PARTY.
A. If legal action or arbitration is necessary to enforce the terms and conditions of this Agreement,
the prevailing party shall be entitled to recover reasonable compensation for preparation, investigation,
court costs, arbitration costs (if applicable) and reasonable attorneys’ fees, from the non-prevailing party as
fixed by an arbitrator or court of competent jurisdiction.
B. Separate and distinct from the right of a prevailing party to recover expenses, costs and
fees in connection with any legal proceeding or arbitration, the prevailing party shall also be entitled to
receive all expenses, costs and reasonable attorneys’ fees incurred in connection with the enforcement of
any arbitration award or judgment entered. Furthermore, the right to recover post-arbitration award and
post-judgment expenses, costs and attorneys’ fees shall be severable and shall survive any award or
judgment and shall not be deemed merged into such judgment.
C. Apart from the obligations above in this Section 16.10, Franchisee agrees and
acknowledges that it will be responsible for the legal fees and other costs that Franchisor incurs in
connection with certain modifications that Franchisor agrees to make to the Franchise Agreement, including
without limitation, modifications made to address the following situations: (i) relocation; or (ii) any other
amendment to extend a given performance deadline of Franchisee, modify the territory awarded hereunder,
or otherwise modify, amend or supplement this Agreement in any way at the request of Franchisee or as
necessary for Franchisee to avoid this Agreement being in default or subject to termination. Franchisor may
set forth flat fee amounts designed to help defray the costs associated with addressing certain of the
foregoing situations in the context of this Agreement or any other agreement with Franchisor, whether in
the Manuals or otherwise in a writing distributed to System franchisees.
16.11 No Withholding of Payments. Franchisee shall not withhold all or any part of any payment to
Franchisor or any of its affiliates on the grounds of Franchisor’s alleged nonperformance or as an offset
against any amount Franchisor or any of Franchisor’s affiliates allegedly may owe Franchisee under this
Agreement or any related agreements.
16.12 Limitation of Actions. Franchisee further agrees that no cause of action arising out of or under this
Agreement may be maintained by Franchisee against Franchisor unless brought before the expiration of
16.13 Third Party Beneficiaries. Franchisor’s officers, directors, shareholders, agents and/or employees
are express third-party beneficiaries of the provisions of this Agreement, including the dispute resolution
provisions set forth in this Section 21, each having authority to specifically enforce the right to
mediate/arbitrate claims asserted against such person(s) by Franchisee.
17.1 Severability. Except as provided in Section 13.4, each article, section, paragraph, term and
provision of this Agreement, or any portion thereof, shall be considered severable and if, for any reason,
any such portion of this Agreement is held by an arbitrator or by a court of competent jurisdiction to be
unenforceable due to any applicable existing or future law or regulation, such portion shall not impair the
operation of or have any effect upon, the remaining portions of this Agreement which will remain in full
force and effect. No right or remedy conferred upon or reserved to Franchisor or Franchisee by this
Agreement is intended to be, nor shall be deemed, exclusive of any other right or remedy herein or by law
or equity provided or permitted, but, each shall be cumulative of every other right or remedy.
17.2 Waiver and Delay. No failure, refusal or neglect of Franchisor to exercise any right, power,
remedy or option reserved to it under this Agreement, or to insist upon strict compliance by Franchisee with
any obligation, condition, specification, standard or operating procedure in this Agreement, shall constitute
a waiver of any provision of this Agreement and the right of Franchisor to demand exact compliance with
this Agreement, or to declare any subsequent breach or default or nullify the effectiveness of any provision
of this Agreement. Subsequent acceptance by Franchisor of any payment(s) due it under this Agreement
shall not be deemed to be a waiver by Franchisor of any preceding breach by Franchisee of any terms,
covenants or conditions of this Agreement.
17.3 Designation of Responsible Parties. Franchisee represents and warrants to Franchisor that the list
below states: (i) the name, mailing address and equity interest of each person holding any shares or other
form of ownership, or security interest convertible into an equity interest, in Franchisee, showing percentage
of ownership held by each and (ii) the name and mailing address of the individual(s) who will be the
Operating Principal(s) of the Studio. Each Operating Principal named below has the authority to act for
Franchisee in all matters relating to the franchised Studio granted hereunder, including voting
responsibilities. Only those individuals who are party to this Agreement and have an ownership interest in
the franchise entity may be listed as an Operating Principal. Franchisee shall promptly notify Franchisor
of any change in any such information. Any change in the Operating Principal(s), or in ownership
information of Franchisee, is subject to Article 14 and the training requirements of this Agreement:
_____________________________ ____________
_____________________________ ____________
_____________________________
17.4 Franchisor’s Discretion. Except as otherwise specifically referenced herein, all acts, decisions,
determinations, specifications, prescriptions, authorizations, approvals, consents and similar acts by
Franchisor may be taken or exercised in the sole and absolute discretion of Franchisor, regardless of the
impact upon Franchisee. Franchisee acknowledges and agrees that when Franchisor exercises its discretion
or judgment, its decisions may be for the benefit of Franchisor or the Club Pilates franchise network and
may not be in the best interest of Franchisee as an individual franchise owner.
17.5 Notices.
A. All notices which the parties hereto may be required or permitted to give under this
Agreement shall be in writing and shall be personally delivered or mailed by certified or registered mail,
return receipt requested, postage paid, or by reliable overnight delivery service, addressed as follows:
If to Franchisor:
Club Pilates Franchise, LLC
17877 Von Karman Ave., Suite 100
Irvine, CA 92614
Attention: Shaun Grove
If to Franchisee:
____________________________
____________________________
____________________________
B. The addressees herein given for notices may be changed at any time by either party by
written notice given to the other party as herein provided. Notices delivered by certified or registered mail
shall be deemed to have been given three (3) business days after postmark by United States Postal Service,
or the next business day after deposit with reliable overnight delivery service or when delivered by hand.
17.6 No Recourse Against Nonparty Affiliates. All claims, obligations, liabilities, or causes of action
(whether in contract or in tort, in law or in equity, or granted by statute) that may be based upon, in respect
of, arise under, out or by reason of, be connected with, or relate in any manner to this Agreement, or the
negotiation, execution, or performance of this Agreement (including any representation or warranty made
17.7 Non-Disparagement. Franchisee agrees that it will refrain from making any untrue or derogatory
statements concerning Franchisor and its affiliates, as well as their present and former officers, employees,
shareholders, directors, agents, attorneys, servants, representatives, successors and assigns.
18. ACKNOWLEDGMENTS
18.1 THE SUBMISSION OF THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER AND
THIS AGREEMENT SHALL BECOME EFFECTIVE ONLY UPON THE EXECUTION HEREOF BY
THE FRANCHISOR AND THE FRANCHISEE. THE DATE OF EXECUTION BY THE FRANCHISOR
SHALL BE CONSIDERED TO BE THE DATE OF EXECUTION OF THIS AGREEMENT.
18.2 THIS AGREEMENT SHALL NOT BE BINDING ON THE FRANCHISOR UNLESS AND
UNTIL IT SHALL HAVE BEEN ACCEPTED AND SIGNED BY AN AUTHORIZED OFFICER OF
THE FRANCHISOR.
This Agreement, the documents referred to herein, and the exhibits hereto, constitute the entire and only
agreement between the parties concerning the granting, awarding and licensing of Franchisee as an
authorized Club Pilates Franchisee at the Studio location, and supersede all prior and contemporaneous
agreements. There are no representations, inducements, promises, agreements, arrangements or
undertakings, oral or written, between the parties other than those set forth herein. Except for those
permitted to be made unilaterally by Franchisor hereunder, no amendment, change or variance from this
Agreement shall be binding on either party unless mutually agreed to by the parties and executed by their
authorized officers or agents in writing. This Agreement does not alter agreements between Franchisor and
Franchisee for other locations. Nothing in this Agreement or in any related agreement, however, is intended
to disclaim the representations Franchisor made in the FDD that Franchisor furnished to Franchisee.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set forth below to be
effective upon execution by Franchisor.
If Franchisee is an individual:
By:_________________________ Signature:_______________________
Date: __________________________
Title: _______________________
Signature: _______________________
_______________________________
[Name of Franchisee]
By: ____________________________
Title: __________________________
Date: __________________________
By: ____________________________
Title: __________________________
Date: __________________________
This Addendum is made to the Club Pilates Franchise Agreement (the “Franchise Agreement”) between Club
Pilates Franchise, LLC (“Franchisor”), and ________________________ (“Franchisee”), dated
__________________, 20__.
1. Preservation of Agreement. Except as specifically set forth in this Addendum, the Franchise Agreement
shall remain in full force and effect in accordance with its terms and conditions. This Addendum is attached to
and upon execution becomes an integral part of the Franchise Agreement.
2. Authorized Location. The parties hereto agree that the Authorized Location referred to in Section 1.3
of the Franchise Agreement shall be the following:
_____.
3. Designated Territory, if any. Pursuant to Section 1.3 of the Franchise Agreement, Franchisee’s
Designated Territory will be defined as follows (if identified on a map, please attach map and reference attachment
below):
This Addendum is agreed to and accepted by the parties this ___ day of _________________, 20__.
FRANCHISOR:
By: ______________________________
Title: _____________________________
FRANCHISEE:
By: ______________________________
Title: _____________________________
By: ______________________________
Title: _____________________________
This Electronic Funds Transfer Agreement (the “Agreement”) is made on this ___day of
___________________________, 20__ by and between Club Pilates Franchise, LLC. (“Franchisor”), and
_____________________________ or their assignee, if a partnership, corporation or limited liability company is
later formed (“Franchisee").
Whereas, Franchisor and Franchisee are parties to a Club Pilates Franchise Agreement executed on even
date herewith (the “Franchise Agreement”) and desire to enter into an Addendum to the Franchise Agreement;
Now, therefore in consideration of the mutual promises contained herein and as an inducement to
Franchisor to execute the Franchise Agreement, the parties agree as follows:
A. Franchisee shall pay any and all fees and other charges in connection with this Addendum and the
Franchise Agreement (including, without limitation, the Royalty Fees, contributions to the Fund and any other
payments due to Franchisor by Franchisee, and any applicable late fees and interest charges) by electronic,
computer, wire, automated transfer, ACH debiting, and bank clearing services (collectively "electronic funds
transfers" or “EFT”‘), and Franchisee shall undertake all action necessary to accomplish such transfers.
B. Upon execution and delivery of this Agreement, Franchisee shall execute and deliver two (2) originals of
the “Electronic Debit Authorization” attached as Exhibit 3 to the Franchise Agreement, which authorizes
Franchisee’s bank or other financial institution to accept debit originations, electronic debit entries, or other EFT,
and electronically deposit fees and contributions owing Franchisor directly to Franchisor’s bank account(s). Upon
Franchisor’s request, Franchisee shall deliver to Franchisor all additional information that Franchisor deems
necessary (including, without limitation, financial institution of origin and relevant accounts and ABA/transit
numbers for any new bank accounts that Franchisee opens after the date of this Addendum) in connection with
such EFT.
C. By executing this Addendum, Franchisee authorizes Franchisor to withdraw funds at such days and times
as Franchisor shall determine via EFT from Franchisee’s bank account for all fees and other charges in connection
with the Franchise Agreement and this Addendum, as described in the first sentence of this paragraph. Franchisee
authorizes weekly ACH debits via EFT based on an amount equal to the total weekly amount due Franchisor, as
set forth in Section 5 of the Franchise Agreement.
D. Franchisee is responsible for paying all service charges and other fees imposed or otherwise resulting
from action by Franchisee’s bank in connection with EFT by Franchisor, including, without limitation, any and
all service charges and other fees arising in connection with any EFT by Franchisor not being honored or processed
by Franchisee’s bank for any reason and a Fifty Dollar ($50) charge by Franchisor for processing the EFT. Upon
written notice by Franchisor to Franchisee, Franchisee may be required to pay any amount(s) due under the
Franchise Agreement and/or this Addendum directly to Franchisor by check or other non-electronic means in lieu
of EFT at Franchisor’s discretion. It shall be a non-curable event of default under Article 15 of the Franchise
Agreement if Franchisee closes any bank account without completing all of the following forthwith after such
closing: (1) immediately notifying Franchisor thereof in writing, (2) immediately establishing another bank
account, and (3) executing and delivering to Franchisor all documents necessary for Franchisor to begin and
continue making withdrawals from such bank account by EFT as this Addendum permits.
F. Wherefore, the parties have set forth their hand and seal on the day and date first above written.
FRANCHISOR:
By: ______________________________
Title: _____________________________
FRANCHISEE:
By: ______________________________
Title: _____________________________
By: ______________________________
Title: _____________________________
The undersigned hereby authorizes Club Pilates Franchise, LLC (the “Franchisor”), to initiate debit entries to the
undersigned’s checking account indicated below and the depository named below (the “Depository”), to debit the
same to such account.
This authority is to remain in full force and effect until the underlying obligations under the Franchise Agreement
have been satisfied in full or released in writing by Franchisor.
This authorization further confirms my understanding of Exhibit 2 to the Franchise Agreement signed by me/us
in which I/we expressly agree that this authorization shall apply to any and all Depositories and bank accounts
with which I/we open accounts during the term of the Franchisee Agreement and any renewals. Without limiting
the generality of the forgoing, I/we understand that if I/we close any bank account, I/we are obligated immediately
to: (i) notify Franchisor thereof in writing, (ii) establish another bank account, and (iii) execute and deliver to
Franchisor all documents necessary for Franchisor to begin and continue making withdrawals from such bank
account/depository by ACH debiting or other electronic means. I/we specifically agree and declare that this
Authorization shall be the only written authorization needed from me/us in order to initiate debit entries/ACH
debit originations to my/our bank account(s) established with any Depository in the future.
DATE: _________________________________________________
ID NUMBER: _________________________________________________
_____________________________ __________________________
___________________________ _________________________
For value received, and in consideration for, and as an inducement to Club Pilates Franchise, LLC (the
"Franchisor") to execute the Club Pilates Franchise Agreement (the "Franchise Agreement"), of even date
herewith, by and between Franchisor and ______________________ or his assignee, if a partnership, corporation
or limited liability company is later formed (the "Franchisee"), _____________________________ (the
“Guarantor(s)”), jointly and severally, hereby unconditionally guarantee to Franchisor and its successors and
assigns the full and timely performance by Franchisee of each obligation undertaken by Franchisee under the
terms of the Franchise Agreement, including all of Franchisee’s monetary obligations arising under or by virtue
of the Franchise Agreement.
Upon demand by Franchisor, Guarantor(s) will immediately make each payment required of Franchisee under the
Franchise Agreement. Guarantor(s) hereby waive any right to require Franchisor to: (a) proceed against
Franchisee for any payment required under the Franchise Agreement; (b) proceed against or exhaust any security
from Franchisee; or (c) pursue or exhaust any remedy, including any legal or equitable relief, against Franchisee.
Without affecting the obligations of Guarantor(s) under this Guarantee, Indemnification and Acknowledgment,
Franchisor may, without notice to Guarantor(s), extend, modify, or release any indebtedness or obligation of
Franchisee, or settle, adjust or compromise any claims against Franchisee.
Guarantor(s) waive notice of amendment of the Franchise Agreement and notice of demand for payment
by Franchisee, and agree to be bound by any and all such amendments and changes to the Franchise
Agreement.
Guarantor(s) hereby agree to defend, indemnify and hold Franchisor harmless against any and all losses, damages,
liabilities, costs, and expenses (including, without limitation, reasonable attorneys’ fees, reasonable costs of
investigations, court costs, and arbitration fees and expenses) resulting from, consisting of, or arising out of or in
connection with any failure by Franchisee to perform any obligation of Franchisee under the Franchise Agreement,
any amendment, or any other agreement executed by Franchisee referred to therein.
Guarantor(s) hereby acknowledge and agree to be individually bound by all obligations and covenants of
Franchisee contained in the Franchise Agreement, including those related to non-competition and confidentiality.
This Guarantee shall terminate upon the expiration or termination of the Franchise Agreement, except that all
obligations and liabilities of Guarantor(s) that arise from events that occurred on or before the effective date of
such termination shall remain in full force and effect until satisfied or discharged by Guarantor(s), and all
covenants that by their terms continue in force after termination or expiration of the Franchise Agreement shall
remain in force according to their terms. Upon the death of an individual Guarantor, the estate of such Guarantor
will be bound by this Guarantee, but only for defaults and obligations existing at the time of death, and the
obligations of the other Guarantor(s) will continue in full force and effect.
The validity of this Guarantee and the obligations of Guarantor(s) hereunder shall in no way be terminated,
restricted, diminished, affected or impaired by reason of any action that Franchisor might take or be forced to take
against Franchisee, or by reason of any waiver or failure to enforce any of the rights or remedies reserved to
Franchisor in the Franchise Agreement or otherwise.
The use of the singular herein shall include the plural. Each term used in this Guarantee, unless otherwise defined
herein, shall have the same meaning as when used in the Franchise Agreement.
In connection therewith, each of the undersigned hereby appoints the Secretary of State for the State of California
as his agent for service of process to receive summons issued by the court in connection with any such litigation.
Franchisor and Guarantor(s) agree that any dispute under this Guarantee shall be resolved by arbitration pursuant
to Article 16 of the Franchise Agreement (except as otherwise provided in Article 16 of the Franchise Agreement).
IN WITNESS WHEREOF, each of the undersigned has signed this Guarantee as of the date of the Franchise
Agreement.
WITNESS: GUARANTOR(S)
__________________________
By: _____________________
ADDENDUM TO LEASE
This Addendum to Lease (this "Addendum") modifies and supplements that certain lease dated
_________________________ and entered into by Tenant and Landlord concerning the Location at
__________________________________________________________(the "Lease").
Landlord and Tenant, intending that Club Pilates Franchise, LLC, a Delaware limited liability company,
("Franchisor") (and its successors and assigns) be a third-party beneficiary of this Addendum, agree as follows:
(1) Tenant may display the trademarks, service marks and other commercial symbols owned by
Franchisor and used to identify the service and/or products offered at the Studio, including the name "Club
Pilates," the Studio design and image developed and owned by Franchisor, as it currently exists and as it may be
revised and further developed by Franchisor from time to time, and certain associated logos in accordance with
the specifications required by the Club Pilates Manual, subject only to the provisions of applicable law and in
accordance with provisions in the Lease no less favorable than those applied to other tenants of Landlord;
(2) Tenant shall not, and the Landlord shall not permit the tenant to, sublease or assign all or any part
of the Lease or the Premises, or extend the term or renew the Lease, without Franchisor’s prior written consent;
(3) Landlord shall concurrently provide Franchisor with a copy of any written default notice sent to
Tenant and thereupon grant Franchisor the right (but not the obligation) to cure any deficiency or default under
the Lease, should Tenant fail to do so, within five (5) days after the expiration of the period in which Tenant may
cure the default;
(4) The Premises shall be used only for the operation of a Club Pilates Studio;
(5) Tenant may, without Landlord’s consent (but subject to providing Landlord with written notice
thereof), at any time assign this Lease or sublease the whole or any part of the Premises to Franchisor or any
successor, subsidiary or affiliate of Franchisor;
(6) In the event of an assignment of the Lease to Franchisor as described in (6) above, Franchisor
may further assign this Lease, subject to Landlord’s consent, such consent not to be unreasonably withheld based
on the remaining obligations of assignee under the Lease, to a duly authorized franchisee of Franchisor, and
thereupon Franchisor shall be released from all further liability under the Lease;
(8) None of the provisions in this Addendum or any rights granted Franchisor hereunder, may be
amended absent Franchisor’s prior written consent.
TENANT LANDLORD
This Addendum to the Club Pilates Franchise, LLC Franchise Agreement (the
“Addendum”) is made on _____________________________, by and between: (i) Club Pilates
Franchise, LLC, a Delaware limited liability company with a business address at 17877 Von
Karman Ave., Suite 100, Irvine, CA 92614 (the “Franchisor”); and (ii) [INSERT FRANCHISEE
NAME], a/an [LLC/corp/individual(s)] with a business address at [INSERT ADDRESS].
BACKGROUND
B. The parties now wish to update and amend certain terms of the Franchise
Agreement to afford Franchisee the right to offer and provide the Approved Services and Approved
Products, as well as otherwise exercise all franchise rights awarded under the Franchise Agreement
in connection with the Franchised Business, from a non-traditional space within a larger
gym/fitness facility that is located within the Existing Territory.
NOW THEREFORE, in consideration of the mutual agreements, covenants and promises contained
in this Addendum and for mutual consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Background; Definitions.
a. The parties agree and acknowledge that the Background portion of this
Addendum, including all definitions and provisions set forth therein, is hereby incorporated by
reference as if fully set forth in this Section.
Franchisee agrees and acknowledges that it has been advised by counsel and is familiar with and
expressly waives the provisions of California Civil Code § 1542, which provides as follows:
6. Entire Agreement. The Franchise Agreement and this Addendum constitute the
entire, full, and complete agreement between the parties concerning the franchise rights awarded
under that Franchise Agreement. In the event of a conflict between the terms of the Franchise
Agreement and this Addendum, the terms of this Addendum shall control. Except as amended by
this Addendum, all the other terms and conditions of the Franchise Agreement are hereby ratified
and confirmed, including the provisions related to governing law, attorneys’ fees and costs, venue
and dispute resolution, all of which will also apply to any claims, causes of action or disputes arising
out of or related to this Addendum.
