Key Items to Watch out for in the Arthur Murray International, Inc. 2020 FDD
Certain states require that the following risk(s) be highlighted: 1. Out-of-State Dispute Resolution. The franchise agreement requires you to resolve disputes with the franchisor by arbitration and/or litigation only in Florida. Out-of-state arbitration or litigation may force you to accept a less favorable settlement for disputes. It may also cost more to arbitrate or litigate with the franchisor in Florida than in your own state.
Certain states may require other risks to be highlighted. Check the “State Specific Addenda” (if any) to see whether your state requires other risks to be highlighted.
Item 5: Initial Fees
Your initial franchise fee depends on the population in your Market Area, if any, and whether you have been a dance instructor at an Arthur Murray Studio. Prospects who have worked in our System need not pay any initial franchise fee. Population Franchise Fee a) No Market Area granted and Market Area with population of 0 to 250,000 $25,000 b) 250,001 to 500,000 $50,000 c) 500,001 to 1,000,000 $75,000 d) Over 1,000,000 $100,000 If we charge the fee because you have not worked in the Arthur Murray System, you must pay this fee in a lump sum when you sign the Franchise Agreement. We do not charge a fee to those who have worked in the Arthur Murray System and qualify. We did not collect any initial fees during the 2020 fiscal year. The initial franchise fee is not refundable. You must buy or lease all video tapes, promotional brochures and step charts for student lessons from AME. Initial purchases or leases for video tapes typically range from $200 to $500; for promotional brochures from $50 to $75; and for step charts from $35 to $75. These are proprietary materials, which are not available elsewhere. Once paid, these initial fees are nonrefundable under any circumstances.
Item 8: Restrictions on Sources of Products and Services
You must follow our methods and execution of dance instruction and all dance steps, standards, programs, testing, charting, recording and similar activities that are part of our System. Except as noted below, there currently are no goods, services, supplies, fixtures, equipment, inventory or real estate for the Studio that you must purchase or lease from us or a designated or approved supplier or under our standards and specifications. Therefore, we do not issue and modify specifications or grant and revoke approval to suppliers. We lease a software program for the operation of your Studio. Currently, you are not required to lease this software program from us but we reserve the right to require you to do so in the future. You must buy all video tapes, promotional brochures and step charts for student lessons from AME. These are proprietary materials, which are not available elsewhere. AME sells these items at its production cost. AME received $44,451 from our franchisees during the fiscal year ending June 30, 2020 for these items. We received payments totaling $20,247 during our last fiscal year from suppliers of promotional materials to our franchisees, representing .001% of our total net revenue for the year ending June 30, 2020 of $10,464,800. We also have an arrangement with Showtime Dance Shoes where we receive 10% of franchisees’ sales of shoes in the Studio. Except as described above, neither we nor AME supplies any other items to franchisees. None of our officers has an interest in any approved suppliers.
You must obtain and maintain, at your own expense, the insurance coverage that we periodically require from carriers meeting our minimum standards. You currently must have a commercial general liability insurance policy with limits of not less than $2,000,000 combined single limit for bodily injury and property damage (or such greater limits as may be required by the landlord of the Studio premises), including motor vehicle liability coverage on any vehicle used to any degree in conjunction with Studio operations, full risk property insurance in an amount equal to full replacement value of all business personal property and leasehold improvements. Premiums depend on the insurance carrier’s charges, the terms of payment and your history. All insurance policies must name us as an additional insured party.
Before you use them, you must submit to us for approval samples of all advertising and promotional materials that we have not prepared or previously approved. We will approve or disapprove these materials within a reasonable time (not exceeding 60 days). You may not use any materials that we have not approved or which do not include all copyright or trademark notices we require. The Studio’s dance floors, which must be oak or maple wood or other approved surface, and furniture, furnishings and decorations must be in good taste and of high quality and character. The Studio also must have a high quality music system.
Collectively, the purchases and leases described above represent 98% of your total purchases and leases in establishing, and an insignificant percentage of your total purchases and leases in operating, the Studio. Except as described above, we do not derive revenue or other material consideration from required purchases or leases. There currently are no purchasing or distribution cooperatives. We do not negotiate purchase arrangements with suppliers for the benefit of franchisees. We do not provide material benefits to a franchisee for using designated or approved sources.
Item 10: Financing
We do not offer direct or indirect financing. We do not guarantee your note, lease or obligation. For your information, our franchisees are eligible for expedited and streamlined Small Business Administration loan processing through the SBA’s Franchise Registry Program (www.franchiseregistry.com).
Item 12: Territory
You must give us the address and a physical description of your Studio before signing the lease or opening the Studio. We first must approve the Studio location. You do not receive an exclusive area. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands we control. However, if your market is large enough to justify more than one Studio, we might designate a “Market Area” in which you may operate as many Arthur Murray Studios as you want. We must approve each Studio location before you open it. You must sign our then current form of franchise agreement for each Studio you choose to open. You need not pay any fee for a new Studio. If your market is large enough, we will insert the Market Area’s precise boundaries, and the number of Studios you want to open, in the Franchise Agreement before you and we sign it. The Market Area’s typical boundaries will be city or county lines, streets and highways or other appropriate political subdivisions. The Market Area generally will be an area based on population density. Each area is a city with at least 50,000 people (or a Census Bureau urbanized area of at least 50,000 people) and a total drawing area population of at least 100,000. That area also might include outlying counties with close economic and social relationships with the central county. These counties must have specified levels of commuting to the central county and meet certain standards concerning metropolitan character (like population density). Each area has at least one central city.
