A structured LOI framework built for martial arts school acquisitions — covering membership-based earnouts, instructor retention provisions, lease assignment contingencies, and SBA financing terms specific to boutique fitness deals in the $300K–$2M revenue range.
A Letter of Intent (LOI) is the foundational document in any martial arts studio acquisition. It signals serious buyer intent, locks in the core economic terms before due diligence deepens, and establishes a framework both parties negotiate toward a definitive purchase agreement. In martial arts studio deals, the LOI must address risks that are unique to this industry: owner-dependency on mat time, membership churn risk post-transition, informal billing histories, instructor retention uncertainty, and lease assignment hurdles. A well-drafted LOI for a martial arts school goes beyond price and structure — it establishes exclusivity, defines the diligence period, and protects the buyer against the most common value erosion scenarios in boutique fitness acquisitions. Most martial arts studio transactions in the lower middle market are structured as asset purchases, with SBA 7(a) financing covering 80–90% of the purchase price, a 10% buyer equity injection, and a seller note or earnout tied to post-close membership performance. The LOI should reflect these structures explicitly so both parties enter diligence with aligned expectations. Sellers should understand that a credible, specific LOI from a qualified buyer is a signal of seriousness — and that accepting an LOI triggers an exclusivity period during which they should not be entertaining other offers. Use this template and guide to build or review an LOI for any martial arts studio acquisition, from a single-location karate school to a multi-disciplinary training center with after-school programming.
Find Martial Arts Studio Businesses to AcquireParties and Business Identification
Identifies the buyer entity, the seller, and the specific business being acquired. In martial arts studio deals, this section should clarify whether the buyer is acquiring assets only or the full entity, and name the studio by its operating brand as well as any LLC or corporate entity name.
Example Language
This Letter of Intent is entered into as of [Date] between [Buyer Name or Acquiring Entity], a [State] [LLC/Corporation] ('Buyer'), and [Seller Legal Name], owner of [Studio Operating Name] ('Business'), a martial arts training facility located at [Address], operating under [Seller's Legal Entity Name]. Buyer intends to acquire substantially all operating assets of the Business as described herein.
💡 Confirm early whether the deal is an asset purchase or stock purchase — most SBA lenders require an asset purchase for boutique fitness businesses. If the seller operates under a valuable trade name, the LOI should explicitly include that brand, curriculum materials, and social media handles as acquired assets. Sellers sometimes assume their personal brand name stays with them — clarify this in the LOI.
Purchase Price and Valuation Basis
States the proposed purchase price and the valuation methodology supporting it. Martial arts studios in the lower middle market typically trade at 2.5x–4.5x SDE. The LOI should tie the price to a specific SDE figure derived from the seller's financials to avoid disputes when due diligence surfaces discrepancies.
Example Language
Buyer proposes a total purchase price of $[Amount] ('Purchase Price'), representing approximately [X.X]x the Business's trailing twelve-month Seller's Discretionary Earnings of approximately $[SDE Amount], as reflected in the Business's 2022 and 2023 tax returns and provided profit and loss statements. The Purchase Price is subject to adjustment following completion of financial due diligence and verification of active membership count and EFT billing consistency.
💡 Always anchor the purchase price to a verified SDE multiple — not gross revenue alone. Martial arts studios with high owner mat time involvement warrant multiples at the lower end of the 2.5x–3.5x range. Studios with documented instructor teams, low churn below 5%, and clean EFT billing can support 3.5x–4.5x. Build in explicit language allowing price adjustment if due diligence reveals membership count or SDE materially differs from representations.
Deal Structure and Financing
Outlines how the purchase price will be funded, including the SBA loan component, buyer equity injection, seller note, and any earnout provisions. This section is critical in martial arts deals where SBA 7(a) financing is common and seller participation via a note signals confidence in the business's continuity.
Example Language
The Purchase Price shall be funded as follows: (i) approximately [80–90]% via SBA 7(a) loan financing obtained by Buyer through an approved SBA lender; (ii) [10]% via Buyer equity injection at closing; and (iii) a Seller Note in the amount of $[Amount] bearing interest at [rate]% per annum over a [24–36]-month term, subordinated to the SBA lender. Additionally, an earnout of up to $[Amount] shall be payable to Seller based on active membership count and monthly EFT revenue thresholds achieved during the 12 months following close, as detailed in the Definitive Agreement.