FRANCHISOR FRANCHISEE
CALIFORNIA ILLINOIS
Commissioner of Financial Protection and Innovation Franchise Bureau
One Sansome Street Illinois Attorney General
Suite 600 500 South Second Street
San Francisco, CA 94104 Springfield, Illinois 62706
Tel: (415) 972-8559 (217) 782-4465
Fax: (415) 972-8590
Toll Free: (866) 275-2677 INDIANA
(for service of process)
CONNECTICUT Indiana Secretary of State
Department of Banking 201 State House
Securities and Business Investments Division Indianapolis, Indiana 46204
260 Constitution Plaza
Hartford, Connecticut 06103-1800 (state agency)
Tel: (860) 240-8230 Securities Commissioner
Indiana Secretary of State
FLORIDA Securities Division, Franchise Section
Tom Kenny, Regulatory Consultant 302 West Washington Street,
Department of Agriculture & Consumer Services Room E-111
Division of Consumer Services Indianapolis, Indiana 46204
P.O. Box 6700 Tel: (317) 232-6681
Tallahassee, Florida 32314
Tel: (850) 488-2221 IOWA
Fax: (850) 410-3804 Dennis Britson
Director of Regulated Industries Unit
HAWAII Iowa Securities Bureau
(for service of process) 340 Maple
Commissioner of Securities of the State of Hawaii Des Moines, Iowa 50319-0066
Department of Commerce and Consumer Affairs Tel: (515) 281-4441
Business Registration Division Fax: (515) 281-3059
Securities Compliance Branch email: iowasec@iid.state.ia.us
335 Merchant Street, Room 203
Honolulu, Hawaii 96813 MARYLAND
(for service of process)
(state agency) Maryland Securities Commissioner
Department of Commerce & Division of Securities
Consumer Affairs 200 St. Paul Place
King Kalakaua Building Baltimore, Maryland 21202-2020
335 Merchant Street, Rm 203
Honolulu, Hawaii 96813 (state agency)
Tel: (808)586-2722 Office of the Attorney General
Fax: (808) 587-7559 Division of Securities
200 St. Paul Place
Baltimore, Maryland 21202-2020
Tel: (410) 576-6360
NORTH DAKOTA
MICHIGAN
WASHINGTON
(for service of process)
Administrator
Department of Financial Institutions
Securities Division
150 Israel Road SW
Tumwater, Washington 98501
FINANCIAL STATEMENTS
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Club Pilates Franchise, LLC
Table of Contents
i
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INDEPENDENT AUDITOR’S REPORT
To the Board of Directors and Member of
Club Pilates Franchise, LLC:
Opinion
We have audited the financial statements of Club Pilates Franchise, LLC (the “Company”), which
comprise the balance sheets as of December 31, 2021 and 2020, and the related statements of
operations, changes to member’s equity, and cash flows for each of the three years in the period ended
December 31, 2021, and the related notes to the financial statements (collectively referred to as the
“financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2021 and 2020, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2021 in accordance with
accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section of our report. We are required to be
independent of the Company and to meet our other ethical responsibilities, in accordance with the
relevant ethical requirements relating to our audits. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with accounting principles generally accepted in the United States of America, and for the
design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is required to evaluate whether there are conditions
or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to
continue as a going concern for one year after the date that the financial statements are available to be
issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute
assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
detect a material misstatement when it exists. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control. Misstatements are
considered material if there is a substantial likelihood that, individually or in the aggregate, they would
influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, and design and perform audit procedures responsive to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,
that raise substantial doubt about the Company’s ability to continue as a going concern for a
reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit, significant audit findings, and certain internal control‐related
matters that we identified during the audit.
Emphasis of Matter
As discussed in Note 1 to the financial statements, the financial statements include allocations of certain
expenses from the Company’s Member, Xponential Fitness LLC, and its related affiliates. Accordingly,
the financial statements may not be indicative of the financial condition that would have existed or the
results of operations that would have been achieved if the Company had operated without such
affiliation. Our opinion is not modified with respect to this matter.
April 1, 2022
‐ 2 ‐
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Balance Sheets
December 31,
2021 2020
Assets
Current Assets:
Cash, cash equivalents and restricted cash $ 3,287,168 $ 1,924,273
Accounts receivable, net 2,159,281 1,558,170
Inventories 2,364,487 2,043,803
Prepaid expenses and other current assets 250,640 52,513
Notes receivable, current portion 278,462 19,041
Deferred costs, current portion 862,136 836,133
Related party receivable (Note 8) 24,787 1,295,294
Total current assets 9,226,961 7,729,227
Property and equipment, net 39,200 170,791
Goodwill 75,337,723 75,337,723
Intangible assets, net 24,501,342 25,592,237
Deferred costs, net of current portion 6,791,980 6,790,479
Notes receivable, net of current portion 279,834 —
Other assets 6,326 10,239
Total assets $ 116,183,366 $ 115,630,696
Liabilities and Member’s Equity
Current Liabilities:
Accounts payable $ 1,631,803 $ 1,935,919
Accrued expenses 2,826,071 2,979,124
Notes payable (Note 8) — 10,958
Deferred revenue, current portion 7,285,073 4,349,358
Other current liabilities 542,483 383,072
Related party payable (Note 8) 404,335 35,619
Total current liabilities 12,689,765 9,694,050
Deferred revenue, net of current portion 16,622,315 14,304,008
Other liabilities 14,820 28,255
Total liabilities 29,326,900 24,026,313
Commitments and contingencies (Note 9)
Member’s equity:
Series A shares 1,000,000 shares issued and outstanding 105,003,698 105,003,698
Receivable from Member (Note 8) (80,641,742) (48,230,008)
Retained earnings 62,494,510 34,830,693
Total Member’s equity 86,856,466 91,604,383
Total liabilities and member’s equity $ 116,183,366 $ 115,630,696
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Statements of Operations
4
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Statements of Changes to Member’s Equity
Retained
Receivable Earnings Total
Class A from Member (Accumulated Member’s
Shares Value Deficit) Equity
Balance at January 1, 2019 1,000,000 $ 105,003,698 $ — $ (302,270) $ 104,701,428
Receivable from Member, (Note 8) — — (15,458,341) (15,458,341)
Cash payments to Member, net (Note 8) — — (20,665,359) — (20,665,359)
Net income — — — 21,364,393 21,364,393
Balance at December 31, 2019 1,000,000 105,003,698 (36,123,700) 21,062,123 89,942,121
Cash payments to Member, net (Note 8) — — (12,106,308) — (12,106,308)
Net income — — — 13,768,570 13,768,570
Balance at December 31, 2020 1,000,000 105,003,698 (48,230,008) 34,830,693 91,604,383
Cash payments to Member, net (Note 8) — — (32,411,734) — (32,411,734)
Net income — — — 27,663,817 27,663,817
Balance at December 31, 2021 1,000,000 $ 105,003,698 $ (80,641,742) $ 62,494,510 $ 86,856,466
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Club Pilates Franchise, LLC
Statements of Cash Flows
6
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Club Pilates Franchise, LLC
Notes to Financial Statements
The Company owns a Pilates fitness and training system (“Club Pilates”) that is proprietary to the Company. The
Company licenses its proprietary system to franchisees who in turn provide facilities to promote Pilates training and
instruction programs to their club members. The Company sells franchises under the name “Club Pilates.” The Club
Pilates concept is an exercise facility where club members have access to classes that promote Pilates training and
instruction programs. As of December 31, 2021, the Company has sold the rights to develop 1,030 franchise studios,
of which 681 studios were operating at December 31, 2021. While operating studios is not a component of the
Company's business model, the Company will from time to time hold a small number of strategic transition studios
as, on occasion, the Company takes ownership of such studios for a limited time while facilitating the transfer of
these studios to new or existing franchisees (“company-owned transition studios”). At December 31, 2021, the
Company did not hold any company-owned transition studios.
The Company’s operating agreement designates one class of membership interest, of which the Member owns one
hundred percent of the interest.
Basis of presentation – The Company's financial statements have been prepared in accordance with accounting
principles generally accepted in the United States (“US GAAP”).
The accompanying financial statements are prepared in accordance with generally accepted accounting principles
applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the
normal course of business. The financial statements include allocations of certain expenses from the Member and its
related affiliates. The Member is responsible for managing and overseeing the day-to-day operations of the
Company. Accordingly, the accompanying financial statements may not be indicative of the results of operations
that would have been achieved if the Company had operated without such affiliations.
Use of estimates – The preparation of the financial statements in conformity with US GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of the financial statements. Actual results could differ from these
estimates under different assumptions or conditions.
The Company has marketing fund restricted cash, which can only be used for activities that promote the Company’s
brand. Restricted cash was approximately $1,254,000 and $939,000 at December 31, 2021 and 2020, respectively.
Concentration of credit risk – Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of cash, accounts receivable and notes receivable. The Company maintains its cash with
high-credit quality financial institutions. At December 31, 2021 and 2020, the Company has cash, cash equivalents
and restricted cash that total approximately $2,993,000 and $1,640,000, respectively, on deposit with high-credit
quality financial institutions that exceed federally insured limits. The Company has not experienced any loss as a
result of these or previous similar deposits. In addition, the Company closely monitors the extension of credit to its
franchisees while maintaining allowances for potential credit losses.
Accounts receivable and allowance for doubtful accounts – Accounts receivable primarily consist of amounts
due from franchisees and vendors. These receivables primarily relate to royalties, advertising contributions,
equipment and product sales, training, vendor commissions and other miscellaneous charges. Receivables are
7
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
unsecured; however, the franchise agreements provide the Company the right to withdraw funds from the
franchisee’s bank account or to terminate the franchise for nonpayment. On a periodic basis, the Company evaluates
its accounts receivable balance and establishes an allowance for doubtful accounts, based on a number of factors,
including evidence of the franchisee’s ability to comply with credit terms, economic conditions and historical
receivables. Account balances are written off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. At December 31, 2021 and 2020, the allowance for
doubtful accounts was $490,000 and $957,000, respectively.
Inventories – Inventories are comprised of finished goods including equipment and branded merchandise primarily
held for sale to franchisees. Cost is determined using the first-in-first-out method. Management analyzes obsolete,
slow-moving and excess merchandise to determine adjustments that may be required to reduce the carrying value of
such inventory to the lower of cost or net realizable value. Write-down of obsolete or slow-moving and excess
inventory charges are included in costs of product revenue in the statements of operations.
Property and equipment, net – Property and equipment are carried at cost less accumulated depreciation.
Depreciation is recognized on a straight-line method based on the estimated useful life of the assets.
The cost and accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss
is included in the results of operations during the period of sale or disposal. Costs for repairs and maintenance are
expensed as incurred. Repair and maintenance costs for the years ended December 31, 2021, 2020 and 2019 were
insignificant.
The Company assesses potential impairments to property and equipment whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of an asset is measured by a comparison
of the carrying amount of an asset group to the estimated undiscounted future cash flows expected to be generated
by the asset group. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows,
an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value
of the asset. There were no impairment charges recorded during the years ended December 31, 2021, 2020 and
2019.
Goodwill and indefinite-lived intangible assets – Indefinite-lived intangible assets consist of goodwill and
trademarks.
Goodwill – The Company tests for impairment of goodwill annually or sooner whenever events or circumstances
indicate that goodwill might be impaired. The annual impairment test is performed as of the first day of the
Company’s fourth quarter. The annual impairment test begins with a qualitative assessment, where qualitative
factors and their impact on critical inputs are assessed to determine whether it is more likely than not that the fair
value of a reporting unit is less than its carrying value. If the Company determines that a reporting unit has an
indication of impairment based on the qualitative assessment, it is required to perform a quantitative assessment.
The Company generally determines the estimated fair value using a discounted cash flow approach, giving
consideration to the market valuation approach. If the carrying value exceeds the estimate of fair value a write-down
is recorded. The Company calculates impairment as the excess of the carrying value of goodwill over the estimated
fair value. Based on the test results, no impairment was recorded for the years ended December 31, 2021, 2020 and
2019.
Trademarks – The Company tests for impairment of trademarks annually or sooner whenever events or
circumstances indicate that trademarks might be impaired. The Company first assesses qualitative factors to
determine whether the existence of events or circumstances leads to a determination that it is more likely than not
that the fair value of the trademarks is less than the carrying amount. In the absence of sufficient qualitative factors,
trademark impairment is determined utilizing a two-step analysis. The two-step analysis involves comparing the fair
value to the carrying value of the trademarks. The Company determines the estimated fair value using a relief from
royalty approach. If the carrying amount exceeds the fair value, the Company impairs the trademarks to their fair
value. Based on the test results, no impairment was recorded for the years ended December 31, 2021, 2020 and
2019.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
Definite-lived intangible assets – Definite-lived intangible assets consisting of franchise agreements, non-compete
agreements and web design and domain are amortized using the straight-line method over the estimated remaining
economic lives. Deferred video production costs are amortized on an accelerated basis. Amortization expense
related to intangible assets is included in depreciation and amortization expense. The recoverability of the carrying
values of all intangible assets with finite lives is evaluated when events or changes in circumstances indicate an
asset’s value may be impaired. Impairment testing is based on a review of forecasted undiscounted operating cash
flows. If such analysis indicates that the carrying value of these assets is not recoverable, the carrying value of such
assets is reduced to fair value, which is determined based on discounted future cash flows, through a charge to the
statement of operations. No definite-lived intangible asset impairment was recorded for the years ended
December 31, 2021, 2020 and 2019.
Revenue recognition –The Company’s contracts with customers consist of franchise agreements with franchisees.
The Company also enters into agreements to sell merchandise and equipment, training, on-demand video services
and membership to company-owned transition studios. The Company’s revenues primarily consist of franchise
license revenues, other franchise related revenues including equipment and merchandise sales and training revenue.
In addition, the Company earns on-demand revenue, service revenue and other revenue.
Each of the Company’s primary sources of revenue and their respective revenue policies are discussed further
below.
Franchise revenue –
The Company enters into franchise agreements for each franchised studio. The Company’s performance obligation
under the franchise license is granting certain rights to access the Company’s intellectual property; all other services
the Company provides under the franchise agreement are highly interrelated, not distinct within the contract, and
therefore accounted for as a single performance obligation, which is satisfied over the term of each franchise
agreement. Those services include initial development, operational training, preopening support and access to the
Company’s technology throughout the franchise term. Fees generated related to the franchise license include
development fees, royalty fees, marketing fees, technology fees and transfer fees, which are discussed further below.
Variable fees are not estimated at contract inception, and are recognized as revenue when invoiced, which occurs
monthly. The Company has concluded that its agreements do not contain any financing components.
Franchise development fee revenue – The Company’s franchise agreements typically operate under ten-year terms
with the option to renew for up to two additional five-year successor terms. The Company determined the renewal
options are neither qualitatively nor quantitatively material and do not represent a material right. Initial franchise
fees are non-refundable and are typically collected upon signing of the franchise agreement. Initial franchise fees are
recorded as deferred revenue when received and are recognized on a straight-line basis over the franchise life, which
the Company has determined to be ten years, as the Company fulfills its promise to grant the franchisee the rights to
access and benefit from the Company’s intellectual property and to support and maintain the intellectual property.
The Company may enter into an area development agreement with certain franchisees. Area development
agreements are for a territory in which a developer has agreed to develop and operate a certain number of franchise
locations over a stipulated period of time. The related territory is unavailable to any other party and is no longer
marketed to future franchisees by the Company. Depending on the number of studios purchased under franchise
agreements or area development agreements, the initial franchise fee ranges from $60,000 (single studio) to
$350,000 (ten studios) and is paid to the Company when a franchisee signs the area development agreement. Area
development fees are initially recorded as deferred revenue. The development fees are allocated to the number of
studios purchased under the development agreement. The revenue is recognized on a straight-line basis over the
franchise life for each studio under the development agreement. Any remaining development fees and franchise fees
are generally recognized as revenue upon the termination of the development agreement with the franchisee.
Franchise royalty fee revenue – Royalty revenue represents royalties earned from each of the franchised studios in
accordance with the franchise disclosure document and the franchise agreement for use of the brand's name,
processes and procedures. The royalty rate in the franchise agreement is typically 7% of the gross sales of each
location operated by each franchisee. Royalties are billed on a monthly basis. The royalties are entirely related to the
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
Company’s performance obligation under the franchise agreement and are billed and recognized as franchisee sales
occur.
Technology fees – The Company may provide access to third-party or other proprietary technology solutions to the
franchisees for a fee. The technology solution may include various software licenses for statistical tracking,
scheduling, allowing club members to record their personal workout statistics, music and technology support. The
Company bills and recognizes the technology fee as earned each month as the technology solution service is
performed.
Transfer fees – Transfer fees are paid to the Company when one franchisee transfers a franchise agreement to a
different franchisee. Transfer fees are recognized as revenue on a straight-line basis over the term of the new or
assumed franchise agreement, unless the original franchise agreement for an existing studio is terminated, in which
case the transfer fee is recognized immediately.
Training revenue – The Company provides coach training services either through direct training of the coaches who
are hired by franchisees or by providing the materials and curriculum directly to the franchisees who utilize the
materials to train their hired coaches. Direct training fees are recognized over time as training is provided. Training
fees for materials and curriculum are recognized at the point in time of delivery of the materials.
The Company also offers coach training and final coach certification through online classes. Fees received by the
Company for online class training are recognized as revenue over time for the 12-month period that the Company is
obligated to provide access to the online training content.
Franchise marketing fund revenue– Franchisees are required to pay marketing fees of 2% of their gross sales. The
marketing fees are collected by the Company on a monthly basis and are to be used for the advertising, marketing,
market research, product development, public relations programs and materials deemed appropriate to benefit
brands. The Company’s promise to provide the marketing services funded through the marketing fund is considered
a component of the Company’s performance obligation to grant the franchise license. The Company bills and
recognizes marketing fund fees as revenue each month as gross sales occur.
Equipment revenue – The Company sells authorized equipment to franchisees to be used in the franchised studios.
Certain franchisees may prepay for equipment, and in that circumstance, the revenue is deferred until delivery.
Equipment revenue is recognized when control of the equipment is transferred to the franchisee, which is at the
point in time when delivery and installation of the equipment at the studio is complete.
Merchandise revenue –The Company sells branded and non-branded merchandise to franchisees for retail sales to
customers at studios. For branded merchandise sales, the performance obligation is satisfied at the point in time of
shipment of the ordered branded merchandise to the franchisee. For such branded merchandise sales, the Company
is the principal in the transaction as it controls the merchandise prior to it being delivered to the franchisee. The
Company records branded merchandise revenue and related costs upon shipment on a gross basis. Customers have
the right to return and/or receive credit for defective merchandise. Returns and credit for defective merchandise were
insignificant for the years ended December 31, 2021, 2020 and 2019.
For certain non-branded merchandise sales, the Company earns a commission to facilitate the transaction between
the franchisee and the supplier. For such non-branded merchandise sales, the Company is the agent in the
transaction, facilitating the transaction between the franchisee and the supplier, as the Company does not obtain
control of the non-branded merchandise during the order fulfillment process. The Company records non-branded
merchandise commissions revenue at the time of shipment.
Other revenue –
Service revenue – For company-owned transition studios, the Company’s distinct performance obligation is to
provide the fitness classes to the customer. The company-owned studios sell memberships by individual class and by
10
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
class packages. Revenue from the sale of classes and class packages for a specified number of classes are recognized
over time as the customer attends and utilizes the classes. Revenues from the sale of class packages for an unlimited
number of classes are recognized over time on a straight-line basis over the duration of the contract period.
On-demand revenue – The Company grants a subscriber access to an online hosted platform, which contains a
library of web-based classes that is continually updated, through monthly or annual subscription packages. Revenue
is recognized over time on a straight-line basis over the subscription period.
Other revenue –The Company earns commission income from certain of its franchisees’ use of certain preferred
vendors. In these arrangements, the Company is the agent as it is not primarily responsible for fulfilling the orders.
Commissions are earned and recognized at the point in time the vendor ships the product to franchisees.
Sales taxes, value added taxes and other taxes that are collected in connection with revenue transactions are withheld
and remitted to the respective taxing authorities. As such, these taxes are excluded from revenue. The Company
elected to account for shipping and handling as activities to fulfill the promise to transfer the good. Therefore,
shipping and handling fees that are billed to franchisees are recognized in revenue and the associated shipping and
handling costs are recognized in cost of product sold as soon as control of the goods transfers to the franchisee.
Credit Losses – The Company’s accounts and notes receivable are recorded at net realizable value, which includes
an appropriate allowance for estimated credit losses. The estimate of credit losses is based upon historical bad debts,
current receivable balances, age of receivable balances, the customer’s financial condition and current economic
trends, all of which are subject to change. Actual uncollected amounts have historically been consistent with the
Company’s expectations. The Company’s payment terms on its receivables from franchisees are generally 30 days.
Shipping and handling fees – Shipping and handling fees billed to customers are recorded in merchandise and
equipment revenues. The costs associated with shipping goods to customers are included in costs of product revenue
in the accompanying statements of operations.
Costs of franchise and service revenue – Costs of franchise and service revenue consists of commissions related to
the signing of franchise agreements, travel and personnel expenses related to the on-site training provided to the
franchisees, and expenses related to the purchase of the technology packages and the related monthly fees. Costs of
franchise and service revenue excludes depreciation and amortization.
Costs of product revenue – Costs of product revenue consists of cost of equipment and merchandise and related
freight charges. Costs of product revenue excludes depreciation and amortization.
