The original documents were scanned as an image. The original file can be downloaded at the link above.

Sample UFOC




Fitniks Franchising, Inc.

A California corporation

3000 Flying C Court

Cameron Park, California 95682

(530) 676-6097

Fitniks Kids' Club franchisees operate fitness centers designed for participants from 6 to 12 years of age.

The initial franchise fee for a single Fitniks Kids' Club is $39,000.00. The franchise fee for multiple Fitniks Kids' Clubs purchased at the same time is discounted as described in Item 5 below. The estimated initial investment required to open a Fitniks Kids' Club including the initial franchise fee is $171,000.00 to $242,250.00.

Risk Factors:




Information comparing franchisors is available. Call the state administrators listed on Exhibit 1 or your public library for sources of information.

Registration of this franchise with the state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in this offering circular is untrue, contact the Federal Trade Commission and your state agencies.

Effective Date: August 1, 2006. The effective date of this circular in certain states is as noted on the State-Specific Addendum to this Franchise Offering Circular.


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Fitniks Kids' Club tm


ITEM                                                                                                                                   PAGE

1.  THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES...................................................1

2.  BUSINESS EXPERIENCE...................................................................................................................2

3.  LITIGATION.........................................................................................................................................2

4.  BANKRUPTCY......................................................................................................................................2

5.  INITIAL FRANCHISE FEE.................................................................................................................3

6.  OTHER FEES........................................................................................................................................4

7.  INITIAL INVESTMENT......................................................................................................................7

8.  RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES.............................................9

9.  FRANCHISEE'S OBLIGATIONS.....................................................................................................11

10.  FINANCING.......................................................................................................................................12

11.  FRANCHISOR'S OBLIGATIONS...................................................................................................12

12.  TERRITORY......................................................................................................................................19

13.  TRADEMARKS.................................................................................................................................21

14.  PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION..........................................22

15.  OBLIGATION TO PARTICD7ATE IN THE ACTUAL OPERATION OF................................22

THE FRANCHISED BUSINESS...................................................................................................22

16.  RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL.................................................23


18.  PUBLIC FIGURES............................................................................................................................27

19.  EARNINGS CLAIMS........................................................................................................................27

20.  LIST OF FRANCHISE OUTLETS..................................................................................................28

21.  FINANCIAL STATEMENTS............................................................................................................28

22.  CONTRACTS.....................................................................................................................................28

23.  RECED?T............................................................................................................................................28


1.  State Franchise Law Administrators

2. Financial Statements

A. Franchise Agreement

B. Disclosure and Confidentiality Agreement

C.  General Release

D. Acknowledgment at Closing

Fitniks Kids' Club                                                                                                                                                Franchise Offering Circular

6554.000/316357.2                  .                                                                                                                                                                                          0706


In this Franchise Offering Circular the words "we", "us", "our", and similar terms refer to Fitniks Franchising, Inc., the franchisor of Fitniks Kids' Clubs. The words "you" and "your" refer to the purchaser of the Fitniks Kids'Club franchise.

Our principal business address is 3000 Flying C Court, Cameron Park, California 95682.

We are a corporation that was incorporated in California on May 9, 2006. Our registered agent for service of process is listed the state-specific exhibit to this Franchise Offering Circular.

We are licensed to franchise Fitniks Kids' Clubs by Fitniks International, Inc., a California corporation, which is referred to in this Franchise Offering Circular as "our licensor". Our licensor currently operates one Fitniks Kids' Club located in Santa Rosa, California. Our licensor is currently our only affiliate.

As of the date of this circular, we do not own or operate a Fitniks Kids' Club. As of the date of this circular, granting franchises for Fitniks Kids' Clubs is our only business activity.

Fitniks Kids' Clubs are distinctive fitness facilities designed to appeal to participants from 6 to 12 year of age. Fitniks Kids' Clubs feature circuit training equipment enhanced with technology in order to make the training more enjoyable for and to assist participants in accomplishing their training goals. Fitniks Kids' Clubs will occupy approximately 1,500 to 1,800 square feet of space and will provide nutrition and health counseling in addition to fitness and sports preparation programs.

The physical fitness and health club market is well developed but is growing with new concepts and approaches. In addition to traditional facilities such as health clubs, gymnasiums, and weight loss facilities and programs, specialized facilities continue to emerge such as those that cater only to women or children, those that provide express workouts, and others with a similarly narrow focus. There are very few facilities that are specifically for children in the age bracket we intend to attract although that number is growing because of the increasing public awareness that a great many children are overweight, unfit, or are suffering from diseases as a result of their eating habits, weight, and lack of conditioning. This, coupled with a lack of safe play areas, the reduction or elimination of physical education classes in schools, and the growth of sedentary toys and activities, has created a need for facilities dedicated to addressing the conditioning of children.

Fitniks Kids' Clubs are normally situated in shopping centers, street storefronts, or in other commercial locations.

The circular represents our first offer of Fitniks Kids' Club franchises. We have not offered franchises in any other line of business.

