Starting a gym franchise is an exciting and potentially profitable venture, but is it the right choice for you? With so many gym franchises available, it can be difficult to know where to start. It’s even harder to decide if you should license a gym franchise in the first place.
According to the International Health, Racquet & Sportsclub Association (IHRSA), the global fitness industry was valued at $96.7 billion in 2019, and it is expected to grow to $106 billion by 2023. Additionally, a report by ResearchAndMarkets shows that gym and health club franchises are expected to experience a compound annual growth rate (CAGR) of 7.8% from 2020 to 2025.
There is clearly a ton of opportunity for you as a potential gym owner to get in on these franchise gym potential. So in this blog post, we’ll explore the pros and cons and help you consider if it’s a good idea to license a franchise gym. We’ll also provide some insights to help you make an informed decision.
Let’s start with the reasons why you should consider joining a fitness business franchise.
Top 4 Reasons to License Gym Franchise
Gym Franchises Can Give You a Head Start
If you’re looking to open your own gym, a franchise can make the work easier for you because you’ll get access to all of the resources and branding expertise of the franchise gym. If there were ever a reason to buy into a fitness franchise, that’s it.
Gym franchises have already done the hard part of figuring out what works and what doesn’t when it comes to running a successful business in this industry. If you pick the right franchise, they’ll also have strategies to recession-proof the gyms under their franchise, which means all you need to do is start taking advantage of them!
It also helps that they know what they’re doing because they’ve been doing it for years—and some even longer than that! They understand how important it is to run an efficient operation so customers will keep coming back again and again without fail.
This means less stress on both sides: not only will customers feel more comfortable coming back, but they will also appreciate how well-run everything is behind-the-scenes as well! It’s just a win/win across the board.
Licensing Comes With Predefined Operational Templates
Licensing is a great, swift start. After you get your license, you can get right to building your business and making money while still working for yourself.
As a franchise owner, you don’t have to worry about hiring employees or finding a location. You can just focus on maintaining the quality of your gym and growing it as much as possible. You also don’t have to pay rent or any other overhead costs because the parent company covers those through royalties.
You can use their brand name and reputation in the community for marketing purposes without having to spend any extra money outside of royalties (which will vary depending on size).
Plus, since many corporate gym chains often come with recognizable names (think Planet Fitness) and locations that people know well around town—like Planet Fitness gyms—you’ll be able to leverage these assets before even opening up shop! This helps offset any potential risk associated with starting something new out of nothing at all.”
Many Franchises are Affordable to Begin With
A gym franchise can be an affordable way to start a business, simple as that. Many of the top franchises have relatively low initial franchise fee structures and make it easy to get started quickly. It’s even more glaring when you compare these costs to the initial investment of being an independent gym owner.
For example, the average cost to build a large fitness facility ranges anywhere between $800,000 and $1 million per location. If we use an average of $900K per location for our calculations (not including land), then it would cost about $4 million just to build five facilities from scratch.
A business license from snap fitness or anytime fitness won’t cost nearly as much.
Plus, there are some other costs we need to consider when comparing building from scratch versus buying into a franchise system like Curves or Anytime Fitness:
- Maintenance fees for equipment
- Staffing costs
- Marketing expenses
- Learning costs of setting up a proven business model
- Insurance premiums
- Tenant improvement costs
- Signage installation fees
- Furniture/fixture purchases
- …the list goes on!
These could easily add up over time without proper planning beforehand, so having this sort of guidance available through your franchisor will greatly reduce those initial investment burdens while still providing customers with an exceptional experience.
Franchises Can be Profitable on Their Own
You can increase profits by thinking through how you’ll structure and run your business. For example, let’s say you have an existing franchise in the same industry that is struggling to compete with other similar businesses in the area.
A lot of these fitness business establishments are being driven out of business because they don’t offer anything different or new to help them stand out from their competitors. They’re all doing the same formulaic things in terms of their operations management, marketing strategies and customer experience—so why should anyone choose yours over theirs?
There are some simple things you could do to get ahead of this trend: You can follow the existing profitability models established by other franchise owners within your industry or, if possible (and legal), build on those models for even more profit potential!
Is everyone losing profit by providing personal trainer services? Consider working with these trainers on a contract basis. That way, they are free to come and go as they please but will still help your patrons achieve their goals. Plus, it doesn’t hurt that the personal trainers will be able to earn a little on the side.
