A field-tested LOI framework built for boutique fitness acquisitions — covering membership retention milestones, instructor continuity, Reformer equipment, and lease assignment terms that protect your deal from closing day forward.
A Letter of Intent (LOI) is the foundational document in any pilates studio acquisition. It signals serious buying intent, establishes the key economic and structural terms of the deal, and creates a framework for due diligence before both parties invest heavily in attorneys and accountants. For pilates studios specifically, a well-crafted LOI must address risks that are unique to this industry: instructor dependency, membership churn, aging Reformer equipment, and lease transferability. Unlike a retail or e-commerce acquisition, a pilates studio's value is deeply tied to relationships — with members, instructors, and the landlord — making it critical to lock in protective language around each of these early in the process. Typical pilates studio deals in the lower middle market close at 2.5x–4.5x SDE, with SBA 7(a) financing covering the majority of the purchase price and sellers often carrying a small second note or earnout tied to post-close membership performance. This guide walks you through each section of a standard LOI, provides realistic example language calibrated to the boutique fitness industry, and highlights the negotiation points that separate savvy buyers from those who overpay or inherit avoidable problems.
Find Pilates Studio Businesses to AcquireParties and Studio Identification
Clearly identify the buyer entity, the seller, and the specific business being acquired — including the studio name, legal entity, address, and any DBAs. If the studio operates under a trade name different from its LLC or corporation, capture both. For multi-location sellers, specify whether the LOI covers one location or all.
Example Language
This Letter of Intent ('LOI') is entered into as of [Date] by and between [Buyer Name or Buyer Entity], ('Buyer'), and [Seller Name or Seller Entity], ('Seller'), with respect to the proposed acquisition of the boutique pilates studio operating under the trade name '[Studio Name],' located at [Studio Address], [City, State, ZIP] ('the Business'). The Business is currently operated by Seller as a [LLC/S-Corp/Sole Proprietorship] under EIN [XXXXXXXXX]. This LOI does not include the real property on which the Business operates, which is leased under a separate agreement with [Landlord Name].
💡 If the seller owns multiple studios, define scope precisely. Ambiguity here leads to disputes about which equipment, client lists, or brand assets are included. Confirm whether the acquisition is structured as an asset purchase or stock purchase — most pilates studio deals are asset purchases to avoid assuming unknown liabilities, and this should be stated explicitly in this opening section.
Purchase Price and Valuation Basis
State the proposed purchase price, the valuation methodology used to arrive at it, and the assumed SDE or EBITDA baseline. Pilates studios in the lower middle market typically trade at 2.5x–4.5x SDE depending on revenue quality, membership mix, and lease stability. Anchor the price to trailing twelve-month financials and flag any adjustments.
Example Language
Buyer proposes to acquire substantially all assets of the Business for a total purchase price of [Dollar Amount] ('Purchase Price'), representing approximately [X.X]x the Business's trailing twelve-month Seller's Discretionary Earnings of [Dollar Amount], as reflected in the Seller's 2023 and year-to-date 2024 profit and loss statements and tax returns provided to Buyer. The Purchase Price is contingent upon verification of the stated SDE through due diligence, including confirmation of active membership count, monthly recurring revenue, and the absence of undisclosed liabilities or deferred capital expenditures related to studio equipment.
💡 Sellers of pilates studios frequently include one-time revenue sources — seasonal workshops, teacher training intensives, or retail sales spikes — in their stated SDE. Push to isolate core recurring membership revenue, which should represent at least 60% of total revenue for the valuation to hold. If the seller has added back unusually high personal expenses or owner salary, scrutinize each add-back individually. A $50,000 swing in SDE at a 3.5x multiple represents $175,000 in purchase price — these numbers matter enormously.
Deal Structure and Financing
Outline how the purchase price will be funded, including buyer equity, SBA loan proceeds, seller note, and any earnout component. Pilates studio acquisitions frequently use SBA 7(a) loans with 10–15% buyer down payment. Seller notes and earnouts tied to membership retention are common and should be introduced here at a high level.
Example Language
Buyer intends to finance the acquisition as follows: (i) approximately [X%] of the Purchase Price through an SBA 7(a) loan facilitated by [Lender Name or 'an SBA-approved lender'], (ii) a buyer equity injection of not less than [Dollar Amount or Percentage], and (iii) a seller note of [Dollar Amount] to be subordinated to the SBA loan, bearing interest at [X%] per annum, with a [24/36]-month repayment term commencing [90/180] days post-close. Additionally, Buyer proposes an earnout of up to [Dollar Amount] payable to Seller based on active membership retention thresholds during the twelve months following close, as described in Section [X].
