Anyone running a franchise gym

Discussion in 'Starting & Running a Business' started by Jack Lee, 20th Apr, 2022.

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  1. Jack Lee

    Jack Lee New Member

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    Talked to a friend in the fitness industry in Brisbane - he’s a personal trainer at Anytime and also helps manage the gym. He says the owner doesn’t do much and gym does really well. He’s looking to open a gym himself. Is there truth to this? I’ve been cautious of businesses but to think about it the 24/7 gyms would have low overhead and the largest outgoings would be rent and maintenance/electricity I assume?

    I’ve been thinking about what I should do after I build a property portfolio and can reasonably retire - I don’t want to absolutely retire and so looking for options. This would be many years down the track though.
     
  2. geoffw

    geoffw Moderator Staff Member

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    There would be a huge capital investment and a lot of competition.

    I go to a very large gym where I've never seen more than 12 people - sometimes 3 or 4. There are so many around - I just picked one which was cheap and with no contracts.
     
  3. The Y-man

    The Y-man Moderator Staff Member

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    If money is not an issue, why not contribute back to society for free? I am going to teach some guitar at our local U3A for free.

    The Y-man
     
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  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Nah, equipment is leased.
     
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  5. geoffw

    geoffw Moderator Staff Member

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    Ok, then the statement by the OP about low overheads and the biggest expenses being rent and maintenance/electricity may not be correct?

    There would be some staffing, whether done by the owner or staff member/s - admin, memberships, cleaning, professional trainers.
     
  6. Trainee

    Trainee Well-Known Member

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    Has your friend seen the actual financial statements for the business?
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Mostly outsourced/contractors.
     
  8. MB18

    MB18 Well-Known Member

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    I believe the F45 franhcise recently floated in the US.
    Obviously its not the same thing as an individual franchise, but what was telling (from the brief commentary I heard) was that most of its revenue actually just came from selling the franchises in the first place.
    Locally I think Ardent Lesuire (?) own the Goodlife Gym chain.

    To answer your question however, no I do not anyone although I would also be curious to know the answer.
    New gyms seem to be popping up everywhere, each catering to a different niche, but none seem to close up shop in a hurry so there must be a living to be made.
     
  9. geoffw

    geoffw Moderator Staff Member

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    Whether outsourced or contractors, they are still expenses to the business.

    The OP, @Jack Lee , mentioned some expenses. I don't know gyms, but I was thinking that there were more expenses, such as staffing. He mentioned a franchise gym, so there would be franchise and advertising fees. There are probably more.

    It may be difficult to get these, but they would provide an excellent insight into the financial resources required for the business. Or perhaps there may be ways to get the same insights - perhaps trying to find a mentor in the business.

    I'm sure, for instance, that there would be many gyms making money from people who purchase memberships but who stop going after a while. If all financial members turned up in one week, some gyms wouldn't be able to cope. So there are some potentially good income streams as well
     
  10. Foxdan

    Foxdan Well-Known Member

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    I’m in the gym industry but I own my own niche business

    would 100% NOT recommend fitness industry post Covid. And would 100% not recommend a 24/7 where there are so many low cost competitors. The market after Covid has changed and less people want to attend a gym.

    Your friend is naive to think his boss makes a fortune and probably isn’t aware of all the overheads / franchise costs.
     
  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I had a approach to assist a small business person. Claimed sales of $2m+ a year and wondered why lender wouldnt touch it. Margins on sale are low..so low its barely profitable. Signs of this are debt isnt reducing. Slower to pay costs. Tax payments are now in arrears. Finance commitments to rent, lease of gear, car and own home on top. Many people see lots of customers or money and assume its profitable. Often see the boss driving a financed car and spending away and assume its a successful business. Very common in certain industries like hospitality. Signs of death are often evident and sadly its unpaid suppliers and employees. Possibly cash is the thing keeping them above drowning but thats also untaxed.
     
  12. chindonly

    chindonly Well-Known Member

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    I've been in fitness and related industries for over 30 years, but not in the franchise model. I do have a couple of friends that have purchased or looked to purchase.

    My understanding is that some do very well, but they are in the minority. There are just so many competitors now, that most only produce fairly average returns, and you would need to purchase at least 2 to get a livable passive income for most, dependent on how much work you will do yourself.

    If you make serious inquiries to purchase one, you will get access to financials etc. I did see some a few years ago, and they were only 40-50k a year profit.
    Have a look at the business broker sites and you will see they can vary quite a bit in price. There are plenty for sale at the moment!

    Rent can be very high, and equipment is expensive for quality. One good commercial treadmill can be about 10k, and needs replacement about every 5 years or less.

    As Foxdan says above, the industry has changed since COVID and returns are significantly less.
    There is such a proliferation of gyms right now across 24/7, big box, crossfit, PT studios, boxing, circuit/F45, private operators, that it is hard to understand how some survive and others like World Gym are expanding.

    If you don't know much about the industry, you can get some business reports that give you a higher level view. Gyms and Fitness Centres in Australia - Industry Data, Trends, Stats | IBISWorld

    Good luck!
     
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  13. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    My very generic rule of thumb is "The only people making money with a franchise is Head Office"
    Seems to work for 95% of the time, the other 5% do really well out of it but I suspect could have gone alone and done just as well or better.
     
  14. Ace in the Hole

    Ace in the Hole Well-Known Member

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    I was in the gym equipment supply business for some time until recently, still connected a little indirectly.
    Sales of home gym equipment during Covid absolutely exploded, and it was already a very strong industry prior to Covid anyway.
    The trend to gym at home was in place for almost a decade rather than public gym's before Covid.
    Covid accelerated this massively.
    I can't imagine this will reverse at any time soon.
     
  15. NHG

    NHG Well-Known Member