Do you want to start a gym by buying Orange Theory franchise? If YES, here is how much it cost to open an Orange Theory franchise and their requirements. Acquiring an Orange Theory gym is ideal for an individual who is interested in combining a healthy, active lifestyle with a well-known and respected business.

Although some Orange Theory franchisees have a background as trainers and continue to teach classes after starting their own franchise, most owners spend their days taking care of the same daily administrative and managing tasks which every business requires.

Orange Theory franchise owners receive extensive support from the corporate headquarters, and most franchisees find they can spend more time enhancing and promoting a welcoming atmosphere at their studios.

Being an Orange Theory franchisee accords you a unique platform to offer a service with no real competition. Orange Theory began in 2010 with only one studio. Now there are over 525 gyms open with another 520+ gyms in development. The best news is that no Orange Theory studio has closed due to lack of members.

How Do Orange Theory Franchisees Make Money?

As an Orange Theory franchisee, you will make money through the sale of different tiers of memberships. These three different membership levels give members a set number of classes per month. Members can purchase additional classes at a discounted rate compared to non-members. In addition to earning money on memberships, an Orange Theory studio can sell the brand’s clothing and accessories.

The average cost of a membership at Orange Theory is between $59 – $200 a month depending on the membership level. Non-members can take a single class for $28. You can also make additional money through the sale of Orange Theory clothing and accessories.

Additional add-on services are restricted according to the franchise agreement. The best way to increase profits would be to open up another Orange Theory gym in a populated area far enough away from your first location that it would be able to develop its own local membership.

Financial Requirements and How Much Orange Theory Franchise Cost

If you are thinking of acquiring an Orange Theory Fitness franchise, below are the fees you need to consider too, according to Orange Theory’s 2019 FDD;

1. Initial Franchise Fee: $59,950

You’re expected to pay Orange Theory an initial franchise fee equal to $59,950 for a single franchise when you sign the Franchise Agreement.

  • The Initial Franchise Fee is not refundable.
  • Orange Theory charges the Initial Franchise Fee uniformly to all franchisees. It has no intention, now or in the future, of reducing the Initial Franchise Fee for any prospective franchisee, although it reserves the right to do so on a case-by-case basis, or if it runs a franchise marketing promotion.

2. Royalty Fee: 8% of Gross Sales

  • When payable:
  • Orange Theory will debit your bank account for the Royalty due.
  • You are expected to complete the payment of Royalties to Orange Theory even if your minimum performance levels have not been met.
  • Orange Theory requires you to meet the following minimum performance standards during the term of your Franchise Agreement (the “Performance Standards”): Gross Sales (non-cumulative): Year 1: $300,000, Year 2:  $350,000, Year 3 and thereafter:  $400,000.
  • Year 1 starts on the date on which the Studio first opens for member workouts of any kind and ends on the day before the first anniversary of such date. Each subsequent year runs for the same 12-month period thereafter.
  • If you do not reach the Performance Standards during any year, then (i) you’re expected to pay to Orange Theory the difference between the Royalties actually paid and the amount of Royalties you would have paid if you had met the Performance Standards, within 10 days of Orange Theory’s invoice; and (ii) develop and implement a business plan that Orange Theory must approve in writing to improve performance.
  • If you do not reach the Performance Standards in two consecutive years, Orange Theory may, among and in addition to other possible remedies, (a) terminate your exclusive rights to the Territory; (b) reduce the scope of the geographic area comprising the Territory in which you will have exclusive rights; or (c) terminate the Franchise Agreement.
  • “Gross Sales” means the total gross revenue from the provision of all products and services sold or performed anywhere through or by means of the Studio’s business. For example, Gross Sales includes:
  • (a)membership fees, initiation fees, enrollment fees, processing fees, paid-in-full dues, renewal fees, corporate/third-party payer fees, monthly dues, and any fees or revenue generated and derived during any presales;
  • (b)fees and charges for optional services;
  • (c)fees charged to non-members using the Studio’s services;
  • (d)revenue derived from merchandise and product sales and other Core Business Operations and any Ancillary Business Operations that you or your affiliates perform; and
  • (e) payments (for example, rent and license fees) that contractors make to you relating directly or indirectly to their performance of Ancillary Business Operations.
  • “Gross Sales” does not include taxes collected from the customer and paid to a taxing authority, refunds and credits provided to customers, and rent or fees collected from an unrelated business that is not directly accessible from the Studio.