Downsides of Licensing a Fitness Franchise
So far, we’ve painted fitness franchises in a fantastic light, and it may seem like your best option as a gym owner is to hop on the train. But before you do, it’s critical to understand that being an independent gym owner has its perks.
In this section, we talk about some of the downsides of a fitness franchise.
You’re Not in Control of the Business
First, it’s important to note that when you buy a gym franchise, the franchise owners will have some control over your business. They’ll tell you what employees to hire and how much they should be paid; they’ll provide a training manual for those employees; and they’ll establish the prices for memberships and add-ons like personal training.
You may not be able to make decisions about staffing unless it comes down to hiring someone who isn’t qualified or doesn’t perform well.
The fitness franchises also have control over marketing—it’s one of their primary jobs! And while this might seem like an advantage at first glance, it can actually end up being pretty bad news as far as profits go.
Remember how we said the business owner of fitness clubs know what works and what doesn’t when it comes to advertising their franchise? Well, if the company has used ineffective strategies in the past, then there’s a chance these methods will continue even after you take ownership of your own gym.
A gym business thrives on repeat business, but you also need new members to keep walking through the door. If that doesn’t happen, your fitness business could be in serious financial trouble.
You May Not be Able to Grow as Fast as You Want
You’ll have to be prepared for the fact that no matter how hard you work, your business will always be in the franchise’s shadow, and you may never feel like an independent gym owner. It can take years before a gym starts making money and even longer before it breaks even on its expenses and earns back its initial investment.
If your goal is to make money quickly, this can be discouraging because there are limits to how much revenue your franchise will generate each month. The best way to increase profits is through growing membership numbers, but as part of a franchise system, growth will be slow unless the gym brand ramps up marketing in your area.
You May Not be Able to Sell the Business When You Want
Even if you’ve been successful with your gym franchise, there’s no guarantee that someone will want to buy it from you. If this happens, then your money will have gone into something that isn’t earning any income for years or decades to come—and perhaps never again in its current form.
If you do decide to sell, you can’t go about it like it’s your own business. Instead, you may need the help of an experienced broker who can help identify interested buyers and advice you on how to price the business correctly.
You also have to hope that the fitness brand has great PR so that more people would be interested in taking it off your hands.
There may also be restrictions on selling the business based on what type of license comes with your contract.
Some More Factors to Consider Before Licensing a Gym Franchise
Here are some other things that need consideration when you’re trying to license a gym franchise.
- What kind of payment options will they offer?
- How much does it cost to run the gym each day?
- How much income do you make per day on average?
- Is the location profitable?
Costs to Consider When Licensing a Gym Franchise
The costs are arguably some of the most favorable aspects of licensing a fitness franchise. So it’s only natural that we go over some of them and show you what to expect.
1. Franchise Fee
The first cost to consider is the franchise fee. This is what you pay to be part of a particular brand and have access to its marketing materials, brand recognition and support systems. Fitness franchises charge differently, depending on the size. But it’s usually around $25,000 for smaller gyms and up to $250,000 for larger facilities.
2. Royalty Fees
These are payments made by you each month or quarter (depending on how often you want them) based on your gross sales from that period.
They range from 7-10% of gross revenue for smaller gyms with less than 10 employees, 9-12% for mid-range businesses with between 10-20 workers, 10-14% for large businesses with 20+ employees.
You could also be looking at 11-15% if both locations are located in major metropolitan areas such as New York City or Los Angeles. These rates could be higher if you share profits rather than paying royalties alone—but remember that this arrangement could also decrease your earnings over time because there are fewer incentives available under this model compared with its counterpart!
3. Advertising Fees (Optional)
Advertising fees may be included in some packages when purchasing an existing gym franchise license, like 24 Hour Fitness’ Gold package ($149k/year). However, these costs will probably drop significantly once they’ve been paid off after several years.
In this case, work would have been done promoting products through advertisements placed within various media platforms such as radio spots, television commercials, billboards around town, etcetera…
Should You License a Gym Franchise: Final Considerations
Fitness franchises can be a great choice for anyone who wants to get into the fitness industry. They offer a lot of help and assistance when it comes to things like marketing, branding, and even how you run your business. If you’re considering one of these franchise options, keep in mind all of the pros and cons before making a decision!
If you’ve decided to become an independent business owner, you’ll need to check out our posts on effective marketing strategies for new gym owners and how to generate more revenue in your gym.