There are laws concerning health and fitness clubs in many states. You should ascertain whether there any of those laws in your state.

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The principal executives who have responsibility concerning our franchises are:

Donna R. Moore - Director, President, and Chief Executive Officer

Ms. Moore began development of the Fitniks concept in early 2004 after more than 35 years in retail marketing and brand development. She assumed her positions with us upon our formation. She was a principal with the business-consulting firm of JMEA Consulting in Dallas, Texas, from July, 2001, until June, 2004. From January, 2000, until June, 2001, she was the Chief Executive Officer of Hit or Miss, Inc., a chain of women's apparel stores, headquartered in Stoughton, Massachusetts. Ms. Moore was a Director of Loewen Group International, now Alderwoods, operators of funeral parlors and cemeteries, located in Toronto, Ontario, Canada from January, 1999, until January, 2002. Since November, 2004, she has been a member of the Board of Directors of Disney Store, a subsidiary of Children's Place Retail Stores, Inc. located in Seacaucus, New Jersey. Since October, 1996, she also has been a member of the Board of Directors on Ablest, Inc., a temporary staffing firm, located in Clearwater, Florida.

Howard W. Cann - Chief Financial Officer, Treasurer, and Secretary

Mr. Cann assumed his positions with us upon our formation. Mir. Cann is also an independent business consultant, a business he began in September, 2005. From July, 2003, until September, 2005, Mr. Cann was the Chief Financial Officer of SOMA Networks, a broadband wireless systems company located in San Francisco, California. From 1999 until he joined SOMA Networks, Mr. Cann was President and Chief Executive Officer of Planergy International, Inc., an energy integration and management company located in Richmond, California.

In addition to our officers, we have a franchise broker, Michael G. Cann. Mr. Cann, the son of Howard Cann, has been a partner with Carson Captial Advisors located in Mill Valley, California, since April, 2006. From May, 2005 until he formed Carson Capital Advisors, Mr. Cann was Vice President in the San Francisco, California office of Cascadia Capital, an investment banking firm. From September, 2000, until May, 2005, he was Vice President in the San Francisco office of Banc of America Securities also an investment banking firm.


Neither we nor the people identified in Item 2 of this circular are or have been engaged in any litigation, including any that is required to be discussed in this offering circular.


Donna Moore, our President and Chief Executive Officer, was Chief Executive Officer of Hit or Miss, Inc. a chain of women's apparel stores headquartered in Stoughton, Massachusetts, from January, 2000, until June, 2001. Hit or Miss, Inc. filed a petition for reorganization under

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Chapter 11 of the Bankruptcy Act on November 17, 2000. The action was filed in the U.S. Bankruptcy Court, District of New Jersey, and is Bankruptcy Petition # 00-41272-NLW. We are not aware of the current status of this action.

Other than the above, neither we nor the people identified in Item 2 of this offering circular have been involved as a debtor in proceedings under the U. S. Bankruptcy Code, including any that is required to be discussed in this offering circular.


The initial fee you must pay us depends on the number of Fitniks Kids' Clubs that your Franchise Agreement grants you the right to open. If the Franchise Agreement covers only a single Fitniks Kids' Club, your franchise fee is $39,000.00, payable in full upon the signing of the Franchise Agreement. If your Franchise Agreement grants you the right to open more than one Fitniks Kids' Club, the initial fee is equal to $39,000.00 for your first Fitniks Kids' Club and $31,200.00 for each additional Fitniks Kids' Club covered by the Agreement, payable as follows: you must pay $19,500.00 times the total number of Fitniks Kids' Clubs covered by the Agreement when you sign the Franchise Agreement with the balance for each club due when the lease for the facility is signed.

Once you are an existing Fitniks Kids' Club franchisee and desire to purchase a franchise for a subsequent club, the initial franchise fee for each club will be equal to 90% of the single-club franchise fee being charged at the time you sign your Franchise Agreement covering your additional club or clubs.

Various factors can affect your ability to obtain a refund of your franchise fee:

If your Franchise Agreement covers a single Fitniks Kids' Club, upon signing the Agreement and paying your franchise fee you are given the right to locate Fitniks Kids' Club in a geographic area described in the Franchise Agreement. You will have the exclusive right for 30 days to find a location that meets our approval in that area. During the 30-day period, we will not grant another person the right to seek a location for a Fitniks Kids' Club in that area nor will we take a Fitniks Kids' Club location in that area ourselves. If you do not find an acceptable location in your designated area within 30 days from the date of your Franchise Agreement, you will have another 90 days within which to find a location in that area on a nonexclusive basis. During the 90-day nonexclusive period, we can allow other Fitniks Kids' Club franchisees to, and can ourselves, seek and take locations for Fitniks Kids' Clubs in that area. The taking of sites in your designated area by us or by others may reduce or eliminate the acceptable locations available to you in the area. If you do not find an acceptable location in your designated area within 120 days of the date of this Agreement, we can terminate the Franchise Agreement and refund all but $5,000.00 of your initial franchise fee which we can retain in consideration for our efforts in connection of granting you this franchise and holding your designated area for you. We can also allow you to continue to look for a site but can terminate your Franchise Agreement during that time on giving you 10 days notice before you have found a site that we approve. We can retain $5,000.00 of your initial franchise fee at the time we terminate your agreement.