Advertising costs – Advertising costs are expensed as incurred. Advertising costs are included in selling, general
and administrative expense. For the years ended December 31, 2021, 2020 and 2019, the Company had
approximately $362,000, $321,000 and $300,000, respectively, of advertising costs, including amounts spent in
excess of marketing fund revenue.
Selling, general and administrative expenses – The Company’s selling, general and administrative (“SG&A”)
expenses consist primarily of salaries and wages, sales and marketing expenses, and Member-allocated SG&A
expenses based on shared services primarily consisting of payroll, professional and legal fees, occupancy expenses,
management fees, travel expenses, and conference expenses. Allocations are generally divided evenly across all
franchisors owned by the Member.
Marketing fund expenses – Marketing fund expenses are recognized as incurred, and any marketing fund
expenditures in excess of marketing fund revenue are reclassified as SG&A expenses in the accompanying
statements of operations.
Income taxes – As a single member LLC, the Company is considered a disregarded entity and the results of its
operations are filed with the Member’s federal and state income tax returns. As such, the Company itself is typically
not subject to an income tax liability as the taxable income or loss of the Company is passed through to the Member.
Therefore, no liability for federal income taxes has been included in the financial statements. The Company
11
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
accounts for uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740. ASC
Topic 740 prescribes a recognition threshold and measurement process for accounting for uncertain tax positions
and also provides guidance on various related matters such as derecognition, interest, penalties, and required
disclosures. The Company does not have any uncertain tax positions. However, the Company is required to pay an
annual gross receipts fee and tax for its operations in California.
Comprehensive income – The Company does not have any components of other comprehensive income recorded
within its financial statements and therefore does not separately present a statement of comprehensive income in its
financial statements.
Fair value measurements – ASC Topic 820, Fair Value Measurements and Disclosures, (“ASC 820”) applies to
all financial assets and financial liabilities that are measured and reported on a fair value basis and requires
disclosure that establishes a framework for measuring fair value and expands disclosure about fair value
measurements. ASC 820 establishes a valuation hierarchy for disclosures of the inputs to valuations used to measure
fair value.
This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be
accessed at the measurement date.
Level 2 – Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are
observable for the asset or liability (i.e., interest rates and yield curves), and inputs that are derived principally
from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 – Unobservable inputs that reflect assumptions about what market participants would use in pricing
the asset or liability. These inputs would be based on the best information available, including the Company’s
own data.
The Company’s financial instruments include cash, restricted cash, accounts receivable, notes receivable, accounts
payable, accrued expenses and notes payable. The carrying amounts of these financial instruments are categorized
within Level 1 of the fair value hierarchy due to the short-term nature of these balances and approximate their fair
value due to their short maturities.
Under the new standard, for each lease classified as an operating lease, lessees are required to recognize on the
balance sheet: (i) a right-of-use (“ROU”) asset representing the right to use the underlying asset for the lease term;
and (ii) a lease liability for the obligation to make lease payments over the lease term.
ASU No. 2020-05, “Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842),” issued by FASB
in June 2020, defers the effective date of Leases (Topic 842) to fiscal years beginning after December 15, 2021, and
interim periods within fiscal years beginning after December 15, 2022. The guidance requires a modified
retrospective transition approach with application in all comparative periods presented (the “comparative method”),
or alternatively, as of the effective date as the date of initial application without restating comparative period
financial statements (the “effective date method”). The Company expects to adopt the new standard on January 1,
2022 and use the effective date method for the initial application. The new guidance also provides several practical
expedients and policies that companies may elect upon transition. The Company plans to elect the package of
12
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
practical expedients under which the Company will not reassess the classification of existing leases, reevaluate
whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new
guidance. The Company does not expect to elect the practical expedient pertaining to land easements, as it is not
applicable to its leases. Additionally, the Company expects to elect to use the practical expedient that permits a
reassessment of lease terms for existing leases using hindsight.
The new standard also provides practical expedients for an entity’s ongoing accounting. The Company currently
expects to elect the short-term lease recognition exemption where it will not recognize ROU assets or lease liabilities
for qualifying leases. For a lease to qualify it has to have a lease term that is 12 months or less and the lease does not
include options to purchase the underlying assets that the lessee is reasonably certain to exercise. The Company also
currently expects to elect the practical expedient to not separate lease and non-lease components.
The Company performed an analysis of the impact of the new lease guidance and is in the process of completing the
final phase of the implementation of the new guidance. The implementation plan includes analyzing the impact of
the new guidance on current lease contracts, reviewing the completeness of its existing lease portfolio, comparing
accounting policies under current accounting guidance to the new accounting guidance and identifying potential
differences from applying the requirements of the new guidance to its lease contracts. Upon transition to the new
guidance on January 1, 2022, the Company currently expects to recognize approximately $157,000 and $166,000 of
ROU assets and operating lease liabilities, respectively.
Credit Losses – In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic
326).” The standard introduces a new model for recognizing credit losses on financial instruments based on an
estimate of current expected credit losses and will apply to trade receivables. The new guidance will be effective for
the Company’s annual and interim periods beginning after December 15, 2022. The Company is currently
evaluating the impact of the adoption of the standard on the financial statements.
December 31,
2021 2020
Property and equipment $ 45,021 $ 73,837
Reacquired franchise rights 29,979 —
Total purchase price $ 75,000 $ 73,837
During the year ended December 31, 2021, the Company refranchised seven company-owned transition studios for
aggregate proceeds of $70,500 and recorded a loss on disposal of the related assets of approximately $121,000.
13
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
The following table illustrates estimated revenue expected to be recognized in the future related to performance
obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2021. The expected future recognition
period for deferred franchise development fees related to unopened studios is based on management’s best estimate
of the beginning of the franchise license term for those studios. The Company elected to not disclose sales and
usage-based royalties, marketing fees and any other variable consideration recognized on an “as invoiced” basis.
December 31,
2021 2020
Franchise and area development fees $ 18,553,225 $ 15,922,116
Equipment and other 5,354,163 2,731,250
Total deferred revenue 23,907,388 18,653,366
Non-current portion of deferred revenue 16,622,315 14,304,008
Current portion of deferred revenue $ 7,285,073 $ 4,349,358
Contract costs – Contract costs consist of deferred commissions resulting from franchise and area development
sales by third-party and affiliate brokers and sales personnel. The total commission is deferred at the point of a
franchise sale. The commissions are evenly split among the number of studios purchased under the development
agreement and begin to be amortized when a subsequent franchise agreement is executed. The commissions are
recognized on a straight-line basis over the initial ten-year franchise agreement term to align with the recognition of
the franchise agreement or area development fees. The Company classifies these deferred contract costs as either
current deferred costs or non-current deferred costs in the balance sheet. The associated expense is classified within
costs of franchise and service revenue in the statements of operations. At December 31, 2021 and 2020, there were
approximately $849,000 and $779,000 of current deferred costs and approximately $6,773,000 and $6,763,000 in
non-current deferred costs, respectively. The Company recognized approximately $1,062,000, $1,329,000 and
$791,000 in franchise sales commission expense for the years ended December 31, 2021, 2020 and 2019,
respectively.
14
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
The Company has also provided unsecured loans for the establishment of new or transferred franchise studios to
various franchisees. These loans have terms of up to two years and bear interest at a stated fixed rate ranging from
0% to 10%, or variable rates based on LIBOR plus a specified margin. The Company accrues interest as an addition
to the principal balance as the interest is earned. Activity related to these loans is presented within investing
activities in the statements of cash flows.
At December 31, 2021 and 2020, the principal balance of the notes receivable was approximately $558,000 and
$19,000, respectively. On a periodic basis, the Company evaluates its notes receivable balance and establishes an
allowance for doubtful accounts, based on a number of factors, including evidence of the franchisee’s ability to
comply with the terms of the notes, economic conditions and historical collections. Account balances are written off
against the allowance after all means of collection have been exhausted and the potential for recovery is considered
remote. At December 31, 2021 and 2020, the Company has not recorded a reserve for uncollectible notes receivable.
Depreciation expense was approximately $58,000, $98,000 and $99,000 for the years ended December 31, 2021,
2020 and 2019, respectively.
Goodwill $ 75,337,723
Trademarks 20,407,150
Total $ 95,744,873
15
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
Amortization expense was approximately $1,131,000, $1,146,000 and $1,292,000 for the years ended December 31,
2021, 2020 and 2019, respectively.
In addition, the Member has a credit facility that requires collateral. All obligations under the Member’s credit
facility are secured by substantially all of the tangible and intangible assets of the Company.
During the year ended December 31, 2019, the Company paid approximately $754,000 to affiliates of the Member
and recorded deferred commission costs, which are being recognized over the initial ten-year franchise agreement
term.
16
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
December 31,
2021 2020
Related party receivables:
Stretch Lab Franchise, LLC $ 2,919 $ 269,095
CycleBar Holdco, LLC 13,111 296,913
Row House Franchise, LLC 2,919 111,123
AKT Franchise, LLC 2,919 136,982
Yoga Six Franchise, LLC 2,919 21,588
Stride Franchise, LLC — 171,188
Xponential Fitness Brands International, LLC — 288,405
Total related party receivables $ 24,787 $ 1,295,294
Related party payable:
PB Franchising, LLC $ 24,544 $ 35,619
Xponential Fitness Brands International, LLC 376,862 —
Rumble Franchise, LLC 2,201 —
Stride Franchise, LLC 728 —
Total related party payables $ 404,335 $ 35,619
The Company's Chief Executive Officer is the sole owner of ICI, which previously provided unsecured loans to the
Company, which loans the funds to franchisees to purchase a franchise territory or to setup a studio. The Company
records notes payable to ICI and notes receivable from the franchisees resulting from these transactions. The notes
from ICI to the Company accrue interest at the time the loan is made, which is recorded as interest expense. The
notes receivable begin to accrue interest 45 days after the issuance to the franchisee. At December 31, 2021 and
2020, the Company had recorded approximately $0 and $9,000 of notes receivable and $0 and $11,000 of notes
payable, respectively. The Company recognized approximately $1,000, $2,000 and $37,000 of interest income and
$1,000, $8,000 and $74,000 of interest expense, respectively, for the years ended December 31, 2021, 2020 and
2019, respectively. ICI also provides loans directly to franchisees. During the years ended December 31, 2021, 2020
and 2019, the Company made interest payments on these loans to ICI on behalf of the franchisees of approximately
$0, $0 and $46,000, respectively, which is included in SG&A expense in the accompanying statements of
operations.
Leases - The Company has two warehouse leases that the Member has assumed the obligations associated with and
pays amounts due and allocates expenses to the Company and affiliates. Additionally, the Company has two studio
leases, which are used to host training sessions. The leases expire at various dates through 2024. Total rent expense
for studio operating leases was approximately $244,000, $301,000 and $67,000 for the years ended December 31,
2021, 2020 and 2019, respectively.
17
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Club Pilates Franchise, LLC
Notes to Financial Statements
18
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
Exhibit D
To Franchise Disclosure Document
Since the Prospective Franchisee (also called "me," "our," "us," "we" and/or "I" in this document) and
Club Pilates (also called the "Franchisor” or “CLUB PILATES”) both have an interest in making sure that no
misunderstandings exist between them, and to verify that no violations of law might have occurred, and
understanding that the Franchisor is relying on the statements I/we make in this document, I/we assure the
Franchisor as follows:
2. _____________, 20___ The date when I/we received a fully completed copy (other than
signatures) of the Franchise Agreement, Development
Initials _____________ Agreement (if appropriate) and all other documents I/we later
signed.
3. _____________, 20___ The earliest date on which I/we signed the Franchise Agreement,
Development Agreement or any other binding document (not
Initials _____________ including any Letter or other Acknowledgment of Receipt.)
4. _____________, 20___ The earliest date on which I/we delivered cash, check or other
consideration to the Franchisor, or any other person or
Initials _____________ company.
__________________________________________________________________.
(If none, the Prospective Franchisee should write NONE in his/her/their own handwriting.)
2. No oral, written, visual or other claim, guarantee or representation (including, but not limited to, charts,
3. No contingency, prerequisite, reservation or otherwise exists with respect to any matter (including, but
not limited to, the Prospective Franchisee obtaining any financing, the Prospective Franchisee's selection,
purchase, lease or otherwise of a location, any operational matters or otherwise) or the Prospective Franchisee
fully performing any of the Prospective Franchisee's obligations, nor is the Prospective Franchisee relying on the
Franchisor or any other entity to provide or arrange financing of any type, nor have I/we relied in any way on
such, except as expressly set forth in the Franchise Agreement, Development Agreement (if and as appropriate)
or a written Addendum thereto signed by the Prospective Franchisee and the Franchisor, except as follows:
__________________________________________________________________.
(If none, the Prospective Franchisee should write NONE in his/her/their own handwriting.)
4. The individuals signing for the "Prospective Franchisee" constitute all of the executive officers, partners,
shareholders, investors and/or principals of the Prospective Franchisee and each of such individuals has received
the Uniform Franchise Disclosure Document and all exhibits and carefully read, discussed, understands and
agrees to the Franchise Agreement, Development Agreement (if and as appropriate), each written Addendum
and any Personal Guarantees.
5. I/we have had an opportunity to consult with an independent professional advisor, such as an attorney
or accountant, prior to signing any binding documents or paying any sums, and the Franchisor has strongly
recommended that I/we obtain such independent professional advice. I/we have also been strongly advised by
the Franchisor to discuss my/our proposed purchase of, or investment in, a CLUB PILATES Studio Franchise with
existing Franchisees prior to signing any binding documents or paying any sums and I/we have been supplied
with a list of existing CLUB PILATES Studio Franchisees.
6. I confirm that, as advised, I’ve spoken with past and/or existing CLUB PILATES Studio Franchisees, and
that I made the decision as to which, and how many, CLUB PILATES Studio Franchisees to speak with.
7. I/we understand that: entry into any business venture necessarily involves some unavoidable risk of loss
or failure, the purchase of a CLUB PILATES Franchise (or any other) is a speculative investment, an investment
beyond that outlined in the Disclosure Document may be required to succeed, there exists no guaranty against
possible loss or failure in this or any other business and the most important factors in the success of any CLUB
8. I/we agree and acknowledge that any information that was put into the specific form of Franchise
Agreement or Development Agreement that was not specifically set forth in the template form of these
agreements attached to the Disclosure Document that I/we was/were disclosed with, including any specific
details on the Site Selection Area, Designated Territory, Development Area, Development Schedule, party
contact information and/or ownership details and other information necessary to complete the standard
exhibits to the Franchise Agreement and/or Development Agreement, as applicable, were mutually agreed to
and/or requested by me/us. Moreover, I/we agree and acknowledge that I/we had sufficient time to review the
completed agreements with our business advisors and attorney(s), as I/we determined appropriate, prior to
entering into any such agreement with Franchisor.
If there are any matters inconsistent with the statements in this document, or if anyone has suggested
that I sign this document without all of its statements being true, correct and complete, I/we will (a) immediately
inform the President of Club Pilates Franchise, LLC (949-346-9794), and (b) make a written statement regarding
such next to my signature below so that the Franchisor may address and resolve any such issue(s) at this time
and before either party goes forward.
I/we understand and agree that the Franchisor does not furnish or endorse, or authorize its salespersons
or others to furnish or endorse, any oral, written or other information concerning actual or potential sales, costs,
income, expenses, profits, cash flow, tax effects or otherwise (or from which such items might be ascertained),
from franchised or non-franchised units, that such information (if any) not expressly set forth in Item 19 of the
Franchisor's Disclosure Document (or an exhibit referred to therein) is not reliable and that I/we have not relied
on it, that no such results can be assured or estimated and that actual results will vary from unit to unit, franchise
to franchise, and may vary significantly.
I/we understand and agree to all of the foregoing acknowledgements, and represent and warrant that all of the
above statements are true, correct and complete.
Title:________________________________
TABLE OF CONTENTS
1. Overview ........................................................................................................................................ 2
2. Club Pilates Classes ..................................................................................................................... 3
2.1. Class Standards .............................................................................................................................. 3
2.2. Signature Classes ........................................................................................................................... 4
2.2.1. CP Intro Class ................................................................................................................................... 4
2.2.2. CP Reformer Flow............................................................................................................................ 5
2.2.3. CP F.I.T. .............................................................................................................................................. 5
2.2.4. CPCardio Sculpt ............................................................................................................................... 5
2.2.5. CP Center + Balance ....................................................................................................................... 5
2.2.6. CP Control ......................................................................................................................................... 6
2.2.7. CP Restore ......................................................................................................................................... 6
1. Competition ................................................................................................................................... 2
1.1. Who Is the Competition ................................................................................................................ 2
1.2. Understanding Your Market ......................................................................................................... 2
1.3. Example Competitive Analysis .................................................................................................... 3
1.4. Secret Shopping ............................................................................................................................. 3
2. Pre-Sale ........................................................................................................................................... 4
2.1.1. Expectations...................................................................................................................................... 4
2.1.2. Pricing Specials ................................................................................................................................ 5
2.2. Memberships Programs ................................................................................................................ 5
2.2.1. Global Fit ........................................................................................................................................... 5
2.2.2. Bump Club & Beyond (BCB) ........................................................................................................... 6
2.2.3. ClassPass ........................................................................................................................................... 6
2.2.4. Groupon/Living Social.................................................................................................................... 7
2.2.5. Thread Nation .................................................................................................................................. 7
2.3. Lulu Lemon ..................................................................................................................................... 8
2.4. Waitlist ............................................................................................................................................. 8
2.5. Passport All Access ........................................................................................................................ 8
2.5.1. Unlimited Single Club Access ....................................................................................................... 9
2.5.2. Annual Unlimited ............................................................................................................................ 9
3. Membership Rates........................................................................................................................ 10
4. Private Training ............................................................................................................................ 13
5. Sales Objections ........................................................................................................................... 14
5.1. Price .................................................................................................................................................. 14
5.2. Have to Think About It .................................................................................................................. 14
5.3. Talk to My Spouse/Partner ........................................................................................................... 15
5.4. I Can Do It on My Own .................................................................................................................. 15
6. Sign Them Up ................................................................................................................................ 16
7. Retention........................................................................................................................................ 17
7.1. Intro Class ....................................................................................................................................... 17
7.1.1. Sales Staff ......................................................................................................................................... 17
7.1.2. Instructors......................................................................................................................................... 18
7.1.3. Sales Staff ......................................................................................................................................... 19
8. Sales Time Line ............................................................................................................................. 20
2. For valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
FRANCHISEE and GUARANTOR hereby release and forever discharge FRANCHISOR, its parents and subsidiaries and
the directors, officers, employees, attorneys and agents of said corporations, and each of them, from any and all
claims, obligations, liabilities, demands, costs, expenses, damages, actions and causes of action, of whatever nature,
character or description, known or unknown (collectively “Damages”), which arose on or before the date of this
General Release, including any Damages with respect to the Franchise Agreement, the Franchised Business, the
Premises and the Guarantee. FRANCHISEE waives any right or benefit which FRANCHISEE or GUARANTOR may have
under Section 1542 of the California Civil Code or any equivalent law or statute of any other state. Section 1542 of
the California Civil Code reads as follows:
"Section 1542. Certain claims not affected by general release. A general release does not extend to
claims which the creditor does not know or suspect to exist in his favor at the time of executing this
release, which if know by him must have materially affected his settlement with the debtor."
3. This General Release sets forth the entire agreement and understanding of the parties regarding the
subject matter of this General Release and any agreement, representation or understanding, express or implied,
heretofore made by any party or exchanged between the parties are hereby waived and canceled.
4. This Agreement shall be binding upon each of the parties to this General Release and their respective
heirs, executors, administrators, personal representatives, successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year set forth
above.
FRANCHISEE:
By:
Print Name:
Title:
GUARANTOR:
, an individual
If the franchise is located in or if franchisee is a resident of any of the following states, then the
designated provisions in the Uniform Franchise Disclosure Document (“Disclosure Document”) and Franchise
Agreement will be amended as follows:
CALIFORNIA
California Corporations Code, Section 31125 requires the franchisor to give the franchisee a disclosure
document, approved by the Department of Financial Protection and Innovation, prior to a solicitation of a
proposed material modification of an existing franchise.
Our website has not been reviewed or approved by the California Department of Financial Protection
and Innovation. Any complaints concerning the content of this website may be directed to the California
Department of Financial Protection and Innovation at www.dfpi.ca.gov.
THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED
AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE DISCLOSURE
DOCUMENT.
1. The following language is added to the end of Item 3 of the Disclosure Document:
Neither Club Pilates Franchise, LLC, nor any person identified in Item 2, or an affiliate or
franchise broker offering franchises under our principal trademark is subject to any currently
effective order of any national securities association or national securities exchange, as defined
in the Securities and Exchange Act of 1934, 15 U.S.C.A. 78a et seq., suspending or expelling such
person from membership in such association or exchange.
2. The following paragraphs are added at the end of Item 17 of the Disclosure Document:
California Business and Professions Code Sections 20000 through 20043 provide rights
to franchisees concerning termination or non-renewal of a franchise. If the Franchise Agreement
contains a provision that is inconsistent with the law, the law will control.
The Franchise Agreement provides for termination upon bankruptcy. This provision may
not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
The Franchise Agreement contains a covenant not to compete which extends beyond
the termination of the franchise. This provision may not be enforceable under California law but
we will enforce it to the extent enforceable.