If we grant you a Market Area, we may not change it without your written consent. We will not operate, or allow others to operate, an Arthur Murray Studio within the Market Area during the term of your Franchise Agreement unless we terminate your territorial protection or “release” a portion of the Market Area to another franchisee. We will terminate your territorial protection (at our election) if you: (a) do not have open and operating within the Market Area the number of Arthur Murray Studios stated in the Franchise Agreement by the specified dates; or (b) breach any of your obligations under the Franchise Agreement, and fail to cure that breach within 30 days following written notice from us. We may terminate the Franchise Agreement if you do not open a specific number of Arthur Murray Studios by a specific date.
You must conduct your business exclusively within your Market Area. If we do not grant you a Market Area, we may designate an area around your Studio and you must conduct your business exclusively within that area. You may not engage in any activities outside this area (or, if applicable, your Market Area), including dance competitions, without our written consent. We do not operate any Arthur Murray Studios and therefore cannot solicit or accept orders in your Market Area (if you have one). You may move your Studio to another address in the Market Area if we approve the location. Whether or not we would allow you to move your Studio to another location depends on the circumstances at the time and what is in the Studio’s best interest and the Arthur Murray System’s best interest. The new location must meet our thencurrent standards for site location and selection including, but not limited to, location, facilities, premises and floor plan. There are no fees or other charges paid to us if you move or relocate. Except as discussed above, you have no options, rights of first refusal or similar rights to acquire additional franchises anywhere.
Although we have not done so, we and our affiliates may sell products under the Marks within and outside your Market Area through any method of distribution other than an Arthur Murray Dance Studio including, sales through such channels of distribution as the Internet, catalog sales, telemarketing, or other direct marketing sales (together, “alternative distribution channels”) and we need not compensate you for these sales made in your Market Area. You may not solicit or accept orders from consumers inside or outside your Market Area using alternative distribution channels such as the Internet, catalog sales, telemarketing, or other direct marking to make sales outside or inside your Market Area without our consent.. We and our affiliates can use alternative channels of distribution to make sales within your Market Area of products or services under trademarks different from the Trademarks you will use under the Franchise Agreement, but we and our affiliates have not yet made any sales of this type. Except as described above, continuation of your territorial exclusivity does not depend on your achieving a certain sales volume, market penetration or other contingency.
Item 15: Obligation to Participate in the Actual Operation of the Franchise Business
You must devote your full time, attention and best efforts to operating the Studio. The Studio always must be under your direct, on-premises control and full time supervision. If you operate more than one Studio, each Studio must be under the direct on-premises supervision of an acceptable manager who has demonstrated the ability to operate a Studio. The manager need not have an equity interest in the business. However, the manager must sign an agreement containing confidentiality and noncompetitive provisions with the Studio.
At our option, you or the Studio’s manager must successfully complete our training program before the Studio opens. You must control and supervise your employees and agents so that they comply with our standards. You may not employ anyone involved in dance instruction unless he or she has successfully completed a teacher’s training class at an Arthur Murray Studio for at least 100 hours of training or has shown sufficient dance knowledge and teaching ability to meet the necessary instructor standards and our proficiency tests.
You must conduct ongoing staff training programs so that all of your instructors, specialists, counselors, supervisors and other personnel know all of our operating and technical manuals and aids and policy releases that are relevant to their respective jobs. All dance instructors must be qualified. Our authorized certified examiners may evaluate their dancing proficiency. All of your trainees, instructors, supervisors, managers and sales personnel must have written employment agreements with you containing specific provisions for our protection. They must protect the confidentiality of our proprietary information. If you assign the Franchise Agreement to a corporation, all of its shareholders, directors and executive officers must agree to be bound personally by the Franchise Agreement.
Item 16: RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
You must offer all products and services that we periodically require for Arthur Murray Studios. You may not offer any products or services that we have not authorized. You must conduct your business exclusively within your Market Area (or, if we do not grant you a Market Area, an area we specify) and you may not engage in any activities outside this area, including dance competitions, without our consent. You may not engage or participate in any dance competition or similar events not sponsored or authorized by us without our prior written consent. Your Studio must follow the dance instruction methods, dance steps, standards, programs, testing, charting, recording and similar activities that are part of our System. We may change these periodically. There are no limits on our right to do so. You must attend and participate in all technical, training, promotional or other meetings we sponsor, whether locally, regionally, nationally or internationally. All student examinations for full standard medal categories must be judged by an examiner we certify. You may not conduct any competitions, showcases, meetings, projects or promotions which conflict with, or are to occur within 14 days of, any regional, area or national event we sponsor of which you have reasonable notice and which you must attend.
You must give dance instruction to students enrolled in any Arthur Murray Studio (to the extent they have not used all of their paid-for courses). The franchisee who enrolled those students will reimburse you for the lessons you teach at the current rates (which will equal the median lesson rates that most franchisees pay employees). We and our franchisees are subject to a Federal Trade Commission Consent Decree which prohibits us from engaging in certain allegedly unfair and deceptive acts and practices and unfair methods of competition. You may not do the following (which include some, though not all, of the prohibited practices): represent directly or implicitly that any service or thing of value is available at reduced prices if it is not so available; refuse to honor the terms of any offer; use promotional means to obtain customers if that purpose is not disclosed; induce the purchase of dance instruction in certain ways; request pupils to sign incomplete contracts; or falsely represent that a given course of instruction will allow one to achieve a certain standard of dancing proficiency.
Our Franchise Agreement provides that every student enrollment and other agreement you use must comply strictly with applicable law. We must approve all student enrollment agreements and contracts for lessons or services before you use them. You must comply with our standards for the maximum total number of lessons and dollar amount for which any one student may reasonably be enrolled (including parties, trips, club memberships and other Studio services). The current limitations are in Section 11(c)(1) of the Franchise Agreement.
To view the full Franchise Disclosure Document, please click here