Existing Studio Owener Franchising FAQ's

1.   How much will it cost to convert to a franchised studio?

The standard franchise agreement requires an initial franchise fee of $10,000. This fee will be waived for all current studio owners who sign franchise agreements within 60 days after being offered the franchise (any studio owner who converts after 60 days must pay the standard franchise fee). Your total costs to convert will be less than the total start-up costs for a new franchise owner. You should review the two charts in Item 7 of our standard FDD. The first chart estimates the initial investment for a new studio owner while the second chart estimates the initial investment for a converting licensee. Some additional costs that you may incur include the following:

•  Training - You may be required to attend the portion of the franchise training program that pertains to studio operations. We will not charge you a fee, but you may incur costs for food, travel and lodging. At this time, we have not decided when or where this training will take place.

•  CPR Training - All studio owners must complete training in a cardiovascular pulmonary resuscitation course approved by the American Heart Association or American Red Cross. If you have recently completed such a course or you attend a free course (some organizations offer free classes), you will not incur any additional expense for this training. We estimate a maximum cost of $200 for CPR training.

•  Office Equipment and Supplies - Unless you already have these items, you must purchase certain equipment and supplies, including a computer system, copy machine, fax machine, stationary, forms, business cards, brochures and related paper items and supplies. Your costs will vary significantly depending on whether you already have these items for your existing studio.

•  Initial Supply of Inventory -Unless you already have these items, you must purchase an initial supply of inventory items, including branded clothing, water products, yoga mats, towels, books and CDs.

•  Signage - We require that all franchised studios operate under the uniform signage that we specify. Unless you already use our approved signage, you will be required to purchase and install new signage.

•  Advisor Costs - If you hire a lawyer, accountant or other advisor to review the franchise documents and provide their professional advice about the franchise opportunity, you will incur additional costs.

2.   How long do I have to purchase new signage, equipment and other items?

We intend to offer all converting licensees a reasonable period of time to purchase the new equipment, signage and inventory. We will not require that you make these purchases immediately upon signing the franchise agreement unless you choose to do so. If you recently incurred significant costs for signage or other items that must be replaced, we will give you a longer period of time to purchase the new items. For most converting studio owners, we anticipate providing a period of six (6) months after signing the agreement to purchase and transition to the use of the new Bikram logo on letterhead, envelopes, business cards and other such items.

3.   What ongoing fees must I pay?

The ongoing fees are described in Item 6 of the FDD. The most significant fees include the monthly royalty fee, advertising fund fee and technology fee. However, if you sign the franchise agreement within 60 days of the offer, all of these fees are waived except that you must pay a royalty of 1% of gross revenues beginning in the second year after you convert. Below is a chart listing the primary fees and the favorable treatment converting licensees will receive during the initial term of their franchise agreement

4.   What about local advertising requirements?

The standard franchise agreement requires that you spend the greater of $400 or 4% of your gross revenues each month on local advertising. If you convert to the franchise system within 60 days, we will not require you to spend any amount on local advertising. However, if we determine that your studio is not operating at full capacity and could benefit from local advertising, we may require you to begin spending minimum amounts on local advertising for your studio (but not to exceed $400 per month or 4% of gross revenues).

5.   Will I have to remodel my location?

Although new studios must meet Bikram’s standards and specifications, you will not be required to remodel your existing studio in order to become a franchisee, with the exception that you may need to change your signage as described above. At the time that you renew or transfer your franchise, you may be required to conform your studio to Bikram’s then current standards and specifications.

6.   If I convert to the franchise model, can I later sell my studio?

Yes, as long as the transfer meets the conditions for transfer described in Section 11 of the Franchise Agreement. If you transfer your studio, you should know that the transferee will be required to sign the then-current form of franchise agreement and will not be entitled to any favorable financial terms offered to you as a converting licensed studio owner.

7.   Why is Bikram now franchising?

Bikram has entertained the idea of franchising for several years. Bikram believes that the Bikram Yoga system and his reputation are suffering from a lack of uniform standards among existing studios. In the past, Bikram has left studio owners to operate their studios in any manner they see fit. While the majority of owners do a great job, there are a number of studios that are operating in a manner that is damaging to Bikram Yoga. By borrowing the best ideas and practices from all current studios, Bikram hopes to develop the ideal model for the operation of a Bikram Yoga studio. Bikram is optimistic that this will improve all studios and promote their long term success.