The Franchise Agreement requires binding arbitration. The arbitration will occur in
Orange County, California, with the costs being borne by the non-prevailing party. The prevailing
party shall be entitled to recover reasonable compensation for expenses, costs and fees in
connection with arbitration, including reasonable attorney’s fees. Prospective franchisees are
encouraged to consult private legal counsel to determine the applicability of California and
federal laws (such as Business and Professions Code Section 20040.5 Code of Civil Procedure
Section 1281, and the Federal Arbitration Act) to any provisions of a franchise agreement
restricting venue to a forum outside the State of California.
These franchises will be/ have been filed under the Franchise Investment Law of the State of Hawaii. Filing
does not constitute approval, recommendation or endorsement by the Director of Commerce and Consumer
Affairs or a finding by the Director of Commerce and Consumer Affairs that the information provided herein is
true, complete, and not misleading.
The Franchise Investment Law makes it unlawful to offer or sell any franchise in this state without first
providing to the prospective franchisee, or subfranchisor, at least seven days prior to the execution by the
prospective franchisee of any binding franchise or other agreement, or at least seven days prior to the payment
of any consideration by the franchisee, or subfranchisor, whichever occurs first, a copy of the Disclosure
Document, together with an copy of all proposed agreements relating to the sale of the franchise.
This Disclosure Document contains a summary only of certain material provisions of the franchise
agreement. The contract or agreement should be referred to for a statement of all rights, conditions, restrictions
and obligations of both the franchisor and the franchisee.
1. The “Summary” section of Item 17(v), entitled Choice of forum, is deleted in its entirety.
2. The “Summary” section of Item 17(w), entitled Choice of law, is deleted and replaced with the following:
3. Illinois law governs the agreement(s) between the parties to this franchise.
4. Any provision in a franchise agreement that designates jurisdiction or venue in a forum outside of Illinois
is void, provided that arbitration may take place outside of Illinois. 815 ILCS 705/4 (West 2010)
5. Any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive
compliance with any provision of the Illinois Franchise Disclosure Act or any other law of Illinois is void. 815 ILCS
705/41 (West 2010)
The Franchise Agreement and Development Agreement are specifically amended as follows:
In recognition of the requirements of the Illinois Franchise Disclosure Act of 1987 (as amended), the
parties to the attached Franchise Agreement (“Agreement”) agree as follows:
1. Governing Law.
a. Section 16.7 of the Franchise Agreement, “CHOICE OF LAWS,” is deleted in its entirety and replaced
with the following:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 (LANHAM
ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), THE FEDERAL ARBITRATION ACT, OR OTHER FEDERAL LAW,
THIS AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE INTERPRETED AND
CONSTRUED UNDER THE LAWS OF THE STATE OF ILLINOIS.
b. Section 21(A) of the Development Agreement is hereby amended to provide that Illinois law governs
the agreements between the parties to this franchise.
3. Section 4 of the Illinois Franchise Disclosure Act provides that any provision in a franchise
agreement/development agreement that designates jurisdiction or venue outside of the State of Illinois
is void. However, a franchise agreement/development agreement may provide for arbitration in a venue
outside of Illinois.
4. Section 41 of the Illinois Franchise Disclosure Act provide that any condition, stipulation or provision
purporting to bind any person acquiring any franchise to waive compliance with the Illinois Franchise
Disclosure Act or any other law of Illinois is void. Accordingly, insofar as the Franchise Agreement
requires you to waive your rights under the Illinois franchise law, these requirements are deleted from
the Franchise Agreement. This provision will not prevent the franchisor from requiring you to sign a
general release of claims as part of a negotiated settlement of a dispute or actual lawsuit filed under any
of the provisions of the Act, nor shall it prevent the arbitration of any claim pursuant to the provisions
of Title 9 of the United States Code.
IN WITNESS WHEREOF, each of the undersigned hereby acknowledges having read this Amendment,
understands and consents to be bound by all of its terms.
By: By:
Title: Title:
1. The “Summary” section of Item 17(c) entitled Requirements for you to renew or extend, and the
“Summary” section of Item 17(m) entitled Conditions for our approval of transfer, is amended by adding the
following:
Any general release you sign shall not apply to the extent prohibited by the Maryland Franchise
Registration and Disclosure Law.
2. The “Summary” section of Item 17(h) entitled “Cause” defined (defaults which cannot be cured), is
amended by adding the following:
The Franchise Agreement provides for termination upon your bankruptcy. This provision might
not be enforceable under federal bankruptcy law (11 U.S.C. Sections 101 et seq.), but we will
enforce it to the extent enforceable.
3. The following are added to the end of the chart in Item 17:
Despite any contradicting provision in the Franchise Agreement, you have 3 years from the date
on which we grant you the franchise to bring a claim under the Maryland Franchise Registration
and Disclosure Law.
A franchisee may bring a lawsuit in Maryland for claims arising under the Maryland Franchise
Registration and Disclosure Law.
The Franchise Agreement and Area Development Agreement is specifically amended as follows:
Any provision requiring Franchisee to execute a general release of any and all claims against Franchisor shall not
apply to claims arising under the Maryland Franchise Registration and Disclosure Law.
Termination upon bankruptcy of the Franchisee might not be enforceable under federal bankruptcy law (11
U.S.C. Sections 101 et seq.), but Franchisor intends to enforce it to the extent enforceable.
Sections 17.3 and 17.4 of the Franchise Agreement and Section 22(H) of the Area Development
Agreement shall be supplemented by the following additional language:
PROVIDED, HOWEVER, THAT THIS LIMITATION OF CLAIMS SHALL NOT ACT TO REDUCE
THE THREE (3) YEAR STATUTE OF LIMITATIONS AFFORDED FRANCHISEE FOR
BRINGING A CLAIM UNDER THE MARYLAND FRANCHISE REGISTRATION AND
DISCLOSURE LAW.
Section 14-226 of the Maryland Franchise Registration and Disclosure Law prohibits a franchisor from requiring
a prospective franchisee to assent to any release, estoppel, or waiver of liability as a condition of purchasing a
franchise. Any provision of this Franchise Agreement which requires a prospective franchisee to disclaim the
occurrence and/or non-occurrence of acts that would constitute a violation of the Maryland Franchise
Registration and Disclosure Law in order to purchase a franchise are not intended to, nor shall they act as a
release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure
Law.
IN WITNESS WHEREOF, each of the undersigned hereby acknowledges having read this Amendment,
understands and consents to be bound by all of its terms.
By: By:
Title: Title:
In recognition of the requirements of the Maryland Franchise Registration and Disclosure Law (as
amended), Md. Code Bus. Reg. Sections 14-201 through 14-233, the following paragraph is added to the
Franchisee Disclosure Questionnaire:
Maryland Franchise Registration and Disclosure Law prohibits a franchisor from requiring a
prospective franchisee to assent to any release, estoppel, or waiver of liability as a condition of
purchasing a franchise. Representations in this questionnaire are not intended to nor shall they
act as a release, estoppel, or waiver of any liability incurred under the Maryland Franchise
Registration and Disclosure Law.
Name of Franchisee/Applicant
Signature
1. THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN
FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE
PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any documents related to a
franchise:
C. A provision that permits a franchisor to terminate a franchise prior to the expiration of this term
except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision
of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable
opportunity, which in no event need be more than 30 days, to cure such failure.
D. A provision that permits a franchisor to refuse to renew a franchise without fairly compensating
the franchisee by repurchase or other means for the fair market value at the time of expiration of the
franchisee’s inventory, supplies, equipment, fixtures and furnishings. Personalized materials which have no
value to the franchisor and inventory, supplies, equipment, fixtures and furnishings not reasonably required in
the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) the
term of the franchise is less than 5 years, and (ii) the franchisee is prohibited by the franchise or other agreement
from continuing to conduct substantially the same business under another trademark, service mark, trade name,
logotype, advertising or other commercial symbol in the same area subsequent to the expiration of the franchise
or the franchisee does not receive at least 6 months advance notice of franchisor’s intent not to renew the
franchise.
E. A provision that permits the franchisor to refuse to renew a franchise on terms generally
available to other franchisees of the same class or type under similar circumstances. This section does not
require a renewal provision.
F. A provision requiring that arbitration or litigation be conducted outside this state. This shall not
preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a
location outside this state.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
1) The failure of the proposed transferee to meet the franchisor’s then-current reasonable
qualifications or standards.
2) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
3) The unwillingness of the proposed transferee to agree in writing to comply with all
lawful obligations.
4) The failure of the franchisee or proposed transferee to pay any sums owing to the
franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
H. A provision that requires the franchisee to resell to the franchisor items that are not uniquely
identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of
first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party
willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor
the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee
has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner
provided in subdivision (C).
I. A provision which permits the franchisor to directly or indirectly convey, assign or otherwise
transfer its obligations to fulfill contractual obligations to the franchisee unless a provision has been made for
providing the required contractual services.
2. If the franchisor’s most recent financial statements are unaudited and show a net worth of less than
$100,000.00 the franchisor shall, at the request of a franchisee, arrange for the escrow of initial investment and
other funds paid by the franchisee until the obligations to provide real estate, improvements, equipment,
inventory, training or other items included in the franchise offering are fulfilled. At the option of the franchisor,
a surety bond may be provided in place of escrow.
3. THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE ATTORNEY GENERAL DOES
NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENFORCEMENT BY THE ATTORNEY GENERAL.
State of Michigan
Consumer Protection Division
Attention: Franchise
670 G. Mennen Williams Building
525 West Ottawa
Lansing, MI 48933
(517) 373-1160
Note: Despite paragraph F above, we intend to enforce fully the provisions of the arbitration section
contained in the Franchise Agreement. We believe that paragraph F is unconstitutional and cannot preclude us
from enforcing our arbitration section. You acknowledge that we will seek to enforce this section as well.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
MINNESOTA
In accordance with the requirements of the state of Minnesota the following disclosure should be read
in conjunction with the Disclosure Document. Any inconsistency with the information contained in the Disclosure
Document will be resolved in favor of this Minnesota Addendum.
As required by the Minnesota Franchise Act, Minn. Stat. Sec. 80C.12(g), we will reimburse you
for any of your costs incurred in the defense of your right to use the Marks, so long as you were
using the Marks in the manner authorized by us, and so long as we are timely notified of the
claim and are given the right to manage the defense of the claim including the right to
compromise, settle or otherwise resolve the claim, and to determine whether to appeal a final
determination of the claim.
2. Item 17 Renewal, Termination, Transfer and Dispute Resolution is amended by adding the following:
B. Choice of Forum
Nothing in the Disclosure Document or Agreement can abrogate or reduce any of your
rights as provided for in Minnesota Statutes 1984, Chapter 80C, or your rights to any
procedure, forum, or remedies provided for by the laws of the jurisdiction.
C. Releases
A general release shall not relieve any person from liability imposed by the Minnesota
Franchise Law, Minn. Stat., Chapter 80C, Sections 80C.22.
These franchises have been registered under the Minnesota Franchise Act, registration does not
constitute approval, recommendation, or endorsement by the Commissioner of Commerce of Minnesota or a
finding by the Commissioner that the information provided herein is true, complete, and not misleading.
The Minnesota Franchise Act makes it unlawful to offer or sell any franchise in this state which is subject
to registration without first providing to the franchisee, at least 7 days prior to the execution by the prospective
franchisee of any binding franchise or other agreement, or at least 7 days prior to the payment of any
consideration, by the franchisee, whichever occurs first, a copy of this Disclosure Document, together with a
copy of all proposed agreements relating to the franchise. This Disclosure Document contains a summary only
of certain material provisions of the Franchise Agreement. The contract or agreement should be referred to for
an understanding of all rights and obligations of both the franchisor and the franchisee.
In recognition of the Minnesota Franchise Law, Minn. Stat., Chapter 80C, Sections 80C.01 through 80C.22, and
the Rules and Regulations promulgated pursuant thereto by the Minnesota Commission of Securities, Minnesota
Rule 2860.4400, et seq., the parties to the attached Franchise Agreement (“Agreement”) agree as follows:
With respect to franchises governed by Minnesota law, Franchisor will comply with Minn. Stat.
Sec. 80C.14, Subds. 3, 4 and 5 which require, except in certain specified cases, that Franchisee be
given 90 days’ notice of termination (with 60 days to cure) and 180 days’ notice of non-renewal
of the Agreement.
As required by Minnesota Franchise Act, Minn. Stat. Sec. 80C.12(g), Franchisor will reimburse
Franchisee for any costs incurred by Franchisee in the defense of Franchisee’s right to use the
Marks, so long as Franchisee was using the Marks in the manner authorized by Franchisor, and so
long as Franchisor is timely notified of the claim and is given the right to manage the defense of
the claim including the right to compromise, settle or otherwise resolve the claim, and to
determine whether to appeal a final determination of the claim.
With respect to franchises governed by Minnesota law, Franchisor will comply with Minn. Stat.
Sec. 80C.14, Subds. 3, 4 and 5 which require, except in certain specified cases, that Franchisee be
given 90 days’ notice of termination (with 60 days to cure) and 180 days’ notice of non-renewal
of the Agreement.
A general release shall not relieve any person from liability imposed by the Minnesota Franchise
Law, Minn. Stat., Chapter 80C, Section 80C.22.
Nothing in the Disclosure Document or Agreement can abrogate or reduce any of your rights as
provided for in Minnesota Statutes 1984, Chapter 80C, or your rights to any procedure, forum, or
remedies provided for by the laws of the jurisdiction.
Any claims brought pursuant to the Minnesota Franchises Act, § 80.C.01 et seq. must be brought
within 3 years after the cause of action accrues. To the extent that any provision of the Franchise
Agreement imposes a different limitations period, the provision of the Act shall control.
IN WITNESS WHEREOF, each of the undersigned hereby acknowledges having read this Amendment,
understands and consents to be bound by all of its terms.
By: By:
Title: Title:
The following information is added to the cover page of the Franchise Disclosure Document:
Except as provided above, with regard to the franchisor, its predecessor, a person identified in Item 2, or an
affiliate offering franchises under the franchisor’s principal trademark:
A. No such party has an administrative, criminal or civil action pending against that person alleging: a
felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent
conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or
misdemeanor allegations.
B. No such party has pending actions, other than routine litigation incidental to the business, which are
significant in the context of the number of franchisees and the size, nature or financial condition of the
franchise system or its business operations.
C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within
the 10 year period immediately preceding the application for registration, has been convicted of or
pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging:
violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or
misappropriation of property; or unfair or deceptive practices or comparable allegations.
D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the
franchise, or under a Federal, State, or Canadian franchise, securities, antitrust, trade regulation or trade
practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or
is subject to any currently effective order of any national securities association or national securities
exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
from membership in such association or exchange; or is subject to a currently effective injunctive or
restrictive order relating to any other business activity as a result of an action brought by a public agency
or department, including, without limitation, actions affecting a license as a real estate broker or sales
agent.
Neither the franchisor, its affiliate, its predecessor, officers, or general partner during the 10-year period
immediately before the date of the offering circular: (a) filed as debtor (or had filed against it) a petition
to start an action under the U.S. Bankruptcy Code; (b) obtained a discharge of its debts under the
bankruptcy code; or (c) was a principal officer of a company or a general partner in a partnership that
either filed as a debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy
Code or that obtained a discharge of its debts under the U.S. Bankruptcy Code during or within 1 year
after that officer or general partner of the franchisor held this position in the company or partnership.
The initial franchise fee constitutes part of our general operating funds and will be used as such in our
discretion.
The following is added to the end of the “Summary” sections of Item 17(c), titled “Requirements for franchisee
to renew or extend,” and Item 17(m), entitled “Conditions for franchisor approval of transfer”:
However, to the extent required by applicable law, all rights you enjoy and any causes of action arising
in your favor from the provisions of Article 33 of the General Business Law of the State of New York and
the regulations issued thereunder shall remain in force; it being the intent of this proviso that the
non-waiver provisions of General Business Law Sections 687.4 and 687.5 be satisfied.
The following language replaces the “Summary” section of Item 17(d), titled “Termination by franchisee”:
The following is added to the end of the “Summary” section of Item 17(j), titled “Assignment of contract by
franchisor”:
However, no assignment will be made except to an assignee who in good faith and judgment of the
franchisor, is willing and financially able to assume the franchisor’s obligations under the Franchise
Agreement.
The following is added to the end of the “Summary” sections of Item 17(v), titled “Choice of forum”, and Item
17(w), titled “Choice of law”:
The foregoing choice of law should not be considered a waiver of any right conferred upon the franchisor
or upon the franchisee by Article 33 of the General Business Law of the State of New York.
NORTH DAKOTA
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
ADDENDUM TO DISCLOSURE DOCUMENT
1. The following language is added to the “Summary” section of Item 17(c) entitled Requirements for you
to renew or extend and Item 17(m) entitled Conditions for our approval of a transfer:
The execution of a general release upon renewal, assignment or termination will be inapplicable
to franchises operating under the North Dakota Franchise Investment Law.
2. The applicable portion of the “Summary” section of Item 17(i) entitled Your obligations on
termination/non-renewal is amended to read as follows:
If we prevail in any enforcement action you will pay all damages and costs we incur in
enforcing the termination provisions of the Franchise Agreement
3. The following is added to the “Summary” section of Item 17(u) entitled Dispute resolution by
arbitration or mediation:
To the extent required by the North Dakota Franchise Investment Law (unless such
requirement is preempted by the Federal Arbitration Act), arbitration will be at a site to
which we and you mutually agree.
4. The following is added to the “Summary” section of Item 17(r) entitled Non-competition
covenants after the franchise is terminated or expires:
5. The following is added to the “Summary” section of Item 17(v) entitled Choice of forum:
However, to the extent allowed by the North Dakota Franchise Investment Law, you
may commence any cause of action against us in any court of competent jurisdiction,
including the state or federal courts of North Dakota.
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accuracy of this information. Any action you take upon the information you find on this website (FranChimp.com), is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of our website.
NORTH DAKOTA
1. The following is added to Section 3.2, “RENEWAL” and Section 14 “TRANSFER OF INTEREST”:
However, to the extent allows by the North Dakota Franchise investment Law, Franchisee may
commence any cause of action against Franchisor in any court of competent jurisdiction,
including the state or federal courts of North Dakota.
To the extent required by the North Dakota Franchise Investment Law (unless such
requirement is preempted by the Federal Arbitration Act), arbitration will be at a site to
which Franchisor and Franchisee mutually agree.
4. Section 18, “ACKNOWLEDGMENTS” is amended by the addition of the following language to the
original language that appears therein to read as follows:
5. Section 13.1 (regarding post-term restrictions) is amended by the addition of the following language to
the original language that appears therein:
IN WITNESS WHEREOF, each of the undersigned hereby acknowledges having read this Amendment,
understands and consents to be bound by all of its terms.
By: By:
Title: Title:
In recognition of the requirements of the Rhode Island Franchise Investment Act (Section 19-28.1-14),
the parties to the attached Franchise Agreement agree as follows:
§19-24.1-14 of the Rhode Island Franchise Investment Act provides that “A provision in
a franchise agreement restricting jurisdiction or venue to a forum outside this state or
requiring the application of the laws of another state is void with respect to a claim
otherwise enforceable under this Act.”
IN WITNESS WHEREOF, each of the undersigned hereby acknowledges having read this Amendment,
understands and consents to be bound by all of its terms.
By: By:
Title: Title:
In recognition of the restrictions contained in Section 13.1-564 of the Virginia Retail Franchising Act, the
Franchise Disclosure Document for Club Pilates Franchise, LLC for use in the Commonwealth of Virginia shall be
amended as follows:
“Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for a franchisor
to cancel a franchise without reasonable cause. If any ground for default or termination stated in the
franchise agreement does not constitute “reasonable cause”, as that term may be defined in the Virginia
Retail Franchising Act or the laws of Virginia, that provision may not be enforceable.”
In recognition of the requirements of the Washington Franchise Investment Protection Act (RCW
19.100.180), the Franchise Disclosure Document is revised as follows:
The state of Washington has a statute, RCW 19.100.180, which may supersede the Franchise
Agreement in your relationship with the franchisor including the areas of termination and
renewal of your franchise. There may also be court decisions which may supersede the franchise
agreement in your relationship with the franchisor including the areas of termination and
renewal of your franchise.
In any arbitration involving a franchise purchased in Washington, the arbitration site shall be
either in the state of Washington, or in a place mutually agreed upon at the time of the
arbitration, or as determined by the arbitrator.
In the event of a conflict of laws, the provisions of the Washington Franchise Investment
Protection Act, Chapter 19.100 RCW shall prevail.
A release or waiver of rights executed by a franchisee shall not include rights under the
Washington Franchise Investment Protection Act except when executed pursuant to a
negotiated settlement after the agreement is in effect and where the parties are represented
by independent counsel. Provisions such as those which unreasonably restrict or limit the
statute of limitations period for claims under the Act, rights or remedies under the Act such as
a right to a jury trial may not be enforceable.
Transfer fees are collectable to the extent that they reflect the franchisor’s reasonable
estimated or actual costs in effecting a transfer.
In recognition of the requirements of the Washington Franchise Investment Protection Act (RCW
19.100.180), the parties to the attached Franchise Agreement and/or Development Agreement agree as follows:
The state of Washington has a statute, RCW 19.100.180, which may supersede the Franchise
Agreement in your relationship with the franchisor including the areas of termination and
renewal of your franchise. There may also be court decisions which may supersede the franchise
agreement in your relationship with the franchisor including the areas of termination and
renewal of your franchise.
In any arbitration involving a franchise purchased in Washington, the arbitration site shall be
either in the state of Washington, or in a place mutually agreed upon at the time of the
arbitration, or as determined by the arbitrator.