💡 SBA lenders will require the seller note to be on full standby for the first 24 months, meaning no payments to the seller during that period. Disclose this to the seller early — surprises here kill deals late in the process. The earnout tied to membership retention is one of the most important protective mechanisms in a pilates studio deal. If the studio loses 20% of its members in the six months after close, the buyer needs recourse. Peg the earnout to objective metrics: active members with auto-pay memberships, not total class bookings.
Membership Retention Earnout Structure
Define the specific membership retention milestones that govern any earnout payment to the seller. This section is particularly critical in pilates studio acquisitions where member loyalty is often tied to instructor relationships or the owner's personal brand.
Example Language
As partial consideration for the acquisition, Buyer shall pay Seller an earnout of up to [Dollar Amount], structured as follows: (i) [Dollar Amount] if the studio maintains a minimum of [Number] active auto-pay memberships through the six-month anniversary of the Closing Date; and (ii) an additional [Dollar Amount] if active auto-pay memberships equal or exceed [Number] through the twelve-month anniversary of the Closing Date. 'Active auto-pay memberships' shall be defined as members with no lapsed payments in the prior 30 days, as documented by the studio's scheduling and billing software ([Mindbody/Pike13/other platform]). Seller agrees to provide reasonable transition support, including no fewer than [X] client-facing appearances at the studio, during the first 90 days post-close to support member retention.
💡 Sellers will push back on earnouts because they feel like deferred trust. Reframe it as shared upside: if the studio retains its members, the seller gets paid more. Define 'active member' precisely using the software platform data — vague definitions are litigated. Also negotiate what constitutes a force majeure carve-out (e.g., a major competing studio opens 200 feet away post-close) versus normal attrition the seller should absorb risk for.
Included and Excluded Assets
Enumerate the assets being acquired and explicitly exclude any personal assets, real property, or liabilities not being assumed. For pilates studios, equipment is a major asset class requiring specific treatment — Reformers, Cadillac tables, chairs, barrels, and other apparatus should be inventoried.
Example Language
The acquisition shall include all tangible and intangible assets of the Business necessary for continued operations, including but not limited to: (i) all Balanced Body, Gratz, Stott, or other brand Reformers, Cadillac tables, chairs, spring boards, barrels, and small props on the premises, as itemized in the equipment schedule attached hereto as Exhibit A; (ii) the studio's trade name, logo, social media accounts, domain name, and associated intellectual property; (iii) all client membership records, booking histories, and CRM data within [Mindbody/Pike13/other]; (iv) the assignable portion of the studio lease at [Address]; (v) existing instructor and staff employment agreements; and (vi) goodwill associated with the Business. Excluded assets include: Seller's personal vehicle, any bank accounts, and accounts receivable outstanding as of the Closing Date.
💡 Demand a physical equipment inventory before the LOI is signed if possible, or condition the LOI on receipt of one within 15 days of execution. Reformers cost $4,000–$7,000 new; a studio with 12 aging Reformers needing replacement represents $50,000–$85,000 in undisclosed capex. Negotiate which party is responsible for any equipment repairs identified during due diligence. Social media account transfer should be addressed specifically — Instagram and Google Business profiles with established reviews are real assets.
Lease Assignment and Landlord Approval
Address the studio's lease directly, including the assignment process, landlord consent requirements, remaining term, and any rent escalations. Lease transferability is one of the most common deal-killers in pilates studio acquisitions.
Example Language
The completion of this transaction is expressly conditioned upon Buyer's receipt of written consent from Landlord [Landlord Name or Entity] to assign the existing lease for the studio premises at [Address] to Buyer, or upon Buyer's execution of a new lease with Landlord on terms satisfactory to Buyer in Buyer's reasonable discretion. Seller represents that the current lease has a remaining term of not less than [Number] years, with monthly base rent of [Dollar Amount], and that no default or notice of default is currently outstanding. Seller shall cooperate fully in facilitating Landlord introductions and consent within [30] days of LOI execution. If Landlord consent cannot be obtained within [60] days of LOI execution, either party may terminate this LOI without further obligation.
💡 Review the actual lease before signing the LOI if at all possible. Many pilates studio leases were signed pre-pandemic with favorable rates that landlords may not wish to honor at assignment. A landlord who can demand a personal guarantee from the buyer, reset rent to market rate, or refuse assignment entirely can blow up an otherwise excellent deal. Also check for kick-out clauses, co-tenancy requirements, and permitted use language — some leases restrict subletting or use changes in ways that affect how a new owner can expand programming.
