Initial Investment Costs
You should anticipate the preceding initial expenditures in connection with the establishment of a Serasana spa franchise and your first several months of operations. Additional factors related to each expenditure category are described in the following notes.
Financing sources may reduce your initial cash requirements, and the availability and terms of financing to any individual franchisee will depend upon factors such as the availability of financing in general, your credit worthiness, the collateral security that you may have and polices of lending institutions concerning the type of business to be operated by you.
The investment and expenditures required of actual franchisees may vary considerable form the projections outlined below, depending on many factors, including geographical area, the amount of space leased by you, if any, and the capabilities of any particular management and service team. If you are purchasing multiple franchises, you will incur the estimated initial expenses for each franchise you operate.
The franchise fee and its refund policy are described in greater detail in Item 5, if applicable, for information regarding the initial fees for multiple franchise purchases. We do not finance any fee.
You must lease or otherwise provide a suitable facility for the operation of the franchise. The amounts listed assume a square footage of 3,500. It is difficult to estimate lease acquisition costs because of the wide variation in these costs between various locations. Lease costs will vary based upon square footage, cost per square foot and required maintenance costs. The low estimate is based on an assumption that you will have to pay a security deposit equal to one month’s rent and is based on leasing a facility of 3,500 square feet. The high estimate based on leasing a facility of 3,500 square feet and a requirement of 2 months deposit. Some lessors may refund the security deposit if you cancel the lease before you occupy the premises. The estimated range of costs in this category only includes your costs to enter into a lease agreement for the facility. Estimated rental costs for 3 months are included with the category “Additional Funds” (See Note 15 below). Serasanas will be typically located in newer commercial shopping centers. However, you may purchase or build a building for your Serasana. The franchisor is unable to estimate real estate costs to purchase or build a building because of wide variations in prices depending on factors like location, type of building, size of property and market conditions.
If you are a new customer of your local utilities, you will generally have to pay deposits to obtain services, including electric, telephone, gas and water. The amount of the deposit and whether the deposit is refundable will vary on the local utilities. You should contact your local utilities for more information.
To adapt to a newly acquired facility for operation of the spa franchise, it must be renovated. The cost of the leasehold improvements will vary depending on factors, including size, condition and location of the facility, local wage rates and the cost of materials. The low estimate assumes that your landlord will provide a partial build-out allowance. The amounts you pay for the leasehold improvements are typically non-refundable. You should inquire about the refund policy of the contractor at or before the time of hiring. This estimate includes a range of $15,000 to $18,000 for architectural fees that you will incur in adapting the franchisor’s prototype architectural plans.
You must purchase and/or lease and install furniture, fixtures and equipment and décor necessary to operate your spa franchise. The cost of the furniture, fixtures and equipment will vary according to local market conditions, the size of the facility, suppliers and other related factors. We do not know if the amounts you pay for furniture, fixtures or equipment are refundable. Factors determining whether furniture, fixtures and equipment are refundable typically include the condition of the items, level of use, length of time of possession and other variables. You should inquire about the return policy of the suppliers at or before the time of purchasing or leasing. We may request to review invoices to ensure the correct items are being purchased.
You must purchase an initial inventory of $8,000 to $25,000. This includes products to be retailed and back bar/tea bar supplies. Costs vary based on the size and location of the franchise, time of season, suppliers and other related factors. We do not know if the amounts you pay for other inventory items are refundable. Factors determining whether other inventory items are refundable typically include the condition of the items at time of return, level of use, and length of time of possession. You should inquire about the return and refund policy of the suppliers at or before the time of purchasing.
You must purchase the following types and amounts of insurance:
1. “All risk” property insurance coverage for assets of the franchise;
2. Workers compensation insurance and employer liability coverage with a minimum limit of $1,000,000 or higher if your state law requires;
3. Comprehensive general liability insurance with minimum liability coverage of $1,000,000 per occurrence, or higher if your state law requires;
4. Business interruption insurance in the amount of $1,000,000;
5. Automobile liability insurance of at least $500,000, or higher if your state law requires.
Factors that may affect your costs of insurance include the size and location of the franchise, value of the leasehold improvements, equipment, inventory, number of employees and other factors. The amounts you pay for insurance are typically non-refundable. You should inquire about the cancellation and refund policy of the insurance carrier or agent at or before the time of purchase.