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If we find an acceptable location in your area during the 30-day period within which you have the exclusive right to find a location, we will offer the site to you. You then have 5 days to accept or reject the location. If you do not accept the location, we can offer the location to another Fitniks Kids' Club franchisee or can keep the location for a company-owned facility even if the location is offered to your during your 30-day exclusive period. If you reject 2 locations we offer to you, we can terminate your Franchise Agreement and retain $5,000.00 of your franchise fee as consideration for our efforts on your behalf.

Once we have approved your proposed location, you must sign a lease for the site within 30 days of receiving our approval. If you do not open your club within 90 days of signing a lease for the site, we can terminate your Franchise Agreement unless in our reasonable judgment you are delayed in opening by causes beyond your reasonable control other than for your financial inability to complete the project on time.

Once you have signed a lease, all amounts you have paid to us become nonrefundable.

If this Agreement grants you the right to open more than one Fitniks Kids' Club, your club-opening schedule and your development area are set forth in your Franchise Agreement. You must open each club by the date specified or you will lose your right to open any clubs not then open or under active construction. If you default under your club-opening schedule, we can retain all fees you have paid us as consideration for holding your development area from the market and granting you development rights. The terms of the Franchise Agreement that grants you development right will govern all of the clubs you open under those development rights. Since we charge a reduced franchise fee for your second and subsequent clubs, we can reduce or eliminate the initial services we provide in connection with the opening of those clubs.

As described in Item 8 below, we have a "Business in a Box" program under which we coordinate the ordering and shipping of most of the items used in your Fitniks Kids' Club. You must order these items from us or from the suppliers we specify. We can require the suppliers to mark up the cost of the items you order up to 20% and pay that amount to us for our efforts in performing our Business in a Box services.


The following chart lists the other fees you must pay us in connection with your Fitniks Kids' Club franchise.

Name of Fee


Due Date


(See Note 1)

Monthly Fee

5% of your monthly

By the 5 th day of the

"Membership revenues" is

membership revenues


defined in Section 9.07 of the Franchise Agreement and means, with certain exceptions, the proceeds resulting from all of your sales and services.

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Name of Fee

(See Note 1)


Due Date


Advertising Fund Fee (See Note 2)

An amount we specify up to 4% of your monthly membership revenues

At the time the monthly fee is paid

This amount is not currently payable. It is payable only if we establish a cooperative fund for local, regional, or national advertising.

Regional Advertising Fund Fee

Not to exceed 4% of your membership revenues

As we require

Payable only if and when we establish a regional advertising program for the region in which your Fitniks Kids' Club is located. Amounts paid to this fund will be applied against your local advertising requirements. See Item 11 below concerning these requirements.

Additional Training Fee

(See Note 3)

$500.00 per day

As we require

For training in addition to the training we provide as part of our initial services.

Extra Visit Fee (See Note 3)

$500.00 per day plus our out of pocket expenses

As we require

This fee is only payable if you notify us that your Fitniks Kids' Club is ready for opening and it is not, preventing our representative from completing his or her duties upon opening or having to return for training.

Special Visit Fee

Reimbursement of out of pocket expenses and/or per diem for the salary and expenses of our representatives

As agreed upon between us

Only payable if you request a special visit by our representatives over and above those we normally provide.


Franchise Offering Circular 0706

Name of Fee

(See Note 1)


Due Date


Renewal Fee

Reimbursement of any costs we incur in connection with the renewal of your franchise including an allowance for the time of our employees and an administrative and overhead charge equal to 15% of the reimbursable costs.

Upon signing your renewal Franchise Agreement

If you relocate your Fitniks Kids' Club at the time you renew, you will not have to reimburse us for our costs in connection with the renewal since our relocation fee, discussed below, covers those costs.

Relocation Fee

40% of the franchise fee we are charging at the time of the relocation of your Fitniks Kids' Club

Upon signing the Franchise Agreement governing the operation of your relocated Fitniks Kids' Club

If the relocation takes place at the time you renew your franchise, you only pay the relocation fee and not the renewal fee.

Transfer Fee

50% of the franchise fee we are charging at the time you transfer your Fitniks Kids' Club; if the transfer is to an existing Fitniks franchisee, the fee is 20% of the then-current franchise fee

Upon approval of the transfer

Payable upon the cumulative transfer of 50% or more of the interests in the franchise. If more than 2 Fitniks Kids' Clubs are being transferred to the same transferee as part of the same transaction, the transfer fees will not exceed the amount of 2 transfer fees plus our out-of-pocket costs for visiting more than 2 facilities as part of our opening assistance to your transferee.

Meeting Fee

As we determine

As we determine

We have the right to charge reasonable fees for attendance at our national or regional meetings and training seminars.