💡 SBA lenders will require the seller note to be on full standby for the loan term in most cases — communicate this to sellers early. The earnout component is particularly powerful in martial arts deals where seller goodwill and student loyalty risk is real. Structure earnouts around objective metrics: number of active EFT-billing members at 3, 6, and 12 months post-close, or total monthly recurring revenue targets tied to the studio's historical average.
Earnout Provisions
Defines the specific performance thresholds and measurement methodology for any contingent consideration. In martial arts studios, earnouts are most commonly tied to membership retention post-transition, protecting the buyer from student attrition caused by the seller's departure from the mat.
Example Language
Seller shall be eligible to receive an earnout payment of up to $[Amount], payable in two installments: (i) $[Amount] if the Business maintains a minimum of [X] active EFT-billing members and $[Monthly Amount] in total monthly recurring membership revenue as of the 6-month anniversary of Closing; and (ii) $[Amount] if the same thresholds are met as of the 12-month anniversary of Closing. Active membership shall be defined as students with an active, non-paused EFT billing agreement processed through [Mindbody / Zen Planner / designated billing platform].
💡 Define 'active member' explicitly — exclude paused, frozen, or credit-hold accounts from the threshold count. Sellers will push for broader definitions; buyers should insist on EFT-billing members only. Set thresholds at 85–90% of the membership count at the time of LOI signing, not at a future projection. Ensure the earnout measurement is software-generated and auditable, not based on the seller's manual count.
Assets Included in the Acquisition
Enumerates the tangible and intangible assets being conveyed. In martial arts studios, intangible assets — curriculum, brand, student relationships, social media accounts, and software data — are often more valuable than physical equipment.
Example Language
The acquisition shall include, without limitation, the following assets of the Business: (i) all training equipment, mats, heavy bags, and facility furnishings located at the Studio premises; (ii) the Business's operating name, trade name, logo, and all associated intellectual property; (iii) all active membership agreements and student contract rights; (iv) the Business's Mindbody / Zen Planner account including member data, billing information, and historical records; (v) the Business's website domain, social media accounts, and Google Business Profile; (vi) all curriculum materials, belt testing rubrics, and branded methodology documentation; (vii) goodwill associated with the Business; and (viii) the telephone number and email address used in Business operations.
💡 Sellers often overlook that their social media following, Google reviews, and software membership database are core business assets — specify each explicitly. Confirm the Mindbody or Zen Planner account can be transferred or reregistered under the buyer entity. If the seller has developed a proprietary curriculum or branded belt system, ensure IP assignment language is included in the definitive agreement.
Lease Assignment and Real Estate
Addresses the transfer of the studio's physical space, which is often one of the highest-risk elements of a martial arts studio acquisition. The business is effectively worthless without a viable location, and lease terms directly impact SBA lender approval.
Example Language
The obligation of Buyer to close the Transaction is expressly conditioned upon Buyer's receipt of a written assignment and assumption of the existing lease for the Studio premises located at [Address], with Landlord's written consent, on terms reasonably acceptable to Buyer and Buyer's SBA lender. The assigned lease must provide for a remaining term, inclusive of any renewal options exercisable by Buyer, of no less than [10] years from the anticipated Closing Date. Seller shall cooperate fully with Buyer in obtaining Landlord consent and shall not agree to any lease modification without Buyer's prior written approval.
💡 SBA lenders require that the remaining lease term plus renewal options equal or exceed the loan term — typically 10 years for a 10-year SBA loan. Confirm whether the existing lease includes a personal guarantee from the seller that cannot be transferred. Negotiate with the seller to obtain a landlord estoppel and consent letter before proceeding deep into diligence. If the landlord requires a personal guarantee from the buyer, ensure this is disclosed to the buyer's lender early.
Due Diligence Period and Access
Defines the length and scope of the buyer's due diligence investigation. In martial arts studio acquisitions, diligence must cover financial records, membership system data, instructor contracts, lease documentation, insurance policies, and any liability or injury claim history.
