Fyzical Franchise

Financing Details

FYZICAL may offer financing for a portion of the initial franchise fee to existing FYZICAL franchisees who meet certain credit requirements. This financing can cover up to 80% of the initial franchise fee, with the franchisee paying a minimum of 20% down. The loan term is 36 months, with an annual interest rate of 9.8%. These loans are secured by a lien on all of the Center's assets, and all owners are required to provide a personal guaranty. Except for this specific program for existing franchisees, FYZICAL does not offer other direct or indirect financing and does not guarantee any third-party notes, leases, or obligations.

Litigation Summary

FYZICAL currently has four litigation cases. Merissa Kihnke, a former in-house general counsel, filed a lawsuit in September 2023 against FYZICAL and its parent company, alleging constructive discharge in violation of the Florida Whistleblower Act. Former employee Dr. Christopher Mulvey filed a Second Amended Complaint in September 2024, alleging his termination was retaliation under Florida's Private Whistleblower Act and the False Claims Act. PG Therapy LLC, a franchisee, filed a complaint in August 2024 asserting causes of action for breach of contract, fraudulent misrepresentation, negligent misrepresentation, unjust enrichment, and implied covenant of good faith and fair dealing. Lastly, a qui tam complaint, U.S. ex rel. James R. Berkley v. Ocean State LLC, et al., filed in December 2020, alleges violations of the False Claims Act by FYZICAL's parent company and other portfolio companies related to Paycheck Protection Program loan applications. All these cases are currently in the discovery process, with the U.S. Department of Justice having declined to intervene in the Berkley litigation.

Renewal Conditions

To renew their franchise agreement, FYZICAL franchisees must notify the franchisor between 90 and 180 days before their initial term expires. They must be in good standing, without any defaults under their existing agreements with FYZICAL or its affiliates. Franchisees are required to sign the franchisor's then-current franchise agreement and all related documents, which may have different terms and conditions. A successor franchise fee, equal to 10% of the then-current initial franchise fee for their Protected Area, must be paid. Additionally, franchisees must sign a General Release, remodel or upgrade their Center to comply with current brand standards and specifications, and ensure they have the right under their lease to maintain possession of the Approved Location throughout the entire renewal term. They must also take any other actions that the franchisor reasonably requires.

Staffing Notes

Each FYZICAL Center must employ at least one Licensed Professional, which includes physical therapists. If the franchisee is a business entity or comprises multiple individuals, an Operating Principal must be appointed to oversee the center's daily management. This Operating Principal is required to successfully complete FYZICAL's initial training program, which includes pre-lab courses, an orientation, and a lab program. If neither the franchisee nor the Operating Principal is a Licensed Professional or actively involved in daily supervision, a Clinical Director must be hired. This Clinical Director must be a Licensed Professional with substantial supervisory experience, work full-time, and also complete the initial training program. Additionally, a Client Care Specialist must complete a virtual administrative training track program prior to the center's opening. Franchisees are solely responsible for hiring, training, and supervising all other employees, ensuring a sufficient number of trained staff are always available. These employees work for the franchisee, not FYZICAL. A minimum of two clinical staff members is indicated by the requirement of having one computer per clinical staff member, with a minimum of two computers per center. Ongoing training and development are provided through a 90-Day Post-Open Success program, including weekly virtual meetings with a coach. Periodic refresher training sessions may be mandatory for the Operating Principal, Clinical Director, Licensed Professionals, and other key employees. All employees and agents who handle confidential information must sign a Confidentiality Agreement. The Clinical Director, Licensed Professionals, and other employees with access to trade secrets must also sign a Nondisclosure, Nonsolicitation, and Noncompetition Agreement, and a Media Release Consent Form.