NOTES: 1. These fees are not refundable and are payable to us. We also mark-up the cost of various items we sell to you or require you to order in connection with opening and continuing operation of your Fitniks Kids' Club. See Item 8 below for more details.

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2.    The Advertising Fund is further discussed in Item 11 of this offering circular. We can charge the Advertising Fund for the time, expenses, and overhead of our employees who work on advertising, promotion, and public relations activities. Rather than trying to determine the exact amount of these expenses, we can charge the Advertising Fund for these services in an amount equal to 10% of the amount collected by the fund.

3.    This fee is adjustable by any increase in the Consumer Price Index between the date of your Franchise Agreement and the event that gives rise to the fee.


The following chart shows the estimated initial investment for a single Kids' Kids' Club occupying approximately from 1,500 to 1,800 square feet of space.



Method of Payment

When Due

To Whom Payment is to be Made

Initial Franchise Fee

(See Note 1)

$39,000 for a single-club franchise with a discount for the purchase of multiple clubs

Lump sum

On signing the Franchise Agreement


Premises Lease

See Note 2

Lump sum



Leasehold Improvements

(See Note 3)

$20,000 to $40,000




As arranged with contractors


"Business in a Box"

(See Note 4)

$80,000 to $100,000

Lump sum

Upon placing order


Exterior Signs

$3,000 to $4,000

As arranged with sign company

As arranged with sign company

Sign companies

Initial inventory

$2,500 to $4,250 (See Note 5)

Lump sum to us and as arranged with other suppliers

Upon placing order with us and as arranged with other suppliers

Suppliers and us

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Method of Payment

When Due

To Whom Payment is to be Made

Security deposits, utility deposits, business licenses, and other prepaid expenses

$3,000 to $5,000 (See Note 6)

As arranged with provider

As needed

Landlord, utility companies, government agencies, etc.

Grand Opening promotion

$7,500 to $10,000

As arranged



As needed

Newspapers, radio, direct mail, etc.




$1,000 to $3,000

As arranged



As needed

Attorney and accountant, insurance agent, etc.

Travel and living expenses while attending training course

$0 to $2,000 (See Note 7)

Lump sum

As needed

Hotel, rental car, restaurants, etc.

Additional funds required before opening and during first 3 months of operation. (See Note 8)

$15,000 to $35,000

As needed

As needed

Working capital,

ongoing expenses,


(See Note 9)

Total Investment:

(See Note 10)

$171,000.00 to $242,250.00.

NOTES: 1. All but $5,000 of the initial franchise fee is refundable under the circumstances described in Item 5 above. Other fees and charges may be payable to us under certain circumstances. See Items 6 and 8 below for more details.

2. A Fitniks Kids' Club will occupy approximately 1,500 to 1,800 square feet of space. Rents range from approximately $1.50 to $5.50 per square foot per month. In addition to base rent, you may also have to pay additional charges to your landlord such as shopping center insurance, taxes, assessments, common area maintenance, heating, ventilating and air conditioning, and other charges. We have made no allowance in this chart for rent that you may have to pay before your Fitniks Kids' Club is open for business. The need for rent payments before opening will depend on the terms of your lease and how fast your Fitniks Kids' Club is ready for opening.

3.  This allowance includes the architect's or designer's fees required to adapt the plans and specifications we give you to your particular space. Leasehold improvements will include building permits, demising walls, flooring, painting lighting, and so forth.

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4.  You will purchase most of your equipment, decor, furniture, fixtures, and computer system through our "Business in a Box" program as described in Item 8 below. By means of this program we coordinate your purchases to attempt to have your goods delivered as soon as possible after the leasehold improvements to your space are completed so that you can be open at the earliest possible time. We assist you in placing your orders with our approved suppliers. We can have your suppliers mark-up by not more than 20% the cost of the items you order under this program and remit that amount to us for our services. You acquire certain of your equipment locally, such as a refrigerated case for the soft drinks you sell.

5.  The amount of inventory needed by your Fitniks Kids' Club will vary depending on the type of club you are opening and the volume of business that is expected. Inventory will include Fitniks logo items, including clothing, and any other resale items you carry.

6. Lease security deposits normally equal 1 or 2 months rent.

7.  You will have no additional costs for travel and living expenses if you live near the club where we do your training or if we do all of your training at your club location.

8. This is an estimate of the additional cash you will need over and above the net income of your Fitniks Kids' Club for its first 3 months of operation. We based these amounts on our experience the opening of the Fitniks Kids' Club operated by our licensor. While these figures are based on our best estimates, we cannot guarantee that you will not have additional cash needs during this period and beyond. Your need for additional funds will depend on factors such as: your management skill, experience, and business ability, local economic conditions, the local market for our services, the prevailing wage rate, competition, the membership levels you reach during the initial period of your operation, and other such factors.

8. No allowance has been made in this chart for any principal or interest expenses required before the opening of your Fitniks Kids' Club. The need for this type of expense will vary with the terms of any financing you get in connection with your Fitniks Kids' Club.