Instructor Continuity and Non-Solicitation
Address the retention of key instructors, their certifications, employment status, and any non-solicitation or non-compete agreements that will be required as a condition of close. Instructor dependency is the single largest risk factor in pilates studio acquisitions.
Example Language
As a condition of Closing, Seller shall use commercially reasonable efforts to ensure that no fewer than [Number] currently employed instructors with active Pilates Method Alliance (PMA) certification or equivalent credential agree to remain employed by the studio under terms acceptable to Buyer through a period of not less than [90/180] days post-close. Additionally, Seller agrees to execute a Non-Solicitation Agreement at Closing prohibiting Seller from directly or indirectly soliciting any studio member, instructor, or employee for a period of [24/36] months following the Closing Date within a radius of [X] miles of the studio location. Buyer may, at its discretion, offer key instructors retention bonuses funded from the Purchase Price adjustment at Closing.
💡 Do not assume instructors will stay simply because the owner says they will. Interview key instructors during due diligence — off the record initially, then formally with seller's permission. Ask directly about their career intentions, compensation expectations, and loyalty to the owner versus the studio. A single lead instructor who departs and takes 40 clients to a competing studio post-close can trigger the earnout penalty and destroy year-one cash flow simultaneously. Instructor non-solicitation by the seller is non-negotiable — push hard for at least 24 months.
Exclusivity and No-Shop Period
Define the exclusivity period during which the seller agrees not to solicit or entertain offers from other buyers. This protects the buyer's investment of time and due diligence expense.
Example Language
In consideration of Buyer's commitment to proceed in good faith with due diligence and financing, Seller agrees that for a period of [60] days from the date of Seller's execution of this LOI ('Exclusivity Period'), Seller shall not, directly or indirectly, solicit, encourage, or enter into discussions with any other party regarding a sale, merger, recapitalization, or other disposition of the Business or its material assets. Seller shall promptly notify Buyer if any unsolicited offer or inquiry is received during the Exclusivity Period. The Exclusivity Period may be extended by mutual written agreement of the parties.
💡 Sixty days is standard for a pilates studio deal; 90 days is reasonable if SBA financing is involved given lender timelines. Sellers may push back on exclusivity, particularly if they have received multiple expressions of interest. A motivated seller in retirement mode is typically more willing to grant exclusivity than a seller who is being courted by a roll-up platform. If the seller refuses exclusivity entirely, treat that as a yellow flag about their commitment to the deal.
Due Diligence Scope and Timeline
Outline the specific due diligence items Buyer will require and the timeline for access. For pilates studios, due diligence must go beyond financial statements to include membership data, equipment condition, and instructor verification.
Example Language
Following execution of this LOI, Seller shall provide Buyer with access to the following materials within [15] business days: (i) three years of federal tax returns and corresponding profit and loss statements; (ii) current balance sheet and accounts payable/receivable schedule; (iii) full membership roster from [Mindbody/other software] including active member count, membership tier breakdown, monthly recurring revenue, and 24-month churn history; (iv) all instructor employment agreements, certifications, and compensation structures; (v) complete equipment inventory with purchase dates, maintenance logs, and current condition assessments; (vi) a copy of the studio lease and any amendments; (vii) all vendor contracts, software subscriptions, and recurring service agreements; and (viii) the past 12 months of class schedules and attendance records. Buyer shall have [30] days from receipt of complete materials to conclude due diligence and notify Seller of any material findings.
💡 Request Mindbody or equivalent CRM access directly — seller-provided exports can omit cancellation history and churn data. Look at monthly net member additions over the trailing 24 months, not just the current active count. A studio with 300 members today that was at 380 members eighteen months ago is a fundamentally different acquisition than one that has grown from 240. Also request the studio's Google reviews history, Yelp profile, and any complaint records — member experience data is publicly available and highly revealing.
Conditions to Closing
List the specific conditions that must be satisfied before the transaction can close. These protect the buyer from proceeding if material problems are uncovered.
Example Language
The obligation of Buyer to consummate the acquisition is conditioned upon satisfaction of the following: (i) completion of due diligence to Buyer's reasonable satisfaction with no material adverse findings; (ii) receipt of SBA 7(a) loan approval for not less than [Dollar Amount] on terms acceptable to Buyer; (iii) written Landlord consent to lease assignment as described herein; (iv) execution of instructor retention agreements with not fewer than [Number] currently certified instructors; (v) Seller's execution of a Non-Solicitation Agreement in form satisfactory to Buyer's counsel; (vi) confirmation that active auto-pay membership count is not less than [Number] as of the Closing Date; and (vii) delivery of a clean equipment inventory showing no Reformers or apparatus requiring immediate capital expenditure exceeding [Dollar Amount] in aggregate.