The insurance will not be limited in any way because of any insurance we maintain. Maintenance of the required insurance will not diminish your liability to us under the indemnities contained in the franchise agreement. The policy or policies will insure against our vicarious liability for actual and (unless prohibited by applicable law) punitive damages assessed against you.
We may require you to increase the minimum limits of and types of coverage to keep pace with regular business practice and prudent insurance custom.
The insurance will insure us, you, and our respective subsidiaries, owners, officers, directors, partners, members, employees, servants, and agents against any loss, liability, products liability, personal injury, death or property damage that may accrue due to your operation of the franchise. Your policies of insurance will contain a separate endorsement naming us as an additional named insured.
This range includes the cost of all signage used in the spa franchise. The signage requirements and costs will vary based upon the size and location of the franchise, local zoning requirements, landlord requirements and local wage rates for installation. The amounts you pay for signage are typically non-refundable. You should inquire about the return and refund policy of the suppliers at or before the time of purchase.
You must purchase general office supplies including stationery, business cards and typical office equipment. Factors that may affect your cost of office equipment and supplies include market conditions, competition among suppliers and other factors. We do not know if the amounts you pay for office equipment and supplies are refundable. Factors determining whether office equipment and supplies are refundable typically include the condition of the items at time of return, level of use and length of time of possession. You should inquire about the return and refund policy of the suppliers at or before the time of purchase.
You must spend the minimum amount we specify on grand opening advertising during the first 3 months of operation. We determine the minimum based on our assessment of your adverting costs in your area and the time of year that you are opening. You may choose to spend more. See Item 11. Factors that may affect the actual amount you spend include the type of media used, the size of the area you advertise to, local media cost, location of the franchise, time of year and customer demographics in the surrounding area. The amounts you spend for grand opening advertising are typically non-refundable. You should inquire about the return and refund policy of the suppliers at or before the time of purchasing.
You must purchase the computer equipment, hardware and software necessary for operating the franchise. Our specifications for computer equipment, hardware and software are described in Item 11. The amounts you pay for computer equipment are typically non-refundable, or if refundable, may be subject to a “restocking” fee. You should inquire about the return and refund policy of the suppliers at or before the time of purchasing.
State and local government agencies typically charge fees for occupancy permits, operating licenses and construction permits. Your actual costs may vary from the estimates based on the requirements of state and local government agencies. These fees are typically non-refundable. You should inquire about the cancellation and refund policy of the agencies at or before the time of payment.
You will need to employ an attorney, an accountant and other consultants to assist you in establishing your franchise. These fees may vary from location to location depending on the prevailing rates of local attorneys, accountants and consultants. These fees are typically non-refundable. You should inquire about the refund policy of the attorney, accountant or consultant at or before the time of hiring.
We recommend that you have a minimum amount of money available to cover operating expenses, including rent, utilities and employees’ salaries for the first 3 months that your franchise is open. These are only estimates based on our affiliate’s experience in opening and operating a similar business. The predominant factors for calculating the 3 month estimate are amounts paid for employee wages and inventory. We cannot guarantee that our recommendation will be sufficient. Additional working capital may be required if sales are low or operating costs are high. These expenses are typically non-refundable.
In compiling this chart, we relied on our and our affiliate’s history, knowledge and experience. The amounts shown are estimates only and may vary for many reasons, including the size and condition of your facility, the capabilities of your management team, where you locate your franchise and your business experience and acumen. You should review these estimates carefully with an accountant or other business advisor before making any decision to buy a franchise. These figures are estimates only and we cannot guarantee that you will not have additional expenses in starting the franchise. We do not offer direct or indirect financing to you for any items.
These tables estimate your initial start-up expenses. These figures represent our estimates based upon our experience and the experience of our licensees and estimated costs provided by authorized suppliers and vendors. We do not guarantee that you will not have additional and different expenses than those we have identified in this table. Your actual costs will depend upon many factors, including, how well you follow our directions and suggestions, your business skill and experience, local economic conditions, the local market for your products, the location and condition of your Franchise Premises, the prevailing wage rates, competition, and your sales levels during the initial period.
We cannot estimate how long it may take for your revenues to exceed your expenses, if ever.
You should not infer that your revenues will exceed your expenses at the end of the three-month initial phase, or by the time your additional funds have been completely expended.
We make no projections or estimate of the amount of additional funds you may need for the operation of your franchise beyond the initial phase.