In the event of a conflict of laws, the provisions of the Washington Franchise Investment
Protection Act, Chapter 19.100 RCW shall prevail.
A release or waiver of rights executed by a franchisee shall not include rights under the
Washington Franchise Investment Protection Act except when executed pursuant to a
negotiated settlement after the agreement is in effect and where the parties are represented
by independent counsel. Provisions such as those which unreasonably restrict or limit the
statute of limitations period for claims under the Act, rights or remedies under the Act such as
a right to a jury trial may not be enforceable.
Transfer fees are collectable to the extent that they reflect the franchisor’s reasonable
estimated or actual costs in effecting a transfer.
IN WITNESS WHEREOF, each of the undersigned hereby acknowledges having read this Amendment,
understands and consents to be bound by all of its terms.
By: By:
Title: Title:
Franchisee Address City State ZIP Code Phone Remaining Development Rights Under ADA?
Brazell, Lanie & Craig 2311 Bent Creek RD STE 600 Auburn Alabama 36830 334-414-4548 0
Booker, Lindsay 3159 Green Valley Road Birmingham Alabama 35243 205-777-7976 0
Booker, Lindsay 707 Richard Arrington Jr. Blvd. S #106 Birmingham Alabama 35233 205-440-2953 0
Booker, Lindsay 1839 Montgomery Hwy. Suite D Hoover Alabama 35244 205-937-7265 0
Schultz, Joshua & Paula 7564 Hwy 72 West, Suite B Madison Alabama 35758 256-680-3776 0
Brazell, Lanie & Craig 8143 Vaughn Rd Montgomery Alabama 36116 334-603-8055 0
Brazell, Lanie & Craig 2940 #D Zelda Rd Montgomery Alabama 36106 334-328-2465 0
Hansen, Peter 4085 South Gilbert Road, Shops B - Suite Chandler Arizona 85249 480-771-4459 1
5
Anderson, Doug & 3131 S. Market St, Suite 103 Gilbert Arizona 85295 480-999-3825 0
Maggie
Gage, Angela & Chris 17570 N 75th Ave., Suite F630 Glendale Arizona 85308 623-230-4088 0
Maro, Cheryl & Louis 783 South Cotton Lane, Suite C-2 Goodyear Arizona 85338 632-562-3344 0
Hansen, Peter 2110 East Baseline Rd, Ste 3 Mesa Arizona 85204 480-795-5916 1
Hansen, Peter 3130 N. Recker Road Suite 103 Mesa Arizona 85215 480-562-3501 1
Garrison, Kathy & Julie 7972 N Oracle Rd Oro Valley Arizona 85704 520-244-3300 1
Maro, Cheryl & Louis 24775 N. Lake Pleasant Parkway, Suite Peoria Arizona 85383 623-473-7768 0
102
Gage, Angela & Chris 6819 N. 16th Street Suite 7 Phoenix Arizona 85016 602-888-8824 0
Gatzemeier, Don 10633 N Tatum Blvd, #102 Phoenix Arizona 85028 480-506-0234 0
Gatzemeier, Don 20910 N. Tatum Blvd., Suite 110 Phoenix Arizona 85050 480-795-3357 0
Hansen, Peter 3750 E. Indian School Road Phoenix Arizona 85018 480-372-4692 1
Pickens, Kim 2450 W Happy Valley Road, #1149 Phoenix Arizona 85085 623-312-8505 0
Hansen, Peter 21051 S Ellsworth Loop Road, Suite 103 Queen Creek Arizona 85142 480-712-5965 1
Gatzemeier, Don 16447 N. Scottsdale Rd. Suite 119 Scottsdale Arizona 85254 480-447-4044 0
Hansen, Peter 9301 E. Shea Unit 104 Scottsdale Arizona 85260 480-771-3774 1
Hansen, Peter 8787 N. Scottsdale Rd. Ste 232 Scottsdale Arizona 85253 480-462-1299 1
Pickens, Kim 31313 N Scottsdale Rd. Scottsdale Arizona 85266 480-900-7278 0
Hansen, Peter 1825 East Guadalupe Ste F-102 Tempe Arizona 85283 480-566-0335 1
Number of Outlets
Franchisee City State Ph # Transferred/Closed
Jacobs, Keith Scottsdale Arizona 480-771-3774 3
Truong, Amy Chino Hills California 909-529-1041 3
Suder, Chris* Fullerton California 714-519-3841 1
Busse, Mary Denver Colorado 720-233-1352 1
Gutierrez, Maria Isabel Coral Gables Florida 305-209-5679 1
Gomez, Amanda Jupiter Florida 561-449-8161 2
Wilson, Chris Winter Garden Florida 407-890-5344 2
Peterson, Mike Cumming Georgia 678-330-2875 1
Little, Stephanie Marietta Georgia 678-647-6220 1
Kulkarni, Pradnya Buffalo Grove Illinois 224-377-0305 2
Tice, Chandler West Des Moines Iowa 515-212-5252 1
Devers, Jennifer Wentzville Missouri 636-887-0019 1
Powell, Lisa Omaha Nebraska 402-807-3741 2
Angelis, Dimitrios Westfield New Jersey 908-233-0950 2
Crawford, Dalya Brighton New York 585-361-8520 1
Gevinski, Ed Brooklyn New York 929-390-2259 1
Harrington, Julie Matthews North Carolina 704-594-5670 1
Webb, Allie Oklahoma City Oklahoma 405-759-7111 1
Koster, Marco Collegeville Pennsylvania 484-284-8004 1
Fraser, Glenn Austin Texas 512-515-1440 2
Springer, Bobby Flower Mound Texas 817-668-0108 3
Gowens, Bret Houston Texas 832-862-2023 4
Schriever, Delma League City Texas 832-920-3198 2
Mehmood, Jodi McKinney Texas 972-838-5558 1
Nicholson, Candi* Seattle Washington 206-294-5944 1
*Please be advised that these franchisees remain in the System as they still currently own and operate one (1) or more Studios.
DEVELOPMENT AGREEMENT
DEVELOPER
________________________
________________________
DATE OF AGREEMENT
EXHIBITS
THIS AREA DEVELOPMENT AGREEMENT (the “Agreement”), is made and entered into
this day of , 20___, by and between: (i) Club Pilates Franchise, LLC, a limited
liability company formed and operating under the laws of the State of Delaware whose principal business
address is 17877 Von Karman Ave., Suite 100, Irvine, CA 92614 (the “Franchisor”); and (ii) , a/n
____________________ with a business address at ____________________ (the “Developer”).
WITNESSETH:
WHEREAS, as the result of the expenditure of time, effort and expense, Franchisor has created a
unique and distinctive proprietary system (hereinafter the “System”) for the establishment, development
and operation of a CLUB PILATES Studio (each, a “Studio”) that provides Studio offering (a) Pilates
instruction and related services that Franchisor authorizes (collectively, the “Approved Services”), and (b)
certain merchandise and other products Franchisor authorizes for sale in conjunction with the Approved
Services and Studio operations (collectively, the “Approved Products”), to the general public and/or
through a membership-based program, under the mark CLUB PILATES.
WHEREAS, Franchisor owns the System and the right to use the Proprietary Marks (as defined
below), and grants the right and license to others to use the System and the Proprietary Marks;
WHEREAS, Franchisor identifies the System and licenses the use of certain trade names, service
marks, trademarks, emblems and indicia of origin, including the mark CLUB PILATES and other trade
names, service marks and trademarks as are now designated and may hereafter be designated by Franchisor
in writing for use with the System (the “Proprietary Marks”);
WHEREAS, Developer desires the right to develop, own and operate multiple CLUB PILATES
Studios under the System in a defined geographic area under a Development Schedule (the “Development
Schedule”) set forth in this Agreement; and
NOW, THEREFORE, the parties, in consideration of the mutual undertakings and commitments
set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, agree as follows
A. DEVELOPMENT AREA
“Development Schedule” means the schedule for Developer to open and operate a specific
cumulative number of CLUB PILATES Studios as set forth in Exhibit B to this Agreement. Each
“Development Period” is a period of time set forth in the Development Schedule wherein Developer must
meet each specific development obligations.
C. FRANCHISE AGREEMENT
Except for the royalty fee and the advertising contributions, which shall remain the same in each
franchise agreement executed pursuant to this Agreement and any extensions of this Agreement, the term
“Franchise Agreement” means the then-current form of agreements (including the franchise agreement and
any exhibits, riders, collateral assignments of leases or subleases, shareholder guarantees and preliminary
agreements) that Franchisor customarily uses in the granting of a franchise for the ownership and operation
of a CLUB PILATES Studio.
Concurrent with the execution of this Agreement, Developer shall execute the Franchise Agreement
for the first Studio that Developer is granted the right to open within the Development Area hereunder.
Franchisor, in its sole discretion, but subject to the express provisions contained herein, may modify or
amend in any respect the standard form of Franchise Agreement it customarily uses in granting a franchise
for a CLUB PILATES Studio.
The parties agree and acknowledge that: (i) Developer must timely execute Franchisor’s then-
current form of Franchise Agreement for each CLUB PILATES Studio that Developer is required to open
and commence operating pursuant to the Development Schedule; and (ii) Franchisor may, in its discretion,
modify or amend the form of Franchise Agreement that Franchisor is using as of the date this Agreement
is executed as it deems appropriate for (a) use in the CLUB PILATES System generally, and (b) execution
by the parties in connection with the Studios that Developer must subsequently open and commence
operating under this Agreement.
D. PRINCIPALS
The term “Principals” includes, collectively and individually, Developer’s owners; if Developer is
an entity, any officers and directors of Developer (including the officers and directors of any general partner
of Developer) and any person and of any entity directly owning and/or controlling ten percent (10%) or
more of Developer, or a managing member or manager of a limited liability company. The initial Principals
shall be listed in Exhibit D. The Principals must execute an agreement in substantially the form of the
attached Guaranty and Assumption of Obligations (immediately following this Agreement) undertaking to
be bound jointly and severally to all provisions of this Agreement.
Developer acknowledges, and does not contest, Franchisor’s exclusive ownership and rights to each
and every aspect of the System. Developer’s right to developer Studios is specifically limited to the
Development Area, as well as the terms and conditions of this Agreement and Franchise Agreements
executed pursuant thereto.
In reliance on the representations and warranties of Developer and its Principals, Franchisor grants
to Developer, and Developer hereby accepts the right and obligation to develop, a designated number of
CLUB PILATES Studios within the Development Area in full compliance with the terms of this
Agreement, including the timely development obligations to open a specific cumulative number of CLUB
PILATES Studios over prescribed periods of time as established in the Development Schedule; and in full
compliance with all obligations and provisions under the form(s) of Franchise Agreement entered into for
the right to own and operate each individual CLUB PILATES Studio.
The term of this Agreement shall commence upon full execution of this Agreement and, unless
earlier terminated by Franchisor pursuant to the terms hereof, this Agreement shall expire upon the earlier
of: (i) the date Developer timely opens the last CLUB PILATES Studio it is required to open and commence
operations within the Development Area pursuant to this Agreement; or (ii) the last day of the last
Development Period on the Development Schedule. Developer acquires no rights under this Agreement to
develop CLUB PILATES Studios outside the Development Area. Upon expiration or termination of this
Agreement for any reason, Developer will have no rights whatsoever within the Development Area (other
than any territorial rights that Franchisor has granted to Developer in connection with any CLUB PILATES
Studio(s) that Developer has timely opened pursuant to a Franchise Agreement as required by the
Development Schedule prior to the date this Agreement is terminated or expires).
B. COMMITMENT OF DEVELOPER
Franchisor has granted these rights in reliance on the business skill, financial capability, personal
character and expectations of performance by the Developer and its Principals. This Agreement is for the
purpose of developing and operating the CLUB PILATES Studios, and is not for the purpose of reselling
the rights granted by this Agreement.
C. DEVELOPMENT PLAN
The following conditions and approvals are conditions precedent before the right of Developer to
develop each CLUB PILATES Studio becomes effective. At the time Developer selects a site for each
CLUB PILATES Studio, Developer must satisfy the operational, financial and training requirements, set
forth below:
(1) Operational: Developer must be in substantial compliance with the material terms
and conditions of this Agreement and all Franchise Agreements granted Developer. For each CLUB
PILATES Studio operated by Developer, Developer must be in substantial compliance with the standards,
specifications, and procedures set forth and described in the Manuals (defined in the Franchise Agreement).
(2) Financial: Developer and the Principals must satisfy Franchisor’s financial criteria
for Developers and Principals with respect to Developer’s operation of its existing CLUB PILATES
This Agreement is not a Franchise Agreement and does not grant Developer any right or license to
operate a CLUB PILATES Studio, or to provide services, or to distribute goods, or any right or license in
the Proprietary Marks. Developer must timely execute Franchisor’s then-current form of Franchise
Agreement for each CLUB PILATES Studio that Developer is required to open under the Development
Schedule.
A. RESERVATION OF RIGHTS
Franchisor (on behalf of itself and its affiliate(s), parent(s) and subsidiaries) retains the rights, in its
sole discretion and without granting any rights to Developer: (1) to itself operate, or to grant other persons
the right to operate, CLUB PILATES Studios at locations and on terms Franchisor deems appropriate
outside the Development Area granted Developer, and (2) to sell the products and services authorized for
CLUB PILATES Studios under the Proprietary Marks or under other trademarks, service marks and
commercial symbols through dissimilar channels of distribution and under terms Franchisor deems
appropriate within and outside the Development Area, including, but not limited to, by electronic means,
such as the Internet, and by web sites established by Franchisor, as we determine, in our sole discretion.
In addition, Franchisor, any other developer and any other authorized person or entity shall have
the right, at any time, to advertise and promote the System, in the Development Area. Developer
acknowledges and agrees that Developer is only granted the right to develop and operate CLUB PILATES
Studios within the Development Area. Accordingly, within and outside the Development Area, Franchisor
and its affiliate and its subsidiaries may also offer and sell, and may authorize others to offer and sell
products and services identified by the Proprietary Marks (including memberships and gift cards) at or from
any location.
Franchisor and its affiliate(s)/parent(s) further reserve the right to: (i) establish and operate, and
license any third party the right to establish and operate, other Studios and Franchised Businesses using the
Marks and System at any location outside of Development Area; (ii) market, offer and sell products and
services that are similar to the products and services offered by the Franchised Business under a different
trademark or trademarks at any location, within or outside the Development Area; (iii) use the Marks and
System, as well as other such marks we designate, to distribute any Approved Products and/or Services in
any alternative channel of distribution, within or outside the Development Area (including the Internet,
mail order, catalog sales, toll-free numbers, wholesale stores, etc.); (iv) to acquire, merge with, or otherwise
affiliate with, and after that own and operate, and franchise or license others to own and operate, any
business of any kind, including, without limitation, any business that offers products or services the same
as or similar to the Approved Products and Services (but under different marks), within or outside the
Development Area; (v) operate and grant others the right to operate Studios at “Non-Traditional Locations,”
including (a) “big box” gyms and/or fitness facilities operating under a mark other than the Proprietary
Marks, (b) military bases, (c) shopping malls, (d) airports, stadiums, arenas and/or other sports,
entertainment and captive venues, (e) major industrial or office complexes, (f) hotels, (g) train stations,
travel plazas and/or other transportation centers, (h) casinos, hospitals and/or academic institutions, that are
within and outside the Development Area, on any terms and conditions we deem appropriate; and (vi) use
Franchisor has the right to own, operate and license others to own and operate other business
concepts in and outside the Development Area consistent with the terms of this Section.
Franchisor has no obligation and will not pay Developer if it exercises any of the rights specified
above within the Development Area granted by the Area Development Agreement or within the Designated
Territory granted by a Franchise Agreement.
Subject to Section 4(A) and the other terms of this Agreement, if Developer (i) is in compliance
with the material terms and conditions contained in this Agreement, including the timely development
obligations to open a specific cumulative number of CLUB PILATES Studios over prescribed periods of
time as established in Exhibit B (the “Development Schedule”), and (ii) is in substantial compliance with
all material obligations under Franchise Agreements executed by Developer for individual CLUB
PILATES Studios under this Agreement; then during the Development Schedule, Franchisor: (i) will grant
Developer the right to own and operate CLUB PILATES Studios located within the Development Area
pursuant to the terms of this Agreement; and (ii) will not operate (directly or through its affiliate), nor grant
a franchise for the location of, any CLUB PILATES Studio within the Development Area, except for
franchises granted to Developer under this Agreement.
If Developer, for any reason within his control, fails to comply with the Development Schedule,
this failure constitutes a material default of this Agreement, and Franchisor has the right to terminate this
Agreement pursuant to Section 14 of this Agreement. In the event Developer fails to cure the noticed
default within the time allowed under Section 14, Franchisor may terminate this Agreement and grant
individual or area development franchises within the Development Area to third parties or own and operate
Studios owned by Franchisor or by the affiliate of Franchisor. Franchisor and Developer agree that the
timely development of Studios by Developer in compliance with the Development Schedule will control
the rights granted Developer by this Agreement, regardless of the time period granted Developer to open a
Studio pursuant to a Franchise Agreement for such Studio. Upon termination of this Agreement, all rights
granted Developer revert to Franchisor, who is free to franchise any other person to use the System within
the Development Area or to itself own and operate CLUB PILATES Studios within the Development Area.
Notwithstanding anything contained in this Section, Franchisor will provide Developer with a one-
time reasonable extension of time not to exceed 90 days to comply with its development obligations in any
one of the Development Period as set forth in the Development Schedule (see Exhibit B), provided: (i)
Developer has already executed a lease for, or otherwise obtained, a Premises that Franchisor approves for
any CLUB PILATES Studio(s) it is required to open and operate during that Development Period; and (ii)
Developer notifies Franchisor of its need for such an extension no less than 30 days prior to expiration of
that Development Period. The parties agree and acknowledge that Franchisor’s grant of this one-time
extension under this Section will not extend, modify or otherwise affect the expiration of any of Developer’s
subsequent Development Periods or subsequent development obligations.
Developer will at all times faithfully, honestly, and diligently perform his obligations under this
Agreement and will continuously exert his best efforts to timely promote and enhance the development of
CLUB PILATES Studios within the Development Area. Developer agrees to open and operate the
cumulative number of CLUB PILATES Studios at the end of each Development Period set forth in the
Development Schedule (see Exhibit B). Developer agrees that compliance with the Development Schedule
is the essence of this Agreement.
D. EXPIRATION OR TERMINATION
After this Agreement expires or terminates for any reason, Franchisor shall have the absolute right
to own and operate, or license other parties the right to own and operate CLUB PILATES STUDIOS, in
the Development Area, except in those Designated Territories granted under each Franchise Agreement
that Developer enters into pursuant to this Agreement.
5. STUDIO CLOSINGS
If during the term of this Agreement, Developer ceases to operate any CLUB PILATES Studio
developed under this Agreement for any reason, Developer must develop a replacement CLUB PILATES
Studio to fulfill Developer’s obligation to have open and in operation the required number of CLUB
PILATES Studios upon the expiration of each Development Period. The replacement CLUB PILATES
Studio must be open and in operation within nine (9) months after Developer ceases to operate the CLUB
PILATES Studio to be replaced or Developer will be in material breach of this Agreement. If, during the
term of this Agreement, Developer, in accordance with the terms of any Franchise Agreement for a CLUB
PILATES Studio developed under this Agreement, transfers its interests in that CLUB PILATES Studio, a
transferred CLUB PILATES Studio shall continue to be counted in determining whether the Developer has
complied with the Development Schedule so long as it continues to be operated as a CLUB PILATES
Studio. If the transferred CLUB PILATES Studio ceases to be operated as a CLUB PILATES Studio, it
will not count toward Developer’s compliance with the Development Schedule.
Developer shall enter into a separate Franchise Agreement with Franchisor for each CLUB
PILATES Studio developed pursuant to this Agreement. The Franchise Agreement to be executed for the
first CLUB PILATES Studio to be developed by Developer under this Agreement must be executed and
delivered to Franchisor concurrently with the execution and delivery of this Agreement. All subsequent
CLUB PILATES Studios developed under this Agreement must be established and operated under the then-
current form of Franchise Agreement then being used by Franchisor for CLUB PILATES Studios under
the System. The then-current form of Franchise Agreement may differ from the form attached as Exhibit
C; however, the provisions regarding royalty fees and advertising contributions shall remain as established
in Exhibit C. Developer must execute the then-current form of Franchise Agreement for each CLUB
PILATES Studio to be developed under this Agreement
Developer acknowledges that the projected opening dates for each CLUB PILATES Studio set
forth in the Development Schedule are reasonable requirements. Developer must execute a Franchise
Agreement for each Studio by the earlier of: (i) fifteen (15) days from the date a lease is signed for a location
that Franchisor approves for the CLUB PILATES Studio at issue; and (ii) the date necessary for Developer
to otherwise comply with its development obligations under this Agreement.
A. ORGANIZATION OF DEVELOPER
Developer makes the following representations, warranties and covenants and accepts the
following continuing obligations:
(4) If, after the execution of this Agreement, any person ceases to qualify as one of the
Developer’s Principal’s (as defined in Section 1), or if Developer believes in the event any individual later
qualifies as one of Principals, Developer shall promptly notify Franchisor and that person shall execute any
documents (including, as applicable, this Agreement) as Franchisor may reasonably require;
(6) Developer agrees to maintain at all times throughout the term of this Agreement,
sufficient working capital to fulfill its obligations under this Agreement; and
(7) Each Principal who has right, title, or interest of ten percent (10%) or more in the
ownership of Developer, must each execute and bind themselves to the confidentiality and noncompetition
covenants set forth in the Confidentiality Agreement and Ancillary Covenants Not to Compete (Exhibit E).