💡 The active membership count condition at closing is critical — protect against a scenario where members cancel in the weeks between LOI signing and close after rumors of a sale circulate. Consider requiring seller to maintain operational normalcy and prohibit any changes to pricing, membership terms, or instructor compensation during the period between LOI and close without buyer's written consent. Each closing condition should have a clear cure period and termination right if uncured.
Confidentiality
Confirm that both parties will maintain strict confidentiality about the existence and terms of the transaction, particularly important in pilates studios where member and instructor concern about ownership change can accelerate departures.
Example Language
Each party agrees to maintain strict confidentiality regarding the existence, terms, and status of this LOI and the proposed transaction. Neither party shall disclose any information regarding this transaction to any third party without the prior written consent of the other party, except to legal counsel, accountants, lenders, and other advisors who are bound by equivalent confidentiality obligations. In particular, neither party shall communicate the existence of this transaction to studio members, instructors, or staff without the prior written agreement of both parties regarding timing and messaging. Breach of this confidentiality provision may cause irreparable harm and shall entitle the non-breaching party to seek injunctive relief.
💡 Instructor and member confidentiality is more sensitive in boutique fitness than in almost any other business category. A rumor that the studio is for sale can trigger immediate instructor job searches and member cancellations — both of which directly harm the seller's earnout and the buyer's first-year performance. Agree on a joint communication plan before anyone is notified, and draft the announcement messaging together as part of the transition agreement.
Non-Binding Nature and Binding Provisions
Clarify which sections of the LOI are binding and which are expressions of intent only, protecting both parties appropriately during the pre-close period.
Example Language
This LOI represents a non-binding expression of intent with respect to the proposed transaction, and shall not create any legally binding obligation on either party to consummate the acquisition except as expressly provided herein. Notwithstanding the foregoing, the following provisions shall be binding and enforceable upon execution by both parties: (i) the Exclusivity and No-Shop provisions of Section [X]; (ii) the Confidentiality provisions of Section [X]; and (iii) each party's agreement to bear its own costs and expenses in connection with the proposed transaction unless otherwise agreed in a definitive agreement. This LOI shall expire and be of no further force or effect if a definitive Purchase Agreement is not executed by both parties within [90] days of the date hereof, unless extended by mutual written agreement.
💡 Always make confidentiality and exclusivity binding even in an otherwise non-binding LOI — these are the two provisions that protect both parties during the vulnerable pre-close period. Confirm with your attorney that the binding provisions are enforceable in the state where the studio is located, as some states have specific requirements around injunctive relief for non-solicitation agreements.
Purchase Price Adjustment for Equipment Condition
Pilates Reformers and apparatus are the largest tangible asset in most studio acquisitions, and their condition is rarely fully disclosed upfront. Negotiate a purchase price adjustment mechanism — sometimes called a true-up — that allows the buyer to reduce the purchase price dollar-for-dollar (or at an agreed multiplier) if the equipment appraisal reveals replacement costs exceeding an agreed threshold. A studio with 15 Reformers averaging 8 years of age may be facing $60,000–$100,000 in replacement costs within 24 months of close that should be reflected in the deal price.
Seller Transition Period and Client Introduction Requirements
In pilates studios where the owner is a beloved instructor or community figure, the transition period is a core value driver. Negotiate a specific, time-bound transition obligation: minimum class appearances, recorded video introductions to members, email communications endorsing the new owner, and attendance at studio events. A vague 'reasonable transition assistance' clause is unenforceable. Specify exactly what the seller will do, for how long, and what compensation (if any) they receive for that time — typically covered by an allocation within the purchase price.
Active Membership Count Floor at Closing
Require that the active auto-pay membership count on the Closing Date be within a defined percentage — typically 5–10% — of the membership count represented during due diligence. If members cancel in the weeks before close due to sale rumors, staffing changes, or seller disengagement, the buyer should have the right to either renegotiate the purchase price or walk from the deal. Define 'active member' precisely using the billing software's auto-pay status, not attendance frequency.
Lease Assignment Approval Timeline and Fallback
Negotiate a clear timeline for obtaining landlord consent to lease assignment, with a specified fallback if consent is denied or delayed. Options include: (i) buyer negotiates a new lease directly with the landlord; (ii) seller provides a sublease or license to operate during a defined bridge period; or (iii) either party may terminate the LOI without penalty. Do not allow the deal to remain in limbo indefinitely waiting on landlord approval — set hard deadlines with termination rights to maintain leverage and deal momentum.