3. Brand Fund Contributions:

Presently 2% of Gross Sales; may be increased up to 3% of Gross Sales

  • When payable:
  • Orange Theory may change the Brand Fund Contribution from time to time.
  • Orange Theory will debit your bank account for the Brand Fund contributions due and contribute this amount to the Brand Fund.

4. Co-operative Advertising:

As determined by Cooperative

  • When payable: As determined by Cooperative.
  • Cooperatives will be made up of all franchised and affiliate-owned Studios located in the designated geographic area covered by each Cooperative. Orange Theory may collect funds on behalf of Cooperatives that it manages.
  • If you are part of and contribute to a Cooperative, Orange Theory will credit dollar for dollar the amount you contribute to a Cooperative toward your required local advertising spend.

5. Successor Franchise Fees:

50% of then-current Initial Franchise Fee for new franchisees

  • When payable: Before renewal.
  • Payable when, and if, you renew your Franchise Agreement. There are other conditions to renew.

6. Transfer/Assignment Fee

50% of then-current Initial Franchise Fee for new franchisees for a Control Transfer. 25% of the then-current Initial Franchise Fee for all other transfers (other than transfers to an Entity formed to operate the Studio).

  • When payable: Before consummation of the transfer or sale.
  • Payable when, and if, you transfer or sell your franchise. There are other conditions to transfer.
  • A “Control Transfer” means any transfer of (i) any interest in the Franchise Agreement; (ii) the Studio or all or substantially all of its assets; (iii) a 20% or greater interest in your Entity: or (iv) an ownership interest that results in a change in control over your Entity.

7. Relocation Fee:

Equal to Orange Theory’s costs and expenses reviewing your proposed site

  • When payable: On demand.
  • You’re expected to reimburse Orange Theory for its out-of-pocket costs and expenses promptly upon receipt of its invoice.
  • These amounts are due and payable only if you relocate your Studio, subject to Orange Theory’s approval.

8. Interest and Late Fees:

Lesser of 18% per annum or the highest rate permitted by law, plus $100 per week or portion of a week that the payment or report is overdue

  • When payable: On demand.
  • Payable on all overdue amounts and reports.
  • Interest begins from the date of non-payment or underpayment.

9. Audit Expenses:

The cost of the audit, including any charges of independent accountants, travel expenses, and per diem personnel charges

  • When payable: On demand.
  • If you understate any payment owed to Orange Theory by more than 2%, you’re expected to reimburse it for its actual costs incurred in conducting the audit, including attorneys’ fees, accountants’ fees, travel expenses, and compensation of its employees.
  • These fees will not exceed Orange Theory’s actual costs.

10. Additional Initial Training:

Substantial fee, presently $1,000 per person per session

  • When payable: On demand.
  • Orange Theory provides initial training for all owners who sign the Franchise Agreement. Should space permit, it may allow you to bring up to 2 additional persons for training, normally a studio manager and your head trainer, on an abbreviated basis.
  • Orange Theory will train up to three trainees at no charge, but may charge you a fee for all additional, replacement, or repeat trainees.
  • You are responsible for travel and living expenses incurred during training.

11. Studio Launch Training:

Substantial fee; presently, $1,400 per person per session (for additional, replacement, or repeat trainees)

  • When payable: On demand.
  • Orange Theory offers training related to sales/operations and fitness programs (“Studio Launch Training”) at no charge for up to eight fitness coaches and four sales associates attending the same initial program, but may charge this fee for all additional, replacement, or repeat trainees participating in Studio Launch Training.

12. Refresher Training Fees:

Substantial fee; presently, $250 per day per person trained

  • When payable: On demand.
  • Orange Theory periodically may require you (or your Managing Owner) and/or, at its option, the Studio’s studio manager to attend and complete to its satisfaction any supplemental or refresher training programs it chooses to provide.

13. Conference Fees:

Substantial registration fees; varies by program

  • When payable: On demand.
  • Orange Theory may mandate you (or your Managing Owner), your lead trainer, and/or your Studio manager to attend various conferences.
  • Presently, Orange Theory requires attendance at its Annual Convention (which it expects will be less than $1,000 per person in 2019) and Annual Training Summit (which it expects will be less than $600 per person in 2019).
  • You are responsible for all travel and living expenses incurred by you and your personnel for attendance at any conferences.

14. On-Site Evaluation Fees

Orange Theory’s costs and expenses in connection with the on-site evaluation

  • When payable: On demand.
  • Payable only if Orange Theory determines that on-site evaluations are or become excessive. In that case, it may require you to reimburse it for its costs and expenses in relation to each evaluation, including the cost of travel, meals, and lodging for its personnel.