9. The refundability of payments is up to the individual vendors and providers with whom you contract.


Because we want to create a public image for and enhance consumer acceptance of Fitniks Kids' Clubs and to protect our proprietary names and marks, we control the appearance of your Fitniks Kids' Club and the goods and services you provide under the Fitniks name. For this reason, your club must comply with our appearance and other requirements. You are allowed to use only the equipment, decor, furniture, fixtures, signs, and items we specify for your Fitniks Kids' Club. We also must specify or otherwise approve all of the merchandise you carry and all of the services you provide in and from your Fitniks Kids' Club and various other aspects of the operation of your facility. If we require you to carry specific items, we usually designate those items by referring to them by model number and their manufacturers or suppliers.

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By means of our "Business in a Box" concept, you are required to contract with us or with designated suppliers for most of your equipment, decor, furniture, fixtures, and other items for your Fitniks Kids' Club. This requirement includes your exercise and computer equipment and software. We will do our best to assemble have these items delivered to your club at one time or in close proximity to each other to have the items installed and be open in short order once your leasehold improvements are completed. You usually must pay for these items at the time you place your order. Our designated suppliers will be instructed to mark-up the cost of the items by up to 20% and remit that mark-up to us in order to compensate us for our efforts in coordinating the procuring, assembling, and delivering of the items to your club. We will reduce or eliminate our mark-up if we determine that adding this cost will increase the cost of your "Business in a Box" above the amounts we have estimated for this portion of your development costs in Item 7 above.

You will acquire locally a refrigerated cooler for the soft drinks that you carry and will acquire the drinks and any food items you carry from local suppliers. We must approve all of these items prior to their being ordered.

You will also be required to purchase from us a sufficient number of "membership kits" for your anticipated membership. The kit contains a Fitniks Kids' Club T-shirt and other items. You must provide a kit provided to each new member of your club as part of their initial membership fee. We will derive revenues from selling you these kits. It is anticipated that you will derive a profit of approximately 50% from reselling the kits to your members.

We anticipate that approximately 5% of your total purchases and leases of goods and services for establishing your Fitniks Kids' Club will be from us. We estimate that approximately 25% of your purchases and leases of goods and services for the continued operation of your club will be'from us. The items you will purchase from us principally will be membership kits for new members and resale items such as Fitniks logo items, including clothing. Since we have not yet opened a franchised Fitniks Kids'Club, we have not yet derived any revenue from these required purchases.

You must procure the computer and software maintenance and support contracts that we specify. See Item 11 below for more details on your computer system and software.

We can require you to carry the merchandise we specify. Unless we agree otherwise, you can only provide such items from your Fitniks Kids' Club and only on the conditions we indicate. We anticipate that you will purchase most of your resale items from us. We will derive revenues from these purchases but you will not have to include your purchases from us in your membership revenues for purposes of determining your monthly fee payments to us.

As discussed above, we must review and approve your location before you can lease or otherwise acquire it. We must approve your plans and specifications prior to their use.

You must use the accounting and club management software we require. See Item 11 for more information on these items.

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You may be required to purchase reasonable quantities of advertising and promotional material from us. We will charge you for our shipping and handling these items and, as such, will derive revenue from these purchases. To date, we have made no such sales. Our shipping and handling charges normally will not exceed 10% of the cost to you of these items.

We do not have a purchasing cooperative. However, we hope to be able to negotiate beneficial terms for Fitniks Kids'Clubs with our principal suppliers.

We evaluate new suppliers based on our supplier criteria at the time. That criteria is made available in writing to franchisees and suppliers who request it. Our supplier criteria, and the specifications and standards for items that we will approve, are developed and changed based on our ongoing experience. We can withdraw our approval of any supplier or item of merchandise when we decide that that is justified. We normally can complete our product review and approval process within 30 days after we receive all required information about the product or supplier being considered, including, if we so require, samples of the items for which approval is being sought. If we incur expenses in connection with evaluating suppliers or merchandise, we can charge the concerned supplier or manufacturer for those costs.

We do not charge suppliers for doing business with Fitniks Kids' Clubs. If any supplier gives us an advertising, marketing, or promotional allowance, we put that money into the Advertising Fund, which is discussed in detail in Item 11 below.

No special benefits are given to franchisees that purchase merchandise or other items from any special source.




Section in Franchise Agreement

Item in Offering Circular

a. Site selection and acquisition/lease

Sections 3 & 5

Items 5, 6, 7, & 11

b. Pre-Opening purchases/leases

Sections 6 & 8

Items 6 & 8

c. Site development and other pre-opening requirements

Sections 5, 6, 7, & 8

Items 6, 7, & 11

d. Initial and ongoing training

Sections 7 & 8

Item 11

e. Opening

Sections 6, 7, 8, & 10

Item 11

f. Fees

Sections 3-5, 7-9, 11, 15, & 16

Items 5 & 6

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Section in Franchise Agreement