B. REQUIREMENTS OF REPRESENTATIVE
Upon the execution of this Agreement, Developer must designate and retain an individual
throughout the term of this Agreement to act on behalf of Developer in all transactions with Developer
concerning Developer’s obligations under this Agreement (the “Representative”). If Developer is an
individual, Developer must perform all obligations of the Representative. The Representative must use
reasonable efforts to do the following, during the entire period he serves in that capacity: (1) maintain a
direct or indirect ownership interest in the Developer; (2) devote substantial time and reasonable efforts to
the supervision and conduct of the business contemplated by this Agreement and execute this Agreement
as one of the Principals; and (3) meet Franchisor’s standards and criteria for a Representative as set forth
in the Manuals or otherwise in writing by Franchisor. If the Representative or any designee is not able to
continue to serve in the capacity of Representative or no longer qualifies, Developer must promptly notify
Franchisor and designate a replacement.
C. BEST EFFORTS
Developer must use his best efforts to substantially comply with all requirements of federal, state
and local rules, regulations and orders.
Developer assumes all costs, liabilities, expenses and responsibilities for locating, obtaining,
financing and developing sites for CLUB PILATES Studios, and for constructing and equipping CLUB
PILATES Studios at those sites. The selection of a site and the development of a Studio at any site is the
responsibility of Developer. The selection of a site by Developer is subject to our approval and must be in
compliance with Franchisor’s site selection procedures and its standards for demographic characteristics,
parking, traffic patterns and the predominant character of the neighborhood, and other commercial
characteristics of the site and any other factors Franchisor may consider relevant in reviewing a site selected
by Developer. Developer must not enter into a binding commitment with a prospective seller or lessor of
real estate with respect to the site for a Studio until Franchisor has approved the proposed site. Developer
specifically acknowledges that the selection of a site by Developer in compliance with Franchisor’s site
selection procedures and the approval of a site by Franchisor does not constitute a representation, promise
or guarantee by Franchisor that the site and the Studio to be operated at that site will be profitable or
successful. Developer acknowledges that factors governing the success of a CLUB PILATES Studio are
unpredictable and beyond Franchisor’s control. Franchisor is not responsible to Developer or to any other
person or entity if a site approved by Franchisor fails to meet Developer’s expectations for revenue or
operational criteria.
B. DEMOGRAPHIC INFORMATION
Before acquiring a site for any Studio by lease or purchase, Developer must locate a site for the
Studio that satisfies the site selection guidelines Franchisor provides to Developer and must submit to
Franchisor, in the form Franchisor specifies, a description of the site, a demographic study and other
information and materials Franchisor may reasonably require and shall represent in writing that Developer
has the option or other firm commitment to obtain the site. Franchisor will review information provided by
Developer for the site which may include the population of the work force or residents, character of the
Developer shall not make any binding commitment to purchase or lease real estate for a proposed
site for a CLUB PILATES Studio until the proposed site has been approved by Franchisor and a Franchise
Agreement has been executed by Franchisor and Developer (or its affiliate) for a Studio at such site.
Developer shall provide Franchisor with a copy of either the proposed contract of sale or lease relating to
the site before the Franchise Agreement is executed. Developer must comply with the conditions set forth
in the Franchise Agreement at issue in connection with the signing of such a lease, including ensuring that
both Developer and the landlord for the proposed site execute Franchisor’s prescribed from of Collateral
Assignment of Lease. Developer must use any approved or designated suppliers that Franchisor designates
in connection with the site selection and acquisition process.
D. FRANCHISE AGREEMENT
Franchisor will deliver a Franchise Agreement, in the then-current form, to Developer for execution
by Developer (or its affiliate). With the execution of this Agreement, Developer must concurrently execute
the Franchise Agreement establishing Developer’s first CLUB PILATES Studio and return both this
Agreement and the Franchise Agreement to Franchisor. If Developer fails to execute the Franchise
Agreement, Franchisor may, at its sole discretion, revoke its approval of the site and its offer to grant
Developer a franchise to operate a CLUB PILATES Studio at the site.
9. DEVELOPMENT FEE
Concurrently with the execution of this Agreement, Developer must pay to Franchisor a
nonrefundable area development fee equal to $___________ (the “Development Fee”). The Development
Fee is deemed fully earned by Franchisor upon execution of this Agreement in consideration of lost
development opportunities and is nonrefundable under any circumstances. Developer will not be required
to pay any additional initial franchise fee for each Studio opened pursuant to this Agreement upon executing
a Franchise Agreement for that Studio.
Developer understands and agrees that any and all individual Franchise Agreements executed by
Developer and Franchisor for CLUB PILATES Studios within the Development Area are independent of
this Agreement. The continued effectiveness of any Franchise Agreement does not depend on the continued
effectiveness of this Area Development Agreement. If any conflict arises with this Agreement and any
Franchise Agreement, the Franchise Agreement controls, has precedence and superiority (except with
respect to the opening deadline for each CLUB PILATES Studio Developer is granted the right to open
under this Agreement).
11. COVENANTS
A. Developer and the Representative covenant that during the term of this Agreement, except
as otherwise approved in writing by Franchisor, Developer and the Representative must devote substantial
(1) During the term of this Agreement, neither Developer, its Principals, owners,
officers or guarantors, nor any immediate family of Developer, its Principals, owners, officers or guarantors,
may, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person,
partnership or corporation:
(b) Employ or seek to employ any person who is at that time employed by
Franchisor, Franchisor’s affiliates or any other System franchisee or developer, or otherwise directly or
indirectly induce or seek to induce such person to leave his or her employment thereat; or
(2) For a period of two (2) years after the expiration and nonrenewal, transfer or
termination of this Agreement, regardless of the cause, neither Developer, its Principals, owners, officers
and guarantors, nor any member of the immediate family of Developer, its Principals, owners, officers or
guarantors, may, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any
other person, partnership or corporation, be involved with any business that competes in whole or in part
with Franchisor by offering or granting licenses or franchises, or establishing joint ventures, for the
ownership or operation of a Competing Business. The geographic scope of the covenant contained in this
Section is any location where Franchisor can demonstrate it has offered or sold franchises as of the date
this Agreement is terminated or expires.
(3) For a period of two (2) years after the expiration and nonrenewal, transfer or
termination of this Agreement, regardless of the cause, neither Developer, its Principals, owners, officers
and guarantors, nor any member of the immediate family of Developer, its Principals, owners, officers or
guarantors, may, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any
other person, partnership or corporation:
C. It is the parties’ intent that the provisions of this Section 11 be judicially enforced to the
fullest extent permissible under applicable law. Accordingly, the parties agree that any reduction in scope
or modification of any part of the noncompetition provisions contained herein shall not render any other
part unenforceable. In the event of the actual or threatened breach of this Section 11 by Developer, any of
Developer’s Principals, or any member of the immediate family of Developer or Developer’s Principals,
Franchisor shall be entitled to an injunction restraining such person from any such actual or threatened
breach. Developer acknowledges that the covenants contained herein are necessary to protect the goodwill
of other System franchisees and developers, and the System. Developer further acknowledges that
covenants contained in this Section 11 are necessary to protect Franchisor’s procedures and know-how
transmitted during the term of this Agreement. Developer agrees that in the event of the actual or threatened
breach of this Section 11, Franchisor’s harm will be irreparable and that Franchisor has no adequate remedy
at law to prevent such harm. Developer and the Principals agree to pay all costs and expenses (including
reasonable attorneys’ fees) incurred by Franchisor in connection with the enforcement of this Section 11.
Developer acknowledges and agrees on Developer’s own behalf and on behalf of the persons who are liable
under this Section 11 that each has previously worked or been gainfully employed in other careers and that
the provisions of this Section 11 in no way prevent any such person from earning a living. Developer
further acknowledges and agrees that the time limitation of this Section 11 shall be tolled during any default
under this Section 11.
D. Developer must ensure that all management personnel of Developer’s Studios opened
under this Agreement, as well as any officers or directors of Developer, execute Franchisor’s then-current
form of Confidentiality and Non-Competition Agreement. Developer must furnish Franchisor a copy of
each executed agreement.
E. Developer hereby agrees that the existence of any claim Developer may have against
Franchisor, whether or not arising from this Agreement, shall not constitute a defense to Franchisor’s
enforcement of the covenants contained in this Section 11. Developer agrees to pay all costs and expenses
(including reasonable attorneys’ fees) that Franchisor incurs in connection with the enforcement of this
Section 11.
F. Notwithstanding the foregoing, Franchisor reserves the right, in its sole discretion, to
reduce the period of time or geographic scope of the non-competition covenants set forth in this Section 11
and in Exhibit E, by written notice to Developer.
A. The parties agree that this Agreement does not create a fiduciary relationship between
them, that Developer is an independent contractor and must at all times represent itself as an independent
contractor. This Agreement does not create either party as an agent, legal representative, subsidiary, joint
venturer, partner, employee or joint employer. Developer shall hold itself out to the public as an
independent contractor operating pursuant to this Agreement. Developer agrees to take any action necessary
B. Developer understands and agrees that nothing in this Agreement authorizes Developer to
make any contract, agreement, warranty or representation on Franchisor’s behalf, or to incur any debt or
other obligation in Franchisor’s name and that Franchisor shall in no event assume liability for, or be
deemed liable under this Agreement as a result of any such action, or for any act or omission of Developer
in the conduct of its business pursuant to this Agreement or any claim or judgment arising therefrom.
C. Developer and each of the Principals shall, at all times, indemnify and hold harmless
Franchisor and its affiliate, successors and assigns and the officers, directors, shareholders, agents,
representatives and employees of each of them (“Indemnitees”) from all losses and expenses incurred in
connection with any formal or informal action, suit, proceeding, claim, demand, investigation or inquiry or
any settlement thereof, which arises out of or is based upon the action or negligence of Developer or any
Principal in any of the following:
(1) The infringement, alleged infringement, or any other violation or alleged violation
of any Proprietary Mark or other proprietary right owned by Franchisor;
(3) The violation of any federal, state or local law, regulation, rule, standard or
directive, or any industry standard, including without limitation, health, sanitation and safety laws and
regulations;
(4) Libel, slander or any other form of defamation of Franchisor or the System, by
Developer or the Principals;
(5) The violation or breach by Developer or any of the Principals of any warranty,
representation, agreement or obligation of this Agreement or any Franchise Agreement; and
(6) Acts, errors or omissions of Developer or any of its agents, servants, employees,
contractors, partners, affiliates or representatives.
Notwithstanding anything contained in this Section 12(C), Developer will not be required to
indemnify, defend or hold Franchisor harmless for any claims or causes of action that arise solely out of
Franchisor’s gross negligence or willful misconduct.
D. Developer and each of the Principals agree to give Franchisor immediate notice of any such
action, suit, proceeding, claim, demand, inquiry or investigation.
E. Franchisor may, at any time and without notice, as it, in its reasonable discretion, consent,
or agree to settlement, or take such other remedial or corrective action as it deems expedient with respect
to the action, suit, proceeding, claim, demand, inquiry or investigation.
F. All losses and expenses incurred under this Section 12 shall be chargeable to and shall be
paid by Developer or any of the Principals pursuant to this Section 12, regardless of any actions, activity or
defense undertaken by Franchisor or the subsequent success or failure of such actions, activity or defense.
However, Franchisor will indemnify Developer from losses or expenses resulting from the direct result of
Franchisor’s negligence or intentional acts.
H. Developer must give Franchisor notice of any such action immediately upon Developer
having received notice of any such action, claim or proceeding.
J. Developer and the Principals expressly agree that the terms of this Section 12 shall continue
in full force and effect after the termination, expiration or transfer of this Agreement or any interest herein.
A. Developer acknowledges that Developer has no interest in or to the Proprietary Marks and
Developer’s right to use the Proprietary Marks is derived solely from the individual Franchise Agreements
entered into between Developer and Franchisor for the purpose of operating CLUB PILATES Studios.
Developer agrees that all usage of the Proprietary Marks by Developer and any goodwill established
exclusively benefits Franchisor. Developer agrees that after termination or expiration of this Agreement,
Developer will not, except with respect to CLUB PILATES Studios operated by Developer under individual
Franchise Agreements, directly or indirectly, at any time or in any manner identify itself or any business as
a Developer or former Developer of, or otherwise associated with, Franchisor or use in any manner or for
any purpose any Proprietary Mark or other indicia of a CLUB PILATES Studio or any colorable imitation.
B. Developer must not use any Proprietary Mark as part of any corporate or trade names or
with any prefix, suffix, or other modifying words, terms, designs, or symbols, or in any modified form, nor
may Developer use any Proprietary Mark in connection with any business or activity, other than the
business conducted by Developer under Franchise Agreements entered into between Developer and
Franchisor, or in any other manner not explicitly authorized in writing by Franchisor.
14. TERMINATION
A. Franchisor may terminate this Agreement for a material default of this Agreement by
Developer and all rights granted herein shall automatically terminate upon written notice to Developer,
upon the occurrence of any of the following:
(1) If Developer becomes insolvent, makes a general assignment for the benefit of
creditors; files a voluntary petition in bankruptcy, or an involuntary petition is filed against Developer in
bankruptcy; or Developer is adjudicated bankrupt; or if a bill in equity or other proceeding for the
appointment of a receiver of Developer or other custodian for Developer or assets is filed and consented to
by Developer; or if a receiver or other custodian (permanent or temporary) of Developer’s assets or
property, or any part thereof, is appointed by a court of competent jurisdiction; or if a proceeding for a
composition of creditors under any state or federal law should be initiated against Developer; or if a final
judgment remains unsatisfied or of record for thirty (30) days or longer, (unless supersedeas bond is filed);
or if Developer is dissolved; or if execution is levied against Developer; or if a suit to foreclose any lien or
mortgage against the premises or Studio is levied; or if the real or personal property of Studio is sold after
levy thereon by any sheriff, marshal or law officer;
(2) If Developer or any of its Principals fail to comply with Section 11 of this
Agreement;
(4) If an immediate threat or danger to public health or safety results from the
operation of a Studio operated by Developer under a Franchise Agreement;
(6) If Developer fails on three (3) or more occasions within any one (1) year period to
comply with one (1) or more provisions of this Agreement, whether or not such failures to comply are cured
after notice thereof is delivered to Developer; or
(7) Failure to comply with the conditions of transfer of any interest in Developer as
required of this Agreement.
B. Franchisor may terminate this Agreement and all rights granted herein, upon thirty (30)
days written notice to Developer, or a less time as specified below, for a material default of this Agreement,
which shall constitute good cause for termination and the failure of Developer to cure the good cause for
termination within the notice period. Good cause for termination shall be the occurrence of any one of the
following events of default:
(1) If Developer fails to meet the development requirements set forth in the
Development Schedule;
(5) If Developer, fails, refuses or is unable to promptly pay when due any monetary
obligation to Franchisor or its affiliate required by this Agreement, or by any Franchise Agreement or any
other agreement between the parties and does not cure the monetary default within fourteen (14) days
following written notice from Franchisor;
(6) If Developer fails to correct a deficiency of a health, sanitation, or safety issue after
notice of such deficiency is issued by a local, state, or federal agency or regulatory authority; or
(7) If Developer fails to comply with any other material term or material condition
imposed by this Agreement or any Franchise Agreement executed pursuant thereto.
C. Failure of Developer to cure the default within the specified time, or a longer period of
time as applicable law may require, will result in Developer’s rights under this Agreement to be terminated
effective on the expiration of the notice period, and without further notice to Developer.
D. Upon termination of this Agreement, Developer has no right to establish or operate any
Studio for which an individual Franchise Agreement has not already been executed by both Franchisor and
Developer, as well as delivered to Developer, as of the date of termination. Franchisor, effective upon
termination of this Agreement, shall have the absolute right and is entitled to establish, and to license others
to establish, CLUB PILATES Studios in the Development Area, except as may be otherwise provided under
any Franchise Agreement which is then in effect between Franchisor and Developer.
E. No default under this Agreement shall constitute a default under any Franchise Agreement
between the parties, unless Developer’s acts or omissions also violate the terms and conditions of the
applicable Franchise Agreement.
F. No right or remedy herein conferred upon or reserved to the Franchisor is exclusive of any
other right or remedy provided or permitted by law or in equity.
All obligations of Franchisor and Developer under this Agreement, which expressly or by their
nature survive the expiration or termination of this Agreement, continue in full force and effect after the
expiration or termination of this Agreement and until they are satisfied in full or by their nature expire.
A. BY FRANCHISOR
Franchisor has the absolute right to transfer or assign this Agreement and all or any part of its rights,
duties or obligations to any person or legal entity without the consent of or notice to Developer. This
Agreement shall inure to the benefit of, and be binding on the successors and assigns of Franchisor.
Developer understands and acknowledges that the rights and duties created by this Agreement are
personal to Developer and its owners and that Franchisor has granted these rights to Developer in reliance
upon the individual or collective character, skill, aptitude, attitude, business ability and financial capacity
of Developer and/or its owners. Unless otherwise provided with respect to an assignment to an entity
controlled by Developer as provided in Section 16(D), none of these rights nor any ownership interest in
Developer may be voluntarily, involuntarily, directly or indirectly, assigned, sold, conveyed, pledged, sub-
franchised or otherwise transferred by Developer or its owners (including by merger or consolidation, by
issuance of additional securities representing an ownership interest in Developer, by conversion of a general
partnership to a limited partnership, by transfer or creation of an interest as a general partner of a
partnership, by transfer of an interest in Developer or in this Agreement in a divorce proceeding, or if
Developer or an owner of Developer dies, by will, declaration of or transfer in trust or the laws of the
intestate succession) without the approval of Franchisor. Any attempted assignment or transfer without
such approval will constitute a breach of this Agreement and will not transfer any rights or interests to such
assignee or transferee.
If Developer is in substantial compliance with this Agreement, Franchisor shall not unreasonably
withhold its approval of an assignment or transfer contemplated by Section 16(B) so long as the proposed
assignee or transferer has good and moral character, sufficient business experience and aptitude to develop
and own and operate Studios, and otherwise meets Franchisor’s then-current standards for developers and
System franchisees. Franchisor may require that any one or more of the following conditions be met before,
or concurrently with, the effective date of any such assignment or transfer:
(1) All the accrued monetary obligations of Developer or any of its affiliates and all
other outstanding obligations to Franchisor or its affiliate arising under this Agreement or any Franchise
Agreement or other agreement between them and all trade accounts and any other debts to Franchisor, of
whatsoever nature, prior to the transfer becoming effective shall be satisfied;
(2) Developer and its affiliates are not in material default of any substantive provision
of this Agreement, any amendment hereof or successor hereto, or any Franchise Agreement granted
pursuant to its terms, or other agreement between Developer or any of its affiliates and Franchisor or its
affiliate;
(3) Developer and its Principals, as applicable, shall have executed a general release,
in a form satisfactory to Franchisor, releasing Franchisor of any and all claims against Franchisor and its
affiliate and their respective past and present partners, the past and present officers, directors, shareholders,
partners, agents, representatives, independent contractors, servants and employees of each of them, in their
corporate and individual capacities, including, without limitation, claims arising under or related to this
Agreement and any other agreements between Developer and Franchisor, or under federal, state or local
laws, rules, and regulations or orders;
(4) The transferee shall demonstrate to Franchisor’s satisfaction that the transferee
meets the criteria considered by Franchisor when reviewing a prospective developer’s application for
development rights, including, but not limited to, Franchisor’s managerial and business experience
standards, that the transferee possesses good moral character, business reputation and credit rating; that the
transferee has the aptitude, financial resources and capital committed for the operation of the business, and
(5) The transferee must (i) sign a written assumption agreement, in a form prescribed
by Franchisor, assuming full, unconditional, joint and several liability from the date of the transfer of all
obligations, covenants and agreements of Developer in this Agreement, and (ii) at our option, execute our
then-current form of Development Agreement that will then govern the remainder of the original
Development Schedule. If transferee is a corporation, limited liability company or a partnership,
transferee’s shareholders, partners, members or other investors, as applicable, shall also execute such
agreement;
(6) Developer shall pay a transfer fee equal to $10,000 per undeveloped territory to
Franchisor at the time of transfer, unless the transfer is being made: (i) to an immediate family member of
Developer that Franchisor approves pursuant to Section 16(F); or (ii) in the form of an encumbrance of the
assets of any Franchised Business (or a subordinating Franchisor’s security interest in such assets) as a
necessary condition to obtain SBA or traditional bank financing;
(7) Developer acknowledges and agrees that each condition, which must be met by the
transferee, is reasonable and necessary; and
(8) Developer must pay any referral fees or commissions that may be due to any
franchise broker, sales agent or other third party upon the occurrence of such assignment.
Franchisor’s consent to a transfer of any interest in Developer described herein shall not constitute
a waiver of any claims it may have against the transferring party, nor shall it be deemed a waiver of
Franchisor’s right to demand exact compliance with any of the terms of this Agreement by the transferee.
Upon an approved transfer under this Section, Developer will only be bound by, and liable in connection
with, its post-term obligations under this Agreement.