15. Insurance Premiums:

mount of unpaid premiums, plus a substantial administrative fee

  • When payable: On demand.
  • Payable only if you fail to maintain required insurance coverage and Orange Theory elects to obtain coverage for you.

16. Product Purchases: Depends

  • You’re expected to buy products that (i) meet Orange Theory’s standards and specifications and (ii) are purchased from suppliers designated or approved by Orange Theory.
  • Orange Theory reserves the right to designate itself or its affiliates as the exclusive supplier for certain products. If it does so, then you’re expected to purchase them from it.

17. Technology Fee:

Presently, approximately $399 to $749 per month, plus a $575 MBO Software setup fee

  • When payable: As invoiced.
  • Presently, this fee includes access to the Required Software that Orange Theory prescribes and requires from time to time for use in the operation of Studios.
  • This fee is paid one month in advance and payments will commence upon the opening of your MBO software account for membership presales for your Studio.
  • Orange Theory may change this fee and the included products and services from time to time.

18. OT Beat Fees:

Pproximately $149 to $449 per month (presently, $149 per month)

  • When payable: As invoiced.
  • You’re expected to purchase the OT Beat™ System from Orange Theory’s affiliate upon opening your Studio and pay a monthly technology fee to Orange Theory and/or its affiliate for the related software.
  • OT Beat Fees may increase and additional technology fees may be incurred from time to time.

19. Non-Compliance Fee:

Up to $1,000 per notice of violation

  • When payable: 10 days after notice of violation.
  • Orange Theory may assess a non-compliance for violations of the Franchise Agreement and/or the Manuals. It reserves all other rights and remedies.

20. Product/Supplier Approval Costs:

Substantial cost of inspection or testing, plus actual cost of laboratory fees, professional fees, and travel and living expenses of its personnel

  • When payable: When billed.
  • Orange Theory may mandate you to pay it or an independent laboratory for the cost of inspection or testing if you desire to purchase or lease items to be used in the Studio from sources Orange Theory has not previously approved.

21. Management Fee:

A fee that Orange Theory specifies, up to 15% of Gross Sales, plus its actual costs and expenses

  • When payable: On demand.
  • If you are in default of the Franchise Agreement, fail to maintain the Studio in accordance with Orange Theory’s standards, or fail to have a trained manager on staff, Orange Theory may send in its personnel to manage the Studio until the default is cured or you are able to meet its standards.
  • If Orange Theory manages your Facility, after a death or disability, the fee shall be 3% of Gross Sales, plus its actual costs and expenses.

22. Indemnification:

Will vary under circumstances

  • When payable: On demand.
  • You’re expected to indemnify Orange Theory and its affiliated parties when certain of your actions result in loss to it under the Agreements.

23. Costs and Attorneys’ Fees:

Will vary under circumstances

  • When payable: On demand.
  • You will reimburse Orange Theory for all costs in enforcing obligations if it prevails.

Steps on How to Get or Open an Orange Theory Franchise

To acquire an Orange Theory franchisee, you will have to decide the appropriate option you want. By appropriate option, we simply mean choosing the type of franchise you want. First, visit https://www.OrangeTheoryfitness.com/careers, choose either “own a US Studio,” “Own a Canadian Studio,” or “own an International Studio” options. Have it in mind that either of these three options has different sites.

You will be automatically redirected to your preferred option. For each of these, there is an available online application form you are to carefully fill and submit. This includes personal information and part of these will ask for your names, address, country and zip code depending on which of these you want.

After you must have successfully filled and submitted the online forms, you will be contacted by Orange Theory. Every other information regarding the next steps to follow will be given you. Howbeit, for each business started, there are state as well as local licenses that apply.

It is important that you find out every detail regarding the licensing requirements for your Orange Theory franchise. This enables you to avoid any legal setbacks that may result.

Sales tax is also another area you should be concerned with. It is mandatory for most types of businesses to collect sales tax for the products or services provided. You need to have a full understanding of how this works, and if it applies to your Orange Theory studio.

  • Conclusion

It’s very important to state that when you acquire an Orange Theory Franchise, you are expected to promote your business. This is aside the support offered by the franchisor. Hence part of its contract terms involve having to spend between $2,500 and $4,000 per month on local advertising. This is to capture your local market.

To locally promote your franchise, you will need to have a website. In this modern age, there are lots of simple tools you can use in creating cheap and effective websites. The main objective here is customer growth. The higher the growth recorded, the more income you make as a franchisee.

Ajaero Tony Martins