Item in Offering Circular

g. Compliance with standards and policies/ Operating Manual

Sections 6, 8, 10, 11, 12, 13, & 14

Items 8 & 11

h. Trademarks and

proprietary information

Sections 2, 8, & 14

Items 13 & 14

i. Restrictions on

products/services offered

Sections 5 & 8

Item 16

j. Warranty and customer service requirements

Section 8

Items 11 & 15

k. Territorial development and sales quotas

Section 5

Items 5 & 6

1. Ongoing product/service purchases

Sections 6, 8, & 10

Item 8

m. Maintenance, appearance and remodeling requirements

Sections 6 & 8

Item 8


Sections 6 & 12

Items 7 & 9

o. Advertising

Sections 9 & 10

Items 6 & 11

p. Indemnification

Section 13

Items 6, 8, & 13

q. Owner's participation/ management/staffing

Sections 7 & 8

Items 11 & 15

r. Records/reports

Sections 8, 9, & 11

Items 6 & 17

s. Inspections/audits

Sections 8 & 11

Items 6, 8, & 11

t. Transfer

Section 15

Item 17

u. Renewal

Section 4

Item 17

v. Post-termination obligations

Sections 8, 16, & 17

Item 17

w. Non-competition covenants

Sections 15 & 17

Item 17

x. Dispute resolution

Section 18

Items 6 & 17

y. Relocation

Sections 4 & 5

Items 6, 12, & 17


We do not offer or provide any type of direct or indirect financing for our franchisees. We do not guaranty your notes, leases, or other obligations.


Except as listed below, we need not provide any assistance to you.

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Pre-Openins Assistance

Before you open your Fitniks Kids' Club, we will:

1.  Consult with you on the location for your Fitniks Kids' Club. (Franchise Agreement Section 5.02)

2.  Evaluate your proposed location based on the information you submit and advise you of our approval or disapproval of the site. (Franchise Agreement Section 5.04)

3.  Give you typical plans and specifications for your Fitniks Kids' Club. (Franchise Agreement Section 6.01)

4.  Consult with you on the telephone regarding the design and construction of your facility. (Franchise Agreement Section 6.04)

5.  By means of our Business in a Box program, assist you in procuring all of the equipment, decor, furniture, fixtures, signs, and other items we specify for your Fitniks Kids' Club. (Franchise Agreement Section 6.03)

6.  Train you and your manager in the operation of a Fitniks Kids' Club. (Franchise Agreement Section 7.01)

7.  Provide a member of our staff to help you with the setup and opening of your Fitniks Kids' Club. (Franchise Agreement Section 7.07)

8.  Consult with you on your Grand Opening promotion. (Franchise Agreement Section 10.01)

Continuing Assistance

During the operation of your Fitniks Kids'Club we provide the following services:

1.   You have the use of our operations and other manuals and other materials as they are developed and made available to our club owners. These manuals and materials are confidential and remain our property. We can change the policies, practices, procedures, and other directives in our manuals when we see fit and you have to follow the changes. You must return our manuals and material when we ask for them. (Franchise Agreement Sections 8.01 to 8.03)

2.   We will provide assistance and advice to you on the telephone concerning the operation of your Fitniks Kids' Club. (Franchise Agreement Section 8.17)

3.  We will send a representative to visit your facility periodically to inspect your facility and to assist you with its operation. (Franchise Agreement Section 8.18)

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4.   If and when it is formed, we will administer the national and regional advertising fund programs. (Franchise Agreement Sections 9.02 through 9.06)

5.   You have the use of the service marks, trademarks, commercial symbols, proprietary programs and software, and the other property we license to you. (Franchise Agreement Sections 14.01 and 14.02)

8. We are developing and, once it is on-line, will maintain the Fitniks Internet web site, although we can transfer this responsibility to a third-party provider. (Franchise Agreement Section 10.07)


As noted above, we can establish a cooperative advertising program, called "the Advertising Fund", to which you can be required to contribute up to 4% of your membership revenues. We will administer this fund to develop advertising, promotional, merchandising, display, and public relations materials and programs for Fitniks Kids' Clubs on a local, regional, or national basis. (Franchise Agreement Sections 9.02 through 9.04) If we have any company-owned Fitniks Kids' Clubs at any time, they will contribute to this fund on the same basis as do our franchisees. (Franchise Agreement Section 9.04).

We are not obligated to spend any of the Advertising Fund money in any particular region even if the money comes from that area. (Franchise Agreement Section 9.04) We are not required to spend all the money received by the Advertising Fund within any particular time. (Franchise Agreement Section 9.04) Funds not spent in the year received are carried over from year to year until they are used. We do not use any of the money from the Advertising Fund to solicit the sale of franchises.

We intend that all Fitniks Kids' Club franchisees will contribute to the Advertising Fund on the same basis and least at the same rates as you do.

We will send an annual report to you showing the receipts and expenses of the Advertising Fund. These reports do not have to be audited. (Franchise Agreement Section 9.03)

We can charge the Advertising Fund for the time, overhead, and expenses of our employees to the extent they do work related to the fund's activities. In the alternative, we can charge the fund in an amount equal to 10% of the money collected by the fund for these costs. (Franchise Agreement Section 9.04)

We can publish or broadcast the material developed by the Advertising Fund in any media we select including newspapers, magazines, radio, television, direct mail, the Internet, and so forth. The coverage of the concerned media can be local, regional, or national in scope. (Franchise Agreement Section 9.04)

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As of the date of this circular, all of our advertising has been developed by our employees and by outside advertising agencies and consultants. We anticipate that this will continue to be the case in the future.