Because Bikram has not charged any fees in the past, he also lacks the financial resources that are necessary to provide ongoing support to studio owners and bring enforcement actions against those who infringe upon his intellectual property rights (these infringements harm all Bikram Yoga studio owners). Franchising provides a proven model that will enable Bikram and all studio owners to take Bikram Yoga to the next level while weeding out the existing problems. Although the transition can be difficult, franchising is the best option for the long term health and growth of Bikram Yoga.

8.   How will joining the franchise impact my marketing efforts?

Trademark owners must police the use of their marks in order to avoid losing rights. As a result, Bikram must monitor and approve all advertising and marketing practices prior to use. The goal is to present a uniform message to the public that embodies the ideas and concepts that Bikram wants to convey. While many owners currently operate their own websites, Bikram intends to create a standardized website for all studio owners. Currently, there are countless websites, many of which convey inaccurate information about Bikram and/or Bikram Yoga. Again, the idea is to create a uniform message. We will give you a reasonable period of time after signing the franchise agreement to switch to the approved Bikram Yoga website, which is currently still under development.

One of the benefits of the franchise model is that all franchisees (other than the converting licensees who are grandfathered in) must contribute to an advertising fund that will be used for local, regional and national advertising efforts designed to promote Bikram Yoga. While the costs to develop such a program for a single studio owner may be exorbitant, pooling funds from all franchisees provides a mechanism to develop and administer a national advertising fund, which will benefit all franchisees. We have not yet established the fund, but we may do so in the future. We will not collect advertising fund fees until we establish the fund.

9.   What are the benefits to joining the franchise model?

The franchise model is designed to benefit all franchisees in the long term. To see the assistance provided to franchisees, you should carefully review Item 11 of the FDD.

10.   I understand that I must sign the franchise agreement within 60 days after it is offered in order to receive the favorable terms. When does the 60 day period begin?

The 60 day period will begin at the time that we advise you that we are offering the franchise in your state. We will post this notice on our website and we will make reasonable attempts to contact all of our studio owners to ensure that they are aware of the offer and advise them to keep checking the website to see when the franchise is being offered in their state. If you are in a state where we are not currently registered, you will have a period of 60 days after we become registered to convert to the franchise and obtain the favorable terms.

11.   What if I don’t receive the FDD shortly after the beginning of the 60 day period?

We will make every effort to provide you with a copy of the FDD as promptly as possible after we receive your request together with your completed Franchise Contact Information Reply form. Please note that the 60 day special offer period does not begin to run from the date you receive the FDD. Instead, the 60 day period runs from the “offer date” listed on our website (i.e., the 60 day period begins to run before you will receive the FDD). Under state and federal law, we are obligated to give you at least 14 days to review the FDD before you sign the franchise agreement or pay us any money. We decided to give our existing studio owners an extended period of time to make their decision. If you cannot make up your mind by the end of the 60 day period, you may still convert to the franchise model at a later date. However, you will not receive the favorable terms we are offering during the 60 day period.

12.   I understand that Bikram cannot offer franchises in certain states at this time. What happens if I operate a studio in one of those states?

Bikram has applied for registration to offer franchises in all states. However, some states take longer than others. If you are in a state where Bikram cannot offer franchises, you will not be given access to the FDD and you will not be able to convert to the franchise model. If you are interested in the franchise, complete the Franchise Contact Information Reply form located on the Bikramyoga.com website. As soon as the registration is complete, we will advise you that we are able to offer the franchise in your state (most likely by posting the notice on our website). Until that time, however, Bikram cannot discuss the franchise offering with you.

13.   What happens if I don't sign the franchise agreement?

As you are aware, the Affiliation Agreements generally grant the studio owners a 6 month term, which can be renewed by the mutual consent of both parties. Bikram will continue to honor the terms and conditions of all existing Affiliation Agreements. However, in fairness to the franchisees, and in order to enhance the Bikram Yoga system, he intends to phase out the affiliated studios over time and only allow franchised studios. Operating a dual distribution system presents many challenges and would be detrimental to the long term success of Bikram Yoga.

14.   What if I have other questions about becoming a franchisee?

The FDD includes a great deal of information about the Bikram Yoga franchise. You should closely review the FDD. We suggest you consult your own attorney if you have any legal questions concerning the FDD. If you have additional questions about franchising, you can send an e-mail to franchise@bikramyoga.com or contact us by phone 310-855-7164 (ext 200) or fax 310-855-7168. We will do our best to answer your questions and/or concern, but we cannot provide you with legal advice. Please understand that we are inundated with questions. We will respond as quickly as possible, but please be patient as the franchise e-mail address has already received nearly 1,000 e-mails. Note, however, that we will not provide any historical or projected earnings information to you.