Instructor Non-Solicitation Scope and Duration
The seller's non-solicitation agreement should cover both clients and instructors, extend for a minimum of 24 months post-close, and apply within a geographic radius sufficient to protect the studio's catchment area — typically 5–10 miles in suburban markets, 1–3 miles in dense urban settings. Sellers often push back on radius and duration; frame it as a condition of the earnout receiving full payment. If the seller opens a competing studio or teaches privately to studio members within 12 months of close, the entire earnout value should be forfeited.
Earnout Measurement Methodology and Dispute Resolution
Define precisely how the earnout will be measured, who has access to the measurement data, and how disputes are resolved. Specify that Mindbody, Pike13, or the studio's primary billing platform will be the system of record, and that Buyer will provide Seller with monthly membership reports during the earnout period. Agree upfront on an independent accountant or platform data pull as the dispute resolution mechanism — earnout disputes are among the most litigated post-close issues in small business acquisitions, and precise drafting here prevents expensive litigation.
Find Pilates Studio Businesses to Acquire
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Pilates studios in the lower middle market generally trade at 2.5x–4.5x Seller's Discretionary Earnings (SDE). Where a studio falls in that range depends heavily on revenue quality, membership mix, and lease stability. A studio generating $400,000 in SDE with 70% recurring auto-pay memberships, a favorable 5-year lease, and a tenured instructor team independent of the owner might command 4x or above. A studio with the same SDE but heavy owner-instructor dependency, a 2-year lease, and declining membership trends would realistically price at 2.5x–3x. The LOI should anchor the purchase price to verified trailing twelve-month SDE and include a price adjustment mechanism if due diligence reveals the stated SDE was overstated.
Virtually all independent pilates studio acquisitions are structured as asset purchases. This allows the buyer to acquire only the specific assets and contracts they want — equipment, lease, client lists, instructor agreements, and goodwill — without assuming the seller's historical liabilities, tax obligations, or legal exposure. Stock purchases are occasionally used when the business holds licenses or contracts that are difficult to transfer without triggering assignment provisions, but these situations are rare in boutique fitness. Your LOI should specify 'asset purchase' explicitly to avoid ambiguity.
Three mechanisms work in combination: first, negotiate instructor retention agreements as a closing condition, requiring key instructors to commit to remaining employed for a defined period post-close; second, tie a portion of the seller's earnout to active membership retention, which creates a financial incentive for the seller to support instructor continuity during the transition; third, require the seller to execute a non-solicitation agreement prohibiting them from directly or indirectly inducing instructors or members to follow them to a competing venture. None of these eliminate the risk entirely — instructors are employees at will in most states — but they create both incentives and remedies that significantly reduce exposure.
From executed LOI to funded close, SBA-financed pilates studio acquisitions typically take 90–120 days. The SBA 7(a) underwriting process is the primary timeline driver, requiring personal financial statements, business tax returns, equipment appraisals, and lease review before conditional approval. Landlord consent for lease assignment can add 2–4 weeks if the landlord is slow to respond or requires negotiation. Buyers should plan for 90 days as the baseline and build a 30-day buffer before any operational transition commitments are made. The LOI exclusivity period should be set at 60 days with a mutual extension option to accommodate SBA timelines.
Before signing an LOI, request at minimum: current active member count by membership tier, monthly recurring revenue for the trailing 12 months, month-over-month net member additions and cancellations for the trailing 24 months, average revenue per member, and the top membership tier breakdown showing how many members are on monthly auto-pay versus class packs or drop-in. This data should come directly from Mindbody, Pike13, or whatever platform the studio uses — not from a seller-prepared spreadsheet. Churn rates above 8–10% monthly are a serious red flag. A studio claiming 300 active members but showing 60 cancellations and 55 new sign-ups per month is on a treadmill with high acquisition costs and poor retention that will strain cash flow post-close.
Yes, and this is common in pilates studio acquisitions. SBA 7(a) rules allow seller notes, but they must typically be on full standby — meaning no payments to the seller — for the first 24 months of the loan term. A typical structure might include an SBA loan covering 75–80% of the purchase price, a 10–15% buyer equity injection, and a seller note of 5–10% of the purchase price on full standby for 24 months, then paid out monthly over an additional 12–24 months. Some buyers also use the seller note as a retention mechanism, conditioning its repayment on the business hitting specified revenue or membership thresholds during the standby period. Discuss the seller note structure with your SBA lender early — different lenders have different policies on seller note terms.
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