In addition to the Advertising Fund, we have the right to establish local and regional advertising programs. If we establish such any of these programs in the region in which your Fitniks Kids' Club is located, you must pay the amount we specify to that fund. Any such payments will be credited to and will not exceed your local advertising requirements as described below. (Franchise Agreement Section 9.06) As is the case regarding the Advertising Fund, our company-owned facilities in each region will pay a similar amount to the local and regional fund. (Franchise Agreement Section 9.06)

We have the right to establish national and regional advertising councils to advise us on our advertising, promotion, and public relations activities. We have sole discretion over how and when the funds collected will be spent. We have the right to prescribe the rules for such councils should they be formed. (Franchise Agreement Section 9.05)

Since continuous local advertising and promotion is important to the success of your Fitniks Kids' Club, you must spend at least 4% of your membership revenues on local advertising and promotion of your club. At the end of each 12-month period, any amounts not expended are payable to the Advertising Fund or, if the Advertising Fund has not yet been formed, to us for use in advertising and promoting the Fitniks Kids' Club system.

If we require, you must participate in Yellow Pages advertising coordinated with any other Fitniks Kids' Clubs in your market area and must pay your pro rata portion of the costs. (Franchise Agreement Section 10.06).

See also Items 6, 8, and 9 above.

Electronic Cash Recording/Inventory Control System

You have to use the computer systems and business operations software that we specify. (Franchise Agreement Section 8.22) We currently require you to purchase a desktop computer with a minimum 1,000 MHZ processor, 258 MB RAM, a hard disk with at least 120 G of storage, USB-2 capacity, a CD/DVD ROM, and an SVGA display of your choice. The computer should operate using Microsoft Windows XP Professional software and should have Microsoft Office 2003, or later, installed for word processing and spreadsheet applications. Microsoft Windows XP Professional and Microsoft Office are products of Microsoft Corporation, One Microsoft Way, Redmond, Washington 98052-6399, telephone: (800) 642-7676. This software is available from most computer software dealers.

You will also need one or more cash drawers, bar code scanners, and receipt printers, as well as a digital camera to use for placing your members' photographs on their membership cards. If you will have more than one workstation, you will need a router, cabling, ports, and the like, to link your computers.

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Your club management software will be DataTrak, manufactured by ABC Financial, P. O. Box 6800, Sherwood, Arkansas 72124, telephone: (800) 622-6290. This software maintains your member database and accounts receivable in addition to performing other club functions such as checking in members, point of sale transactions, inventory control, and other functions, as well as providing reports on membership usage, sales, and other information. You are required to obtain a maintenance contract from ABC Financial for this program so that it will be updated automatically in addition to providing you with ongoing support in the use of the program. As of the date of this circular, ABC Financial charges $135.00 per month for its technical support contract. Its ongoing charges are based on the amounts and type of payments handled through its service presently 4% of the amount billed for an electronic funds transfer from a bank account and 6.5% of the amount billed to a credit card.

You must use Quickbooks as your accounting software. Quickbooks is a product of Intuit, Inc., 2535 Garcia Avenue, Mountain View, California 94043, telephone: (650) 944-6000. Quickbooks is available from most computer software retailers.

In addition to the hardware and software we require, you must obtain high-speed Internet access through any major provider and an Internet browser such as Internet Explorer 6.0, or later, which is normally supplied with Windows XP Professional.

Since we have no Fitniks Kids' Clubs of our own, we have not used any of the above items directly. However, our licensor has used the hardware and software described above since November, 2005, in its operation of the Santa Rosa, California, Fitniks Kids'Club.

Once your computers, peripherals, and Internet connection have been installed and approved by us, you cannot alter, add to, or remove the hardware or software that are part of the system without our prior consent. You may be required to use other computer hardware and software during the term of your Franchise Agreement. You will be allowed a reasonable time to amortize the cost of the hardware and software you are using prior to being required to change these items.

Our representatives have full access your computer system, the data in it, and the reports it creates to the extent they relate to your Fitniks Kids' Club. (Franchise Agreement Section 8.18) There are no contractual limitations on our right to access the information in your system. In addition, ABC Financial and any other supplier that provides a similar service or can provide the required information will be required to submit various reports to us on your operations so that we can assist you in your operation and to confirm the information you otherwise provide to us.

Operations Manuals

We will provide you with our operations and other manuals. Before you purchase a Fitniks Kids' Club franchise you will be allowed to review our manuals at our offices after you sign the Nondisclosure and Confidentiality Agreement appearing as Exhibit B to this circular.