(1) Notwithstanding the provisions of this Section 16 of this Agreement, upon thirty
(30) days’ prior written notice to Franchisor, and without payment of a transfer fee, Developer may assign
this Agreement to a corporation or limited liability company that conducts no business other than the
development and/or operation of CLUB PILATES Studios. Developer shall be the owner of all the voting
stock or interest of the corporation or limited liability company, or if Developer is more than one individual,
each individual shall have the same proportionate ownership interest in the corporation as he had in
Developer before the transfer. Developer and each of its Principals, as applicable, may transfer, sell or
assign their respective interests in Developer, by and amongst themselves with Franchisor’s prior written
consent, which consent shall not be unreasonably withheld; but may be conditioned on compliance with
Section 11, except that such transfer, sale or assignment shall not effect a change in the controlling interest
in Developer.
If Developer receives and desires to accept any bona fide offer to transfer an ownership interest in
this Agreement from a third party, then the Developer shall promptly notify Franchisor in writing and send
Franchisor an executed copy of the contract of transfer. Franchisor shall have the right and option,
exercisable within thirty (30) days after actual receipt of such notification or of the executed contract of
transfer which shall describe the terms of the offer, to send written notice to Developer that Franchisor
intends to purchase the Developer’s interest on the same terms and conditions offered by the third party.
Closing on the purchase must occur within sixty (60) days from the date of notice by Franchisor to the
Developer of Franchisor’s election to purchase. If Franchisor elects not to accept the offer within the thirty
(30) day period, Developer shall have a period not to exceed sixty (60) days to complete the transfer subject
to the conditions for approval set forth in Section 16(C) of this Agreement. Any material change in the
terms of any offer before closing shall constitute a new offer subject to the same rights of first refusal by
Franchisor as in the case of an initial offer. Failure of Franchisor to exercise the option afforded by this
Section 16 shall not constitute a waiver of any other provision of this Agreement. If the offer from a third
party provides for payment of consideration other than cash or involves certain intangible benefits,
Franchisor may elect to purchase the interest proposed to be sold for the reasonable cash equivalent, or any
publicly-traded securities, including its own, or intangible benefits similar to those being offered. If the
parties cannot agree within a reasonable time on the reasonable cash equivalent of the non-cash part of the
offer, then such amount shall be determined by an independent appraiser designated by Franchisor, and his
determination shall be binding.
F. DEATH OR DISABILITY
Upon the death or permanent disability of Developer (or the managing shareholder, managing
member or partner), the executor, administrator, conservator or other personal representative of that person,
or the remaining shareholders, partners or members, must appoint a competent manager that is approved
by Franchisor within ninety (90) days from the date of death or permanent disability (the “90 Day Period”).
Before the end of the 90 Day Period, the appointed manager must attend and successfully complete
Franchisor’s training program and must either execute Franchisor’s then-current form of area development
agreement for the unexpired term of this Agreement, or furnish a personal guaranty of any partnership,
corporate or limited liability company Developer’s obligations to Franchisor and Franchisor’s affiliates. If
the Studio is not being managed by a Franchisor approved manager during the 90 Day Period, Franchisor
is authorized, but is not required, to immediately appoint a manager to maintain the operations of
Developer’s Studios for and on behalf of Developer until an approved assignee is able to assume the
management and operation of the Studio. Franchisor’s appointment of a manager of the Studio does not
relieve Developer of his obligations, and Franchisor is not liable for any debts, losses, costs or expenses
incurred in the operations of the Studio or to any creditor of Developer for any products, materials, supplies
or services purchased by the Studio during any period in which it is managed by Franchisor’s appointed
manager. Franchisor has the right to charge a reasonable fee for management services and to cease to
provide management services at any time. Franchisor’s right of first refusal set forth in Section 16(E) will
not apply to a transfer under this Section if the transferee is an immediate family member of Developer that
Franchisor approves.
(1) Developer acknowledges that the written information used to raise or secure funds
can reflect upon Franchisor. Developer agrees to submit any written information intended to be used for
that purpose to Franchisor before its inclusion in any registration statement, prospectus or similar offering
circular or memorandum. This requirement applies under the following conditions: (i) if Developer
attempts to raise or secure funds by the sale of securities in Developer or any affiliate of Developer
(2) The prospectus or other literature utilized in any offering must contain the
following language in bold-face type on the first textual page:
“NEITHER CLUB PILATES FRANCHISE, LLC NOR ITS AFFILIATE NOR ANY
OF ITS AFFILIATE’S SUBSIDIARIES IS DIRECTLY OR INDIRECTLY THE
ISSUER OF THE SECURITIES OFFERED. NEITHER CLUB PILATES
FRANCHISE, LLC NOR ITS AFFILIATE NOR ANY OF ITS AFFILIATE’S
SUBSIDIARIES ASSUMES ANY RESPONSIBILITY WITH RESPECT TO THIS
OFFERING AND/OR THE ADEQUACY OR ACCURACY OF THE
INFORMATION SET FORTH, INCLUDING ANY STATEMENTS MADE WITH
RESPECT TO ANY OF THEM. NEITHER CLUB PILATES FRANCHISE, LLC
NOR ITS AFFILIATE NOR ANY OF ITS AFFILIATE’S SUBSIDIARIES
ENDORSES OR MAKES ANY RECOMMENDATION WITH RESPECT TO THE
INVESTMENT CONTEMPLATED BY THIS OFFERING.”
(3) Developer and each of its owners agrees to indemnify, defend and hold harmless
Franchisor and its affiliate, and their respective officers, directors, employees and agents, from any and all
claims, demands, liabilities, and all costs and expenses (including reasonable attorneys’ fees) incurred by
Franchisor as the result of the offer or sale of securities. This Agreement applies to any and all claims,
demands, liabilities, and all costs and expenses (including reasonable attorneys’ fees) asserted by a
purchaser of any security or by a governmental agency. Franchisor has the right (but not the obligation) to
defend any claims, demands or liabilities and/or to participate in the defense of any action to which
Franchisor or its affiliate or any of their respective officers, directors, employees or agents is named as a
party.
H. NOTICE TO FRANCHISOR
Provided Developer is not then a public company, if any person holding an interest in Developer
(other than Developer or a Principal, which parties shall be subject to the provisions set forth above)
transfers such interest, then Developer shall promptly notify Franchisor of such proposed transfer in writing
and provide information as Franchisor may reasonably request before the transfer. The transferee may not
be one of Franchisor’s competitors. The transferee must execute a Confidentiality Agreement and Ancillary
Covenants Not to Compete in the form then required by Franchisor, which form shall be in substantially
the same form attached hereto as Exhibit E. Franchisor also reserves the right to designate the transferee
as one of the Principals. If Developer is a public company, this provision applies only to transfers in interest
17. APPROVALS
A. Wherever this Agreement requires the prior approval or consent of Franchisor, Developer
shall make a timely written request to Franchisor for such approval or consent.
B. Franchisor makes no warranties or guarantees upon which Developer may rely and
assumes no liability or obligation to Developer or to any third party to which it would not otherwise be
subject, by providing any waiver, approval, advise, consent, or services to Developer in connection with
this Agreement, or by any reason of neglect, delay or denial of any request therefor.
18. NONWAIVER
B. All rights and remedies of the parties hereto shall be cumulative and not alternative, in
addition to and not exclusive of any other rights or remedies which are provided for herein or which may
be available at law or in equity in case of any breach, failure or default or threatened breach, failure or
default of any term, provision or condition of this Agreement, the rights and remedies of the parties hereto
shall be continuing and shall not be exhausted by any one or more uses thereof, and may be exercised at
any time or from time to time as often as may be expedient; and any option or election to enforce any such
right or remedy may be exercised or taken at any time and from time to time. The expiration or early
termination of this Agreement shall not discharge or release Developer from any liability or obligation then
accrued, or any liability or obligation continuing beyond, or arising out of, the expiration or early
termination of this Agreement.
A. Developer must keep accurate records concerning all transactions and written
communications between Franchisor and Developer relating to the development and operation of Studios
in the Development Area. Franchisor’s duly authorized representative has the right, following reasonable
notice, at all reasonable hours of the day to examine all Developer’s records with respect to the subject
matter of this Agreement, and has full and free access to records for that purpose and for the purpose of
making extracts. All records must be kept available for at least three (3) years after preparation.
All written notices and reports permitted or required to be delivered by the provisions of this
Agreement or of the Manuals shall be deemed so delivered at the time delivered by hand or by e-mail with
receipt confirmed by the receiving party or one (1) business day after sending by overnight courier with
delivery confirmed and addressed to the party to be notified at its most current address of which the
notifying party has been notified. The following addresses for the parties shall be used unless and until a
different address has been designated by written notice to the other party:
Notices to Franchisor:
Notice to Developer:
______________________________
______________________________
______________________________
______________________________
ATTN: ________________________
A. This Agreement is governed by the laws of the state of California without reference to this
state’s conflict of laws principles (subject to state law), except that: (i) any disputes or actions involving
any non-competition covenants set forth in any agreement with us, including the interpretation and
enforcement thereof, must be governed by the law of the state where the Studio is located.; and (ii) any
franchise-specific or franchise-applicable laws of California, including those related to pre-sale disclosure
and the franchise relationship generally, will not apply to this Agreement or franchise awarded hereunder
unless the awarding of said franchise specifically falls within the scope of such California laws, regulations
or statutes without reference to and independent of any reference to this choice of law provision.
A. Developer must first bring any claim or dispute between Developer and Franchisor to
Franchisor’s management and make every effort to resolve the dispute internally. Developer must exhaust
this internal dispute resolution procedure before Developer may bring Developer’s dispute before a third
B. At Franchisor’s option, all claims or disputes between Developer and Franchisor (or its
affiliates) arising out of, or in any way relating to, this Agreement or any other agreement by and between
Developer and Franchisor (or its affiliates), or any of the parties’ respective rights and obligations arising
from such agreement, which are not first resolved through the internal dispute resolution procedure sent
forth in Section 22(A) above, will be submitted first to mediation to take place at Franchisor’s then-current
headquarters under the auspices of the American Arbitration Association (“AAA”), in accordance with
AAA’s Commercial Mediation Rules then in effect. Before commencing any legal action against
Franchisor or its affiliates with respect to any such claim or dispute, Developer must submit a notice to
Franchisor, which specifies, in detail, the precise nature and grounds of such claim or dispute. Franchisor
will have a period of thirty (30) days following receipt of such notice within which to notify Developer as
to whether Franchisor or its affiliates elects to exercise its option to submit such claim or dispute to
mediation. Developer may not commence any action against Franchisor or its affiliates with respect to any
such claim or dispute in any court unless Franchisor fails to exercise its option to submit such claim or
dispute to mediation, or such mediation proceedings have been terminated either: (i) as the result of a written
declaration of the mediator(s) that further mediation efforts are not worthwhile; or (ii) as a result of a written
declaration by Franchisor. Franchisor’s rights to mediation, as set forth herein, may be specifically enforced
by Franchisor. Each party will bear its own cost of mediation and Franchisor and Developer will share
mediator fees equally. This agreement to mediate will survive any termination or expiration of this
Agreement. The parties will not be required to first attempt to mediate a controversy, dispute, or claim
through mediation as set forth in this Section 22(B) if such controversy, dispute, or claim concerns an
allegation that a party has violated (or threatens to violate, or poses an imminent risk of violating): (i) any
federally protected intellectual property rights in the Proprietary Marks, the System, or in any confidential
information; (ii) any of the restrictive covenants contained in this Agreement; and (iii) any of Developer’s
payment obligations under this Agreement.
C. Developer and Franchisor believe that it is important to resolve any disputes amicably,
quickly, cost effectively and professionally, and to return to business as soon as possible. Subject to Sections
22(D)-(E) of this Agreement, Developer and Franchisor have agreed that the provisions of this Article 22
support these mutual objectives and, therefore, agree that any litigation, claim, dispute, suit, action,
controversy, or proceeding of any type whatsoever including any claim for equitable relief and/or where
either party is acting as a “private attorney general,” suing pursuant to a statutory claim or otherwise,
between or involving Developer and Franchisor on whatever theory and/or facts based, and whether or not
arising out of this Agreement, (“Claim”) will be processed in the following manner:
a. Developer and Franchisor each expressly waives all rights to any court proceeding, except
as expressly provided in Sections 22(B) and 22(C), below.
b. All Claims shall be submitted to and resolved by binding arbitration in Orange County,
California, before and in accordance with the arbitration rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator shall be entered in any
Court having jurisdiction thereof.
c. Franchisor and Developer agree that any arbitration between Franchisor and Developer
shall be of Developer’s individual claim and that the claim subject to arbitration shall not
be arbitrated on a class-wide basis.
e. In no event shall Franchisor be liable to Developer for punitive damages in any action
arising out of or relating to this Agreement, or any breach, termination or cancellation
hereof.
f. Any arbitration proceeding conducted under this Section, including all demands, filings
and evidence submitted in connection therewith, must be kept strictly confidential, unless
Franchisor agrees otherwise in writing.
D. Developer acknowledges and agrees that irreparable harm could be caused to Franchisor
by Developer’s violation of certain provisions of this Agreement and, as such, in addition to any other relief
available at law or equity, Franchisor shall be entitled to obtain in any court of competent jurisdiction,
without bond, restraining orders or temporary or permanent injunctions in order to enforce, among other
items, the provisions of this Agreement relating to: (i) Developer’s use of the Proprietary Marks and
confidential information; (ii) the in-term covenant not to compete, as well as any other violations of the
restrictive covenants set forth in this Agreement; (iii) Developer’s obligations on termination or expiration
of this Agreement; (iv) disputes and controversies based on or arising under the Lanham Act, as now or
hereafter amended; (v) disputes and controversies involving enforcement of the Franchisor’s rights with
respect to confidentiality under this Agreement; and (vi) to prohibit any act or omission by Developer or
its employees that constitutes a violation of applicable law, threatens Franchisor’s franchise system or
threatens other franchisees of Franchisor. Developer’s only remedy if such an injunction is entered will be
the dissolution of the injunction, if appropriate, and Developer waives all damage claims if the injunction
is wrongfully issued.
E. Franchisor’s officers, directors, shareholders, agents and/or employees are express third
party beneficiaries of the provisions of this Agreement, including the dispute resolution provisions set forth
in Section 22 of this Agreement, each having authority to specifically enforce the right to mediate claims
asserted against such person(s) by Developer.
G. Developer shall not withhold all or any part of any payment to Franchisor or any of its
affiliates on the grounds of Franchisor’s alleged nonperformance or as an offset against any amount
Franchisor or any of Franchisor’s affiliates allegedly may owe Developer under this Agreement or any
related agreements.
H. Developer further agrees that no cause of action arising out of or under this Agreement
may be maintained by Developer against Franchisor unless brought before the expiration of one (1) year
after the act, transaction or occurrence upon which such action is based or the expiration of one (1) year
after the Developer becomes aware of facts or circumstances reasonably indicating that Developer may
have a claim against Franchisor hereunder, whichever occurs sooner, and that any action not brought within
this period shall be barred as a claim, counterclaim, defense, or set-off. Developer hereby waives the right
to obtain any remedy based on alleged fraud, misrepresentation, or deceit by Franchisor, including, without
limitation, rescission of this Agreement, in any mediation, judicial, or other adjudicatory proceeding arising
hereunder, except upon a ground expressly provided in this Agreement, or pursuant to any right expressly
I. Developer hereby waives to the fullest extent permitted by law, any right to or claim for
any punitive, exemplary, incidental, indirect, special or consequential damages (including, without
limitation, lost profits) against Franchisor arising out of any cause whatsoever (whether such cause be based
in contract, negligence, strict liability, other tort or otherwise) and agrees that in the event of a dispute, that
Developer’s recovery is limited to actual damages. If any other term of this Agreement is found or
determined to be unconscionable or unenforceable for any reason, the foregoing provisions shall continue
in full force and effect, including, without limitation, the waiver of any right to claim any consequential
damages. Nothing in this Section or any other provision of this Agreement shall be construed to prevent
Franchisor from claiming and obtaining expectation or consequential damages, including lost future
royalties for the balance of the term of this Agreement if it is terminated due to Developer’s default, which
the parties agree and acknowledge Franchisor may claim under this Agreement.
23. ENFORCEMENT
(1) Except as expressly provided to the contrary in this Agreement, each section,
paragraph, term and provision of this Agreement, is considered severable and if, for any reason, any portion
of this Agreement is held to be invalid, contrary to, or in conflict with any applicable present or future law
or regulation in a final, unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which Franchisor is a party, that ruling shall not impair the operation of, or
have any other effect upon, other portions of this Agreement as may remain otherwise intelligible, which
shall continue to be given full force and effect and bind the parties to this Agreement, although any portion
held to be invalid shall be deemed not to be a part of this Agreement from the date the time for appeal
expires, if Developer is a party, otherwise upon Developer’s receipt of a notice of non-enforcement from
Franchisor.
(2) If any applicable and binding law or rule of any jurisdiction requires a greater prior
notice of the termination of this Agreement than is required in this Agreement, or the taking of some other
action not required, or if under any applicable and binding law or rule of any jurisdiction, any provision of
this Agreement or any specification, standard or operating procedure Franchisor prescribes is invalid or
unenforceable, the prior notice and/or other action required by law or rule shall be substituted for the
comparable provisions, and Franchisor has the right, in its sole discretion, to modify the invalid or
unenforceable provision, specification, standard or operating procedure to the extent required to be valid
and enforceable. Developer agrees to be bound by any promise or covenant imposing the maximum duty
B. EXCEPTIONS
Neither Franchisor nor Developer are liable for loss or damage or deemed to be in breach of this
Agreement if its failure to perform its obligations results from: (1) transportation shortages, inadequate
supply of labor, material or energy, or the voluntary foregoing of the right to acquire or use any of the
foregoing in order to accommodate or comply with the orders, requests, regulations, recommendations or
instructions of any federal, state or municipal government or any department or agency; (2) compliance
with any law, ruling, order, regulation, requirement or instruction of any federal, state, or municipal
government or any department or agency; (3) acts of God; (4) acts or omissions of the other party; (5) fires,
strikes, embargoes, war or riot; or (6) any other similar event or cause. Any delay resulting from any of
these causes shall extend performance accordingly or excuse performance, in whole or in part, as may be
reasonable.
The rights of Franchisor and Developer under this Agreement are cumulative and no exercise or
enforcement by Franchisor or Developer of any right or remedy precludes the exercise or enforcement by
Franchisor or Developer of any other right or remedy which Franchisor or Developer is entitled by law to
enforce.
E. VARIANCES
Developer acknowledges that Franchisor has and may at different times approve exceptions or
changes from the uniform standards of the System in Franchisor’s absolute sole discretion, which
Franchisor deems desirable or necessary under particular circumstances. Developer understands that he
has no right to object to or automatically obtain such variances, and any exception or change must be
approved in advance from Franchisor in writing. Developer understands existing Developers may operate
under different forms of agreements and that the rights and obligations of existing Developers may differ
materially from this Agreement.
This Agreement is binding upon the parties of this Agreement and their respective executors,
administrators, heirs, assigns and successors in interest, and shall not be modified except by written
agreement signed by both Developer and Franchisor.
G. CONSTRUCTION/INTEGRATION CLAUSE
This Agreement, all exhibits to this Agreement and all ancillary agreements executed
contemporaneously with this Agreement constitute the entire agreement between the parties with reference
to the subject matter of this Agreement and supersede any and all prior negotiations, undertakings,
representations, and agreements. Nothing in this Agreement or in any related agreement, however, is
intended to disclaim the representations Franchisor made in the FDD that Franchisor furnished to
Developer. Developer acknowledges that Developer is entering into this Agreement, and all ancillary
agreements executed contemporaneously with this Agreement, as a result of Developer’s own independent
investigation of the franchised business and not as a result of any representations about Franchisor made
by Franchisor’s shareholders, officers, directors, employees, agents, representatives, independent
contractors, attorneys, or Developers, which are contrary to the terms set forth in this Agreement or of any
franchise disclosure document, offering circular, prospectus, or other similar document required or
permitted to be given to Developer pursuant to applicable law.
Developer hereby acknowledges and further represents and warrants to Franchisor that:
3. Franchisor has not made any guarantee or provided any assurance that the business
location will be successful or profitable regardless of whether Franchisor may have approved of the
franchise or site location;
4. Developer has (a) read this Agreement in its entirety and understands its contents;
(b) been given the opportunity to clarify any provisions that Developer did not understand and (c) had the
opportunity to consult with professional advisors regarding the operation and effect of the Agreement and
the operation of the System;
5. Developer has, together with its advisors, sufficient knowledge and experience in
financial and business matters to make an informed decision with respect to the franchise offered by
Franchisor; and
6. Developer has received a copy of the Franchise Disclosure Document not later
than the first personal meeting held to discuss the sale of a franchise, or fourteen (14) calendar days before
execution of this Agreement or fourteen (14) calendar days before any payment of any consideration.
Except as may have been disclosed at Item 19 of Franchisor’s Franchise Disclosure Document,
Developer represents and warrants to Franchisor that no claims, representations, or warranties regarding
the earnings, sales, profits, success or failure of the franchised business have been made to Developer and
no such claims, representations or warranties have induced Developer to enter into this Agreement.
24. CAVEAT
B. Developer acknowledges that it has entered into this Agreement after making an
independent investigation of Franchisor’s operations and not upon any representation as to gross sales,
volume, potential earnings or profits which Developer in particular might be expected to realize, nor has
anyone made any other representation which is not expressly set forth in this Agreement, to induce the
Developer to accept this franchise and execute this Agreement.