Example Language
Buyer shall have [45–60] calendar days from the date of execution of this LOI to complete due diligence ('Due Diligence Period'). During the Due Diligence Period, Seller shall provide Buyer with full access to: (i) three years of federal tax returns and monthly profit and loss statements; (ii) complete membership reports, EFT billing history, and churn data from the Business's billing platform; (iii) all instructor employment agreements, independent contractor agreements, and certification documentation; (iv) the existing lease and any amendments, correspondence with Landlord, and renewal option documentation; (v) all insurance policies including general liability, student accident, and professional liability coverage; and (vi) any claims, complaints, or litigation related to student injuries or instructor conduct in the past five years.
💡 Push for access to the live billing platform — export reports are not sufficient. Request a rolling 24-month membership retention report showing active, new, paused, and cancelled members by month. For instructor diligence, verify that certifications are current, that instructor agreements include non-solicitation provisions, and that any lead instructors are willing to remain post-acquisition. Student injury history and insurance claims are high-stakes — request a loss runs report from the carrier.
Exclusivity
Grants the buyer an exclusive negotiating period during which the seller agrees not to market the business, solicit other buyers, or enter into any other acquisition discussions. This protects the buyer's diligence investment and signals good faith from the seller.
Example Language
In consideration of Buyer's commitment to conduct due diligence and incur associated costs, Seller agrees that from the date of execution of this LOI through the expiration of the Due Diligence Period, Seller shall not, directly or indirectly, solicit, encourage, or negotiate with any other party regarding the potential sale, transfer, or disposition of the Business or its assets ('Exclusivity Period'). Seller shall promptly notify Buyer if approached by any third party regarding such a transaction during the Exclusivity Period.
💡 45–60 days is standard for martial arts studio acquisitions given the complexity of SBA financing timelines. Sellers may push back on exclusivity if they have multiple interested parties — stand firm, as exclusivity is a fundamental protection for the buyer's diligence investment. Consider offering a modest exclusivity deposit of $5,000–$10,000 held in escrow, refundable only if seller defaults on representations, to demonstrate seriousness while reinforcing exclusivity.
Seller Transition and Training
Outlines the seller's post-close obligations to support a smooth handoff of operations, student relationships, and instructor management. This is uniquely important in martial arts studios where the seller is often the most recognized face of the brand.
Example Language
Seller agrees to remain available to Buyer for a transition and training period of [90–180] days following the Closing Date ('Transition Period'), during which Seller shall: (i) continue teaching a mutually agreed reduced class schedule to facilitate student relationship transfer to Buyer or designated instructors; (ii) introduce Buyer to key instructors, students, and vendor relationships; (iii) assist in the transfer of all billing accounts, platform access, and vendor contracts; and (iv) cooperate with Buyer's communication strategy for announcing the ownership transition to the student community. Compensation for the Transition Period, if any, shall be agreed upon in the Definitive Agreement.
💡 Negotiate the transition period carefully — a seller who disappears immediately creates real churn risk. Six months on the mat part-time, with a scripted student communication plan, is a reasonable ask for studios where the owner teaches regularly. If the seller's ongoing presence is critical to membership retention, tie a portion of the seller note or earnout to their active participation during the transition period. Avoid compensation structures that incentivize the seller to minimize post-close involvement.
Non-Compete and Non-Solicitation
Restricts the seller from opening a competing martial arts studio, teaching independently, or soliciting students and staff after the sale. Given the personal loyalty students often feel toward founding instructors, a robust non-compete is essential in martial arts acquisitions.
Example Language
As a condition of closing, Seller shall execute a Non-Competition and Non-Solicitation Agreement prohibiting Seller from, directly or indirectly: (i) operating, owning, or instructing at any martial arts training facility within a [10]-mile radius of the Studio for a period of [3–5] years following the Closing Date; (ii) soliciting or accepting enrollment from any current or former student of the Business for any competing instruction or training program during the same period; and (iii) soliciting or inducing any instructor, employee, or contractor of the Business to leave their position or engagement with Buyer.