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Selection of Your Club Location

Section 5 above describes the various time periods within which you are allowed to seek a location for your Fitniks Kids' Club. We are available to consult with you on the telephone concerning the characteristics a location must have to get our approval. (Franchise Agreement Section 5.02) When you have found a location you find appropriate for your Fitniks Kids' Club, you must provide us with the details of the site to assist us in deciding whether to approve the site. (Franchise Agreement Section 5.04) Most Fitniks Kids' Clubs will be located in highly visible, high traffic areas. We have developed a site selection model that we share with you that contains various demographic information to assist in your site search and to help us evaluate proposed locations. When we evaluate a site we look at the types of businesses and residential units in the area, the area's demographics and traffic patterns, other fitness facilities in the area, the location's visibility, accessibility, size, layout, parking, and similar factors. It is your responsibility to find a site for your Fitniks Kids' Club. You cannot lease, or otherwise acquire the site until we approve the location. (Franchise Agreement Sections 3.02 and 5.04)

We will not unreasonably withhold or delay our approval of any location you have found although the Franchise Agreement does not contain any specific time limit within which we must consider and approve or disapprove any such location. (Franchise Agreement Section 5.04)

If your Franchise Agreement gives you the right to open a single Fitniks Kids' Club, once we approve the location, you must obtain a fully-signed lease or other document giving you the right to occupy the premises within 30 days after we approve the site. (Franchise Agreement Section 3.02) You must provide us with a copy of the proposed lease for our review and approval before you sign the lease. (Franchise Agreement Section 5.05) You must provide us with a copy of your fully-executed lease within 5 days of its execution. (Franchise Agreement Section 5.05). You must open for business within 90 days after you sign your lease unless in our reasonable judgment you are prevented from doing so by causes beyond your control other than your financial inability to complete the project. (Franchise Agreement Section 3.02)

See Section 5 above concerning the refundability of your initial fee in the event your Franchise Agreement is terminated because you did not comply with the time requirements described above.

Time Needed to Open a Fitniks Kids' Club

It typically takes between 3 to 6 months between the time you sign your Franchise Agreement and the opening of your Fitniks Kids' Club. Factors that can affect the time within which a Fitniks Kids' Club can be built and opened include the time needed to secure a location, lease, and financing for the project, the time needed to obtain plans and building permits, requirements of local laws and other governmental requirements, the availability of labor and materials, the time required to complete your leasehold improvements the installation of your equipment, fixtures, and decor, the hiring and training of your employees, and for similar reasons.

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Our training program is conducted as needed. Part of the training is Internet-based. For our initial franchisees, the training course is held at a Fitniks Kids' Club we designate or, in our discretion, at your Fitniks Kids' Club, prior the opening of your club. In addition to the Internet-based training, the course lasts approximately 5-7 days. Our training program is discussed in Section 7 of the Franchise Agreement.

Before the opening of your Fitniks Kids' Club, you and your manager must satisfactorily complete our training course. (Franchise Agreement Section 7.03) If you already own a Fitniks Kids'Club and have completed our training course, we will train one additional person in connection with each of your subsequent facilities. (Franchise Agreement Section 7.01)

If a partnership, limited liability company, corporation, or other entity owns your Fitniks Kids' Club, an owner of the entity must attend and complete the training course to our satisfaction unless we otherwise agree. (Franchise Agreement Section 7.01) Only a person who has successfully completed our training course can supervise the operation of your Fitniks Kids' Club. (Franchise Agreement Section 7.01) If your manager does not satisfactorily complete our training course, you cannot employ that person in your facility. (Franchise Agreement Section 7.03)

You do not pay us an additional fee to attend our training course. However, you have to pay any salary, travel, and living expenses of your manager and any others we allow to attend our training course. (Franchise Agreement Section 7.04) If any of your employees do not satisfactorily complete our training course, you can send a replacement to the course. In that case, we can require you to pay us an additional training fee for training the replacement employee. You also must pay us an additional training fee if you are required to send, or request to send, additional employees to take some or our training course at a later time. Our additional training fee is $500.00 per day per trainee. That fee is subject to adjustment by any increase in the Consumer Price Index between the date of your Franchise Agreement and the date of the training. (Franchise Agreement Section 7.05) You may also have to pay our special visit fee if we have to send someone to your Fitniks Kids' Club to conduct that training. (Franchise Agreement Section 8.19)

If we sponsor conventions, courses, seminars, programs, or other meetings for our franchisees or for their employees you and the appropriate employees must attend those meetings, up to a maximum of 2 such meetings in any 12-month period. In addition, if we sponsor any regional training seminars or other meetings in the region in which your Fitniks Kids' Club is located, you are required to attend these meetings and to send to these meetings those of your employees we designate. (Franchise Agreement Section 7.09) We can charge a reasonable fee for any of these conventions, courses, seminars, or meetings. You must pay your own expenses, and those of your employees, for travel, lodging, salaries, and the other costs incurred in attending these events. (Franchise Agreement Section 7.09)

Listed below is a chart showing our current training schedule, its principal instructors, the instructional material you will use, and the location of the training:

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The original documents were scanned as an image. The original file can be downloaded at the link above.