C. Developer represents and acknowledges that he has received a copy of this Agreement,
with all blanks filled in, from Franchisor at least seven (7) calendar days before the date of execution of
this Agreement. Developer further represents that he understands the terms, conditions and obligations of
this Agreement and agrees to be bound.
25. MISCELLANEOUS
A. Except as otherwise expressly provided, nothing in this Agreement is intended, nor shall
be deemed, to confer any rights or remedies upon any person or legal entity who is not a party to this
Agreement.
B. The headings of the several sections and paragraphs are for convenience only and do not
define, limit or construe the contents of sections or paragraphs.
C. The “Developer” as used in this Agreement is applicable to one (1) or more persons, a
corporation or a partnership or limited partnership or limited liability company as the case may be, and the
singular usage includes the plural and the masculine and neuter usages include the other and the feminine.
If two (2) or more persons are at any time Developer under this Agreement, their obligations and liabilities
to Franchisor shall be joint and several. References to “Developer” and “Assignee” which are applicable
to an individual or individuals shall mean the owner or owners of the equity or operating control of
Developer or the Assignee, if Developer or the Assignee is a corporation, partnership, limited partnership
or limited liability company.
This Agreement shall be executed in multiple copies, each of which shall be deemed an original.
FRANCHISOR: DEVELOPER:
CLUB PILATES FRANCHISE, LLC
By: IF AN INDIVIDUAL:
Date: Date:
Spouse Signature:
Date: ___________________________
IF A PARTNERSHIP, CORPORATION, OR
OTHER ENTITY:
By:
Print Name:
Title:
Date:
In consideration of, and as an inducement to, the execution of that certain Area Development
Agreement (the “Area Development Agreement”) by and between Club Pilates Franchise, LLC (the
“Franchisor”), and ___________________ (“Developer”), each of the undersigned (each, a “Guarantor”)
hereby personally and unconditionally (a) guarantees to Franchisor, and its successor and assigns, for the
term of the Area Development Agreement and as provided in the Area Development Agreement, that
Developer shall punctually pay and perform each and every undertaking, agreement and covenant set forth
in the Area Development Agreement; and (b) agrees to be personally bound by, and personally liable for
the breach of, each and every obligation of Developer under the the Area Development Agreement, both
monetary obligations and non-monetary in nature, including without limitation, those obligations related
to: confidentiality and non-disclosure; indemnification; the Proprietary Marks; the in-term and post-term
covenants against competition, as well as all other restrictive covenants; and the governing law, venue,
attorneys’ fees and other dispute resolution provisions set forth in the Area Development Agreement (that
shall also apply to this Guaranty and Assumption of Obligations).
Each Guarantor hereby waives: (1) acceptance and notice of acceptance by Franchisor of the
foregoing undertakings; (2) notice of demand for payment of any indebtedness or nonperformance of any
obligations guaranteed; (3) protest and notice of default to any party with respect to the indebtedness or
nonperformance of any obligations guaranteed; (4) any right Guarantor may have to require that an action
be brought against Developer or any other person as a condition of liability; and (5) the defense of the
statute of limitations in any action hereunder or for the collection of any indebtedness or the performance
of any obligation hereby guaranteed.
Each Guarantor hereby consents and agrees that: (1) such Guarantor’s undertaking shall be direct,
immediate and independent of the liability of, and shall be joint and several with, Developer and any other
Guarantors; (2) Guarantor shall render any payment or performance required under the Area Development
Agreement upon demand if Developer fails or refuses punctually to do so; (3) Guarantor’s liability shall
not be contingent or conditioned upon pursuit by Franchisor of any remedies against Developer or any other
person; (4) Guarantor’s liability shall not be diminished, relieved or otherwise affected by any extension
of time, credit or other indulgence which Franchisor may grant to Developer or to any other person,
including the acceptance of any partial payment or performance, or the compromise or release of any claims,
none of which shall in any way modify or amend this guaranty, which shall be continuing and irrevocable
during the term of the Area Development Agreement; (5) this undertaking will continue unchanged by the
occurrence of any bankruptcy with respect to Developer or any assignee or successor of Developer or by
any abandonment of the Area Development Agreement by a trustee of Developer; (6) neither the
Guarantor’s obligations to make payment or render performance in accordance with the terms of this
undertaking nor any remedy for enforcement shall be impaired, modified, changed, released or limited in
any manner whatsoever by any impairment, modification, change, release or limitation of the liability of
Developer or its estate in bankruptcy or of any remedy for enforcement, resulting from the operation of any
present or future provision of the U.S. Bankruptcy Act or other statute, or from the decision of any court or
agency; (7) Franchisor may proceed against Guarantor and Developer jointly and severally, or Franchisor
may, at its option, proceed against Guarantor, without having commenced any action, or having obtained
any judgment against Developer; and (8) Guarantor shall pay all reasonable attorneys’ fees and all costs
and other expenses incurred in any collection or attempt to collect amounts due pursuant to this undertaking
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Guaranty on the date
stated on the first page hereof.
PERSONAL GUARANTORS
___________________________
[Insert Name of Guarantor] [Insert Name of Spouse]
___________________________
[Insert Name of Guarantor] [Insert Name of Spouse]
___________________________
[Insert Name of Guarantor] [Insert Name of Spouse]
___________________________
[Insert Name of Guarantor] [Insert Name of Spouse]
DEVELOPMENT AREA
____________________________________________________________
____________________________________________________________
____________________________________________________________
DEVELOPER FRANCHISOR
Title:_______________________________
DEVELOPMENT SCHEDULE
1. Development Schedule
Expiration of Development Number of New Unit Franchises that Number of Unit Franchises
Period Must be Opened and Commence that Must be Open and
Operations Within Development Operating by the Expiration of
Period the Development Period
Developer’s failure to comply with the Development Schedule in any manner shall be grounds for
Franchisor to (a) terminate the Development Agreement to which this Development Schedule is attached
as an Exhibit, or (b) in lieu of such termination, terminate any exclusive or other territorial rights that
Developer may have within the Development Area or otherwise under the Development Agreement.
APPROVED:
DEVELOPER FRANCHISOR
Title:_______________________________
FRANCHISE AGREEMENT
A. The following is a list of shareholders, partners, members or other investors in Developer, including
all investors who own or hold a direct or indirect interest in Developer, and a description of the
nature of their interest:
B. The following is a list of all of Principals described in and designated pursuant to this Area
Development Agreement, each of whom shall execute the Confidentiality Agreement and Ancillary
Covenants Not to Compete substantially in the form set forth in Exhibit E of this Area Development
Agreement:
DEVELOPER FRANCHISOR
Title:_______________________________
This Agreement is made and entered into this day of ___________, 20__, between CLUB
PILATES FRANCHISE, LLC, a Delaware limited liability company
(“Franchisor”), (“Developer”), and
(“Covenantor”).
RECITALS
WHEREAS, Franchisor has obtained the right to develop a unique system (the “System”) for the
development and operation of CLUB PILATES Studios under the name and marks CLUB PILATES
(“Studios”); and
WHEREAS, the System includes, but is not limited to, certain trade names, service marks,
trademarks, logos, emblems and indicia of origin, including, but not limited to, the marks CLUB PILATES
and other trade names, service marks, trademarks, logos, insignia, slogans, emblems, designs and
commercial symbols as Franchisor may develop in the future to identify for the public the source of services
and products marketed under the marks and under the System and representing the System’s high standards
of quality, appearance, service and all information relating to the System and to the development and
operation of the Studio, including, without limitation, the operating manual, Franchisor’s training program,
members and supplier lists, or other information or know-how distinctive to a CLUB PILATES Studio; all
of which Franchisor may change, improve and further develop and which Franchisor uses in connection
with the operation of the System (collectively, the “Confidential Information”); and
WHEREAS, the Proprietary Marks and Confidential Information provide economic advantages to
Franchisor and are not generally known to, and are not readily ascertainable by proper means by,
Franchisor’s competitors who could obtain economic value from knowledge and use of the Confidential
Information; and
WHEREAS, Franchisor has taken and intends to take all reasonable steps to maintain the
confidentiality and secrecy of the Confidential Information; and
WHEREAS, Franchisor has granted Developer the limited right to develop a CLUB PILATES
Studio using the System, the Proprietary Marks and the Confidential Information, pursuant to an Area
Development Agreement entered into on _____________________________, 20 (“Area Development
Agreement”), by and between Franchisor and Developer; and
WHEREAS, Franchisor and Developer have agreed in the Area Development Agreement on the
importance to Franchisor and to Developer and other licensed users of the System of restricting the use,
access and dissemination of the Confidential Information; and
WHEREAS, Developer has agreed to obtain from those covenantors written agreements protecting
the Confidential Information and the System against unfair competition; and
WHEREAS, Covenantor wishes and needs to receive and use the Confidential Information in the
course of his employment or association in order to effectively perform the services for Developer; and
WHEREAS, Covenantor acknowledges that receipt of and the right to use the Confidential
Information constitutes independent valuable consideration for the representations, promises and covenants
made by Covenantor.
NOW, THEREFORE, in consideration of the mutual covenant and obligations contained in this
Agreement, the parties agree as follows:
Confidentiality Agreement
1. Franchisor and/or Developer shall disclose to Covenantor some or all of the Confidential
Information relating to the System. All information and materials, including, without limitation, manuals,
drawings, specifications, techniques and compilations of data which Franchisor provides to Developer
and/or Covenantor are deemed Confidential Information for the purposes of this Agreement.
2. Covenantor shall receive the Confidential Information in confidence and must, at all times,
maintain them in confidence, and use them only in the course of his employment or association with a
Developer and then only in connection with the development and/or operation by Developer of a CLUB
PILATES Studio for so long as Developer is licensed by Franchisor to use the System.
3. Covenantor shall not at any time make copies of any documents or compilations containing
some or all of the Confidential Information without Franchisor’s express written permission.
4. Covenantor shall not at any time disclose or permit the disclosure of the Confidential
Information except to other employees of Developer and only to the limited extent necessary to train or
assist other employees of Developer in the development or operation of a CLUB PILATES Studio.
5. Covenantor must surrender any material containing some or all of the Confidential
Information to Developer or Franchisor, upon request, or upon termination of employment by Developer,
or upon conclusion of the use for which the information or material may have been furnished to Covenantor.
6. Covenantor shall not at any time, directly or indirectly, do any act that would or would
likely be injurious or prejudicial to the goodwill associated with the Confidential Information and the
System.
7. Franchisor loans all manuals to Developer for limited purposes only and they remain the
property of Franchisor and may not be reproduced, in whole or in part, without Franchisor’s written consent.
1. In order to protect the goodwill and unique qualities of the System and the confidentiality
and value of the Confidential Information during the term of this Agreement, and in consideration for the
disclosure to Covenantor of the Confidential Information, Covenantor further agrees and covenants as
follows:
b. Not to employ, or seek to employ, any person who is at the time or was within the
preceding one hundred eighty (180) days employed by Franchisor, its affiliate or any Developer of
Franchisor, or otherwise directly or indirectly induce such person to leave that person’s employment except
as may occur in connection with Developer’s employment of that person if permitted under the Area
Development Agreement; and
c. Except with respect to Studios operated under a valid and existing Franchise
Agreement between Developer (or Developer’s affiliates) and Franchisor, own, maintain, operate, engage
in, or have any financial or beneficial interest in (including any interest in corporations, partnerships, trusts,
limited liability companies, unincorporated associations or joint ventures), advise, assist or make loans to,
any Competing Business (as defined below) or a business that is of a character and concept similar to a
CLUB PILATES Studio. For purposes of this Agreement, a “Competing Business” is defined as any
business that (1) derives at least ten percent (10%) of its revenue from sales generated from the provision
of any Pilates instruction or other Approved Services and Approved Products that are offered at a CLUB
PILATES Studio, or (2) grants franchises or licenses to others to operate the type of business described in
subpart (1) of this Section.
b. Employ, or seek to employ, any person who is at the time or was within the
preceding one hundred eighty (180) days employed by Franchisor, its affiliate or any franchisee of
franchisor, or otherwise directly or indirectly induce such persons to leave that person’s employment; and
Miscellaneous
1. Developer shall make all commercially reasonable efforts to ensure that Covenantor acts
as required by this Agreement.
2. Covenantor agrees that in the event of a breach of this Agreement, Franchisor would be
irreparably injured and be without an adequate remedy at law. Therefore, in the event of a breach, or
3. Covenantor agrees to pay all expenses (including court costs and reasonable attorneys’
fees) incurred by Franchisor and Developer in enforcing this Agreement.
4. Any failure by Franchisor to object to or take action with respect to any breach of this
Agreement by Covenantor shall not operate or be construed as a waiver of or consent to that breach or any
subsequent breach by Covenantor.
6. The parties acknowledge and agree that each of the covenants contained in this Agreement
are reasonable limitations as to time, geographical area, and scope of activity to be restrained and do not
impose a greater restraint than is necessary to protect the goodwill or other business interests of Franchisor.
The parties agree that each of the foregoing covenants shall be construed as independent of any other
covenant or provision of this Agreement. If all or any portion of a covenant in this Agreement is held
unreasonable or unenforceable by a court or agency having valid jurisdiction in any unappealed final
decision to which Franchisor is a part, Covenantor expressly agrees to be bound by any lesser covenant
subsumed within the terms of the covenant that imposes the maximum duty permitted by law as if the
resulting covenant were separately stated in and made a part of this Agreement.
7. This Agreement contains the entire agreement of the parties regarding the subject matter
of this Agreement. This Agreement may be modified only by a duly authorized writing executed by all
parties.
8. All notices and demands required to be given must be in writing and sent by personal
delivery, expedited delivery service, certified or registered mail, return receipt requested, first-class postage
prepaid, facsimile or electronic mail, (provided that the sender confirms the facsimile or electronic mail, by
sending an original confirmation copy by certified or registered mail or expedited delivery service within
three (3) business days after transmission), to the respective parties at the following addresses unless and
until a different address has been designated by written notice to the other parties.
Attention:
Attention:
Any notices sent by personal delivery shall be deemed given upon receipt. Any notices given by
facsimile or electronic mail shall be deemed given upon transmission, provided confirmation is made as
provided above. Any notice sent by expedited delivery service or registered or certified mail shall be
deemed given three (3) business days after the time of mailing. Any change in the foregoing addresses
shall be effected by giving fifteen (15) days written notice of such change to the other parties. Business
day for the purpose of this Agreement excludes Saturday, Sunday and the following national holidays: New
Year’s Day, Martin Luther King Day, Presidents’ Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving and Christmas.
9. The rights and remedies of Franchisor under this Agreement are fully assignable and
transferable and inure to the benefit of its respective parent, successor and assigns. The respective
obligations of Developer and Covenantor hereunder may not be assigned by Developer or Covenantor
without the prior written consent of Franchisor.
FRANCHISOR: DEVELOPER:
______________________________
Name of Corporation
By: By:
Title: Title:
______________________________
Developer
______________________________
Developer
______________________________
Developer
______________________________
Name of Limited Liability Company
By: __________________________
Title: _________________________
The following states have franchise laws that require that the Franchise Disclosure
Document be registered or filed with the state, or be exempt from registration: California,
Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode
Island, South Dakota, Virginia, Washington, and Wisconsin.
This document is effective and may be used in the following states, where the document
is filed, registered or exempt from registration, as of the Effective Date stated below:
STATE EFFECTIVE DATE
CALIFORNIA Pending Exemption
FLORIDA September 21, 2021
HAWAII Pending Registration
ILLINOIS Pending Exemption
INDIANA Pending Exemption
KENTUCKY Effective (one-time filing)
MARYLAND Pending Exemption
MICHIGAN Effective
MINNESOTA Pending Registration
NEBRASKA Effective (one-time filing)
NEW YORK Pending Exemption
NORTH DAKOTA Pending Exemption
RHODE ISLAND Pending Exemption
SOUTH DAKOTA Pending Exemption
TEXAS Effective (one-time filing)
UTAH March 2, 2022
VIRGINIA Pending Exemption
WASHINGTON Pending Exemption
WISCONSIN Pending Registration
Other states may require registration, filing, or exemption of a franchise under other laws,
such as those that regulate the offer and sale of business opportunities or seller-assisted
marketing plans.
RECEIPTS
This Disclosure Document summarizes provisions of the franchise agreement and other information in plain
language. Read this Disclosure Document and all agreements carefully.
If Club Pilates Franchise, LLC offers you a franchise, it must provide this Disclosure Document to you 14 calendar
days before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in connection
with the proposed franchise sale.
New York, Oklahoma and Rhode Island require that we give you this Disclosure Document at the earlier of the
first personal meeting or 10 business days before the execution of the franchise agreement, or other agreement,
or the payment of any consideration that relates to the franchise relationship.
Michigan, Oregon and Wisconsin require that we give you this Disclosure Document at least 10 business days
before the execution of any binding franchise agreement, or other agreement, or the payment of any
consideration, whichever comes first.
If Club Pilates Franchise, LLC does not deliver this Disclosure Document on time or if it contains a false or
misleading statement, or a material omission, a violation of federal and state law may have occurred and should
be reported to The Federal Trade Commission, Washington D.C. 20580 and the appropriate State Agency
identified on Exhibit B.
The franchisor is Club Pilates Franchise, LLC located at 17877 Von Karman Ave., Suite 100, Irvine, CA 92614. The
name, principal business address, and telephone number of each Franchise Seller offering the Franchise are:
Mike Gray, 17877 Von Karman Ave., Suite 100, Irvine, CA 92614, (949) 346-9794; Lance Freeman and Emily
Brown, Xponential Fitness, LLC, 17877 Von Karman Avenue, Suite 100, Irvine, California 92614, (949) 370-7093;
___________________________________________.
Issuance Date: April 1, 2022. The effective date in each state is listed on the State Cover Page. Club Pilates
Franchise, LLC authorizes the agents listed in Exhibit B to receive service of process for it. I have received a
Franchise Disclosure Document dated April 1, 2022. This Disclosure Document included the following Exhibits:
A-1. FRANCHISE AGREEMENT AND EXHIBITS
A-2. NON-TRADITIONAL VENUE ADDENDUM
B. LIST OF STATE AGENTS FOR SERVICE OF PROCESS AND STATE ADMINISTRATORS
C. FINANCIAL STATEMENTS
D. STATEMENT OF PROSPECTIVE FRANCHISEE
E. TABLE OF CONTENTS OF THE OPERATIONS MANUAL
F. GENERAL RELEASE OF ALL CLAIMS
G. STATE-SPECIFIC ADDENDA
H. LIST OF CURRENT FRANCHISEES AND, IF APPROPRIATE, THEIR OUTLETS
I. LIST OF FRANCHISEES THAT LEFT SYSTEM IN THE PAST YEAR
J. DEVELOPMENT AGREEMENT
K. STATE EFFECTIVE DATES
L. RECEIPTS
__________________________ __________________________
(Print Name) (Signature)
__________________________
Date
Please keep this copy and return signed, original receipt on following page to us.
If Club Pilates Franchise, LLC offers you a franchise, it must provide this Disclosure Document to you 14 calendar
days before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in connection
with the proposed franchise sale.
New York, Oklahoma and Rhode Island require that we give you this Disclosure Document at the earlier of the
first personal meeting or 10 business days before the execution of the franchise agreement, or other agreement,
or the payment of any consideration that relates to the franchise relationship.
Michigan, Oregon and Wisconsin require that we give you this Disclosure Document at least 10 business days
before the execution of any binding franchise agreement, or other agreement, or the payment of any
consideration, whichever comes first.
If Club Pilates Franchise, LLC does not deliver this Disclosure Document on time or if it contains a false or
misleading statement, or a material omission, a violation of federal and state law may have occurred and should
be reported to The Federal Trade Commission, Washington D.C. 20580 and the appropriate State Agency
identified on Exhibit B.
The franchisor is Club Pilates Franchise, LLC located at 3185 Pullman Street, Costa Mesa, CA 92626. The name,
principal business address, and telephone number of each Franchise Seller offering the Franchise are: Mike Gray,
17877 Von Karman Ave., Suite 100, Irvine, CA 92614, (949) 346-9794; Lance Freeman and Emily Brown,
Xponential Fitness, LLC, 17877 Von Karman Avenue, Suite 100, Irvine, California 92614, (949) 370-7093;
___________________________________________.
Issuance Date: April 1, 2022. The effective date in each state is listed on the State Cover Page. Club Pilates
Franchise, LLC authorizes the agents listed in Exhibit B to receive service of process for it. I have received a
Franchise Disclosure Document dated April 1, 2022. This Disclosure Document included the following Exhibits:
A-1. FRANCHISE AGREEMENT AND EXHIBITS
A-2. NON-TRADITIONAL VENUE ADDENDUM
B. LIST OF STATE AGENTS FOR SERVICE OF PROCESS AND STATE ADMINISTRATORS
C. FINANCIAL STATEMENTS
D. STATEMENT OF PROSPECTIVE FRANCHISEE
E. TABLE OF CONTENTS OF THE OPERATIONS MANUAL
F. GENERAL RELEASE OF ALL CLAIMS
G. STATE-SPECIFIC ADDENDA
H. LIST OF CURRENT FRANCHISEES AND, IF APPROPRIATE, THEIR OUTLETS
I. LIST OF FRANCHISEES THAT LEFT SYSTEM IN THE PAST YEAR
J. DEVELOPMENT AGREEMENT
K. STATE EFFECTIVE DATES
L. RECEIPTS
__________________________ __________________________
(Print Name) (Signature)
__________________________
Date
Please sign this copy of the receipt, date your signature, and return this form to us as described in Item 23.