💡 A 10-mile, 3–5 year non-compete is standard and defensible in most jurisdictions for martial arts studio sales. Sellers will sometimes argue they have a right to continue teaching in some capacity — consider carving out teaching at a single non-competing discipline or at a location materially outside the radius. Ensure the non-solicitation of students extends to online instruction and social media recruitment, which sellers may attempt post-close.
Conditions to Closing
Lists the specific contingencies that must be satisfied before the buyer is obligated to close. These protect the buyer from being forced to close if material issues surface in due diligence or if financing or lease transfer fails.
Example Language
Buyer's obligation to consummate the Transaction is conditioned upon the satisfaction of the following conditions prior to or at Closing: (i) completion of due diligence to Buyer's sole satisfaction; (ii) receipt of SBA 7(a) loan approval and funding commitment from Buyer's lender; (iii) execution of a written lease assignment and Landlord consent with remaining term meeting SBA lender requirements; (iv) no material adverse change in the Business's membership base, revenue, or operations between the date of this LOI and Closing; (v) delivery of executed instructor retention agreements or employment confirmations from Buyer's designated lead instructors; and (vi) resolution to Buyer's satisfaction of any outstanding liability claims, student injury matters, or insurance coverage gaps.
💡 The 'material adverse change' clause is critical — define it to include membership drops exceeding 10–15% from the LOI-date count, loss of any key instructor, or any new liability claim. Seller may resist broad MAC language; negotiate a specific, measurable threshold rather than a subjective standard. SBA lender approval as a condition gives the buyer an exit if financing falls through, which sellers may resist — explain that SBA timelines are real and this protection is standard.
Confidentiality
Obligates both parties to maintain confidentiality regarding the transaction, the business's financial information, and the terms of the LOI. In martial arts studios, premature disclosure to students, staff, or competitors can cause significant harm to the business.
Example Language
Each party agrees to maintain in strict confidence all information disclosed in connection with this LOI and the proposed Transaction, including financial data, membership records, instructor agreements, and the existence of this LOI itself. Neither party shall disclose the terms hereof or the fact of ongoing negotiations to any third party, including students, employees, or competitors, without the prior written consent of the other party, except as required by law or to advisors bound by equivalent confidentiality obligations.
💡 Emphasize to sellers that student and staff disclosure before close creates real attrition risk. Agree on a joint communication strategy for announcing the sale — typically after closing, not before. If the seller has a business broker, confirm the broker's NDA with the seller covers all shared materials. Buyers should also be cautious about sharing LOI terms with lenders who may inadvertently disclose details.
Purchase Price Adjustment Tied to Verified Membership Count
The stated purchase price should be explicitly tied to a verified active membership count and EFT billing total at the time of LOI. If due diligence reveals that the membership base is materially smaller than represented — for example, the seller counted lapsed or paused members — the LOI should allow for a corresponding price reduction. In martial arts studio deals, a variance of more than 10% in active EFT-paying members from the represented count is grounds for renegotiating the purchase price.
Earnout Metric Definition — Active EFT Members vs. Total Enrolled Students
Sellers will often argue for a broader earnout definition that counts all enrolled students, including those on payment plans, trial memberships, or reduced-rate agreements. Buyers should insist on counting only active, current EFT-billing members processed through the studio's billing software as the earnout metric. This distinction can represent a 20–30% difference in the counted base and has significant financial implications for earnout payouts.
Instructor Retention Agreements as a Closing Condition
If the studio has one or more lead instructors beyond the owner who teach the majority of classes, securing written confirmation of their intent to remain post-close — and ideally executed employment or contractor agreements — should be a condition of closing. In some deals, the LOI should specify that the definitive agreement will include instructor retention bonuses funded at close to incentivize key staff to stay through the transition period.
Lease Remaining Term and Renewal Option Sufficiency
The LOI should specify a minimum acceptable remaining lease term inclusive of renewal options — typically 10 years to satisfy SBA lender requirements. If the current lease has only 2–3 years remaining and the landlord has not committed to a renewal, this must surface before the buyer proceeds deep into diligence. Negotiate the LOI to include a specific timeline by which the seller must produce a lease extension or landlord letter of intent.
