Risk Score
Pending analysis
Investment Range
$240,025 - $464,900
Franchise Fee
$20,000
Total US Locations
14
Business Summary
StarCycle operates fitness studios under the brand name "StarCycle" that offer indoor cycling exercise classes. These classes utilize music and choreography. Additionally, StarCycle studios sell exercise merchandise and various other related services and products specified by the franchisor.
Corporate History
StarCycle Franchise, LLC was organized in Oregon on November 12, 2013, and began offering franchises in October 2014. The company franchises fitness studios under the "StarCycle" brand, which provide indoor cycling classes, retail merchandise, and other related services. Although StarCycle Franchise, LLC itself has not operated an exercise business, its affiliate, Down Girls Up, LLC, has owned and operated two StarCycle Studios in the Portland, Oregon area since May 13, 2013. In June 2017, Thomas M. Cook Investments, LLC, acquired a 55% ownership interest in both StarCycle Franchise, LLC and Down Girls Up, LLC, with an agreement to provide funding for StarCycle's growth and development.
Financial Overview
Investment Range
$240,025 - $464,900
Franchise Fee (Low)
$20,000
Franchise Fee (High)
$40,000
Royalty %
5%
Marketing %
2%
Equipment Costs (Low)
$168,000
Equipment Costs (High)
$333,000
Working Capital
$27,500
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Going concern qualification
Financial Health Notes
The franchisor's financial condition raises concerns about StarCycle Franchise, LLC's ability to provide services and support to its franchisees. For the fiscal year ended September 30, 2023, the company reported a net loss of $244,792 and had a working capital deficiency of $1,059,219. These financial factors led the auditors to raise substantial doubt about StarCycle Franchise, LLC's ability to continue operating as a going concern.
Financing Details
StarCycle Franchise, LLC does not offer any direct or indirect financing to its franchisees, nor does it guarantee any loans, leases, or other obligations. However, franchisees interested in the StarCycle program may be eligible for a Small Business Administration (SBA) loan. To pursue an SBA loan, franchisees must follow the SBA loan application process and execute the required SBA Addendum.
Performance Metrics
Total US Locations
14
Franchised Units
11
Corporate Units
3
Avg Square Footage
2,150
Franchising Since
2014
Legal & Compliance Analysis
Recent Litigation
No
Bankruptcy
No
Litigation Summary
StarCycle has no litigation history that is required to be disclosed in this document. The franchisor has no legal issues to report.
Bankruptcy History
StarCycle has no bankruptcy information to report for itself or its key personnel. There is no bankruptcy history required to be disclosed in this document.
Agreement Terms
Initial Term
10 years
Renewal Term
10 years
Renewal Conditions
To renew, StarCycle franchisees must have consistently complied with their agreement throughout the term, not been in default, nor received three or more default notices in any 24-month period. They must not be in default when the renewal term begins and must have paid all their debts to StarCycle and its affiliates, as well as to other suppliers. Franchisees are required to notify StarCycle of their desire to renew between 90 and 180 days before their current agreement expires. They must also have the right to remain at their approved location and agree to upgrade their studio and equipment to meet StarCycle's then-current standards for new studios within six months of the renewal's effective date. Additionally, franchisees need to upgrade their computer system before renewal, provide proof of current licenses, insurance, and permits, and ensure they and their instructors successfully complete any required retraining. They must sign a general release of claims against StarCycle and its affiliates, and execute StarCycle's then-current franchise agreement, which may contain materially different terms. A renewal fee, equal to 25% of StarCycle's then-current initial franchise fee, is also required.
Training & Support Program
Franchisor Assistance
Before a StarCycle studio opens, the franchisor assists with designating a site search area and refers franchisees to an optional national real estate brokerage firm for help with site identification and lease negotiations. StarCycle reviews and approves proposed leases, provides general design specifications for the studio, and conducts an initial training program for the franchisee (or majority owner) and initial instructors. This training is provided at no cost for up to eight individuals at StarCycle's Lake Oswego, Oregon facility, though franchisees are responsible for travel and living expenses. StarCycle also offers advice on supplies and materials and loans a copy of its Operations Manual. Up to three days of pre-opening consultation and advice are provided at the franchisee's studio. After opening, StarCycle makes a representative reasonably available for telephone and email communication during normal business hours as needed. It conducts additional or retraining courses for franchisees and their employees, for which the franchisee pays a fee. Guidance on methods, specifications, standards, management, and operating procedures, as well as approved equipment and supplies, is provided through manuals, bulletins, internet, DVDs, CD ROMs, written materials, reports, and telephonic consultations. StarCycle develops new products, services, and operational methods, with associated fees for training and implementation. The franchisor also maintains a Marketing Fund to develop promotional and marketing programs for the StarCycle system generally.
Initial Training Hours
42
Training Location
Corporate headquarters in Lake Oswego, Oregon
Ongoing Support
After opening, StarCycle Franchise, LLC makes a representative reasonably available to communicate with franchisees by telephone and email during normal business hours if deemed necessary. StarCycle also conducts additional or retraining courses for franchisees and their employees, for which franchisees are responsible for the current training fees and travel expenses. The franchisor provides ongoing guidance on methods, specifications, standards, management, and operating procedures for the StarCycle studio, as well as approved equipment, fixtures, furnishings, signs, products, materials, and supplies, through its Manuals, bulletins, the internet, DVDs, CD ROMs, written materials, reports, and/or telephonic consultations. StarCycle develops and designs new products, services, operations methods, or programs for the studios, and franchisees must offer these new items and pay any associated training or implementation fees. StarCycle also maintains a Marketing Fund for general marketing and promotion of the StarCycle System.
Franchise Requirements
Ideal Candidate Profile
StarCycle Franchise, LLC seeks individuals or entities who meet its qualification requirements and are interested in operating a fitness studio. If the franchisee is an entity, a designated "Majority Owner" must have management control, at least 51% ownership, and be the primary point of contact for business and operational matters with StarCycle. The franchisee or Majority Owner must actively participate in the business and also teach training classes to customers. Additionally, the franchisee and their employees need to possess sufficient computer skills to properly operate the computer system, understand the software, and access email, the Internet, and StarCycle Franchise, LLC's proprietary database management and intranet system. They must also maintain an active and functional email account, checking it at least once daily.
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
Yes
Operational Details
Location Type
retail
Owner Participation
hands-on
Territory Type
limited
Territory Size Requirements
StarCycle territories are defined by geographic scope and shape, considering various market variables including demographics, psychographics, density, market trends, traffic flow, natural and man-made boundaries, neighborhood characteristics, and local competition. The territory may be configured as a drive-time area or delineated by street map landmarks and compass directions on Attachment A of the franchise agreement. Typically, in suburban or rural areas, a minimum of 10,000 qualified households is required, although this number may be smaller in urban markets. A 'qualified household' in an urban area generally has an annual average household income exceeding $100,000, but this income threshold may be lower in suburban or rural settings. StarCycle may, in its sole discretion, grant a franchise for a territory with fewer than 10,000 qualified households in certain circumstances, such as areas with favorable demographics.
Staffing Notes
StarCycle Franchise, LLC requires its studios to be directly supervised by the franchisee or a Majority Owner who actively participates in the business and provides training classes. If a Studio Manager is designated, they must successfully complete training to StarCycle's satisfaction and be approved by the franchisor. The Studio Manager's responsibilities include instructing 45-minute StarCycle classes, running daily operations, bookkeeping, managing the front desk, overseeing childcare services (if offered), equipment maintenance, computer and sound system operations, cleaning, and ensuring the safety of all students and staff. Franchisees are solely responsible for hiring and training their Studio Manager and other employees. StarCycle emphasizes that franchisees must clearly communicate to their staff that they are employed by the franchisee, not by StarCycle Franchise, LLC, and that the franchisee is responsible for all human resources and personnel policies. All employees providing exercise instruction must attend and successfully complete StarCycle's Instructor Training and obtain a Training Certificate. Staff must also adhere to designated uniform requirements and maintain a neat and clean appearance. Employees with access to StarCycle Franchise, LLC's trade secrets and confidential information are required to sign non-disclosure and non-competition agreements.