Seller Non-Compete Geographic Radius and Online Instruction Carveouts
As online martial arts instruction platforms have grown, a non-compete clause limited to a physical radius may leave the buyer exposed to the seller building a competing online following. Negotiate the non-compete to include restrictions on online instruction directed at the studio's student base or geographic market, in addition to the standard physical radius restriction. Sellers often expect to maintain a social media presence — agree in the LOI that social media accounts associated with the studio transfer to the buyer.
Find Martial Arts Studio Businesses to Acquire
Enough information to write a strong LOI on day one — free to join.
Most independently owned martial arts studios in the lower middle market sell for 2.5x–4.5x Seller's Discretionary Earnings (SDE). A studio generating $200,000 in SDE might realistically sell for $500,000–$800,000 depending on the quality of its recurring revenue, instructor team depth, lease terms, and owner independence. Studios where the owner teaches the majority of classes and holds most student relationships trade at the lower end of this range, while studios with documented instructor teams, low EFT churn below 5%, and diversified revenue streams from after-school programs, apparel, or private lessons can command multiples at the higher end. Always verify the SDE calculation by reviewing three years of tax returns alongside the seller's add-back schedule.
Virtually all martial arts studio acquisitions in the lower middle market are structured as asset purchases. An asset purchase allows the buyer to acquire the business's operating assets — membership contracts, equipment, curriculum, brand, and lease rights — without assuming unknown liabilities such as student injury claims, unpaid taxes, or employment disputes from the seller's period of ownership. SBA 7(a) lenders almost universally require an asset purchase structure for boutique fitness acquisitions. The primary exception would be a situation where the business holds a valuable transferable license or contract that can only be assigned within a corporate structure, which is uncommon for independent martial arts studios.
An earnout is a contingent payment structure where a portion of the purchase price — typically 15–25% — is paid to the seller only if specific post-close performance targets are met. In martial arts studio acquisitions, earnouts are most commonly tied to active EFT-billing membership counts or monthly recurring revenue thresholds at 6 and 12 months post-close. Buyers should propose earnouts when there is meaningful uncertainty about membership retention post-transition, particularly when the selling owner is the primary instructor and holds deep personal relationships with students. A well-structured earnout protects the buyer from overpaying for goodwill that may not survive the ownership change while giving the seller an opportunity to earn full value if the business performs as represented.
Verifying the quality and consistency of recurring EFT membership revenue over a 24-month period is the single most important diligence task in a martial arts studio acquisition. Request direct access to the studio's billing platform — Mindbody, Zen Planner, or equivalent — and generate a rolling monthly report showing active members, new enrollments, paused accounts, and cancellations. Calculate the true monthly churn rate. A studio claiming 200 active members with 15% monthly churn is a fundamentally different business than one with 150 members and 3% monthly churn. This analysis directly informs your purchase price, earnout structure, and transition risk assessment.
From executed LOI to closing, a martial arts studio acquisition using SBA 7(a) financing typically takes 90–120 days. The diligence period runs 45–60 days concurrently with the SBA loan application process, which requires the lender to complete a business appraisal, lease review, and credit underwriting. Common delays include landlord consent and lease assignment negotiations, which can add 2–4 weeks if the landlord is unresponsive or requests personal guarantees from the buyer. Buyers should submit their SBA application within the first week of signing the LOI and engage a lender experienced with boutique fitness and service business acquisitions to avoid delays from lenders unfamiliar with the industry's recurring revenue model.
A robust non-compete for a martial arts studio sale should include a geographic restriction of 10 miles from the studio location, a duration of 3–5 years from the closing date, and explicit prohibitions on: opening or operating a competing studio, providing independent martial arts instruction in any format within the restricted area, soliciting current or former students of the studio, and inducing any instructor or staff member to leave the business. Importantly, the non-compete should extend to online instruction platforms and social media channels when the seller's audience substantially overlaps with the studio's student base. Courts generally enforce these provisions in business sale contexts when they are reasonable in scope, and an experienced M&A attorney should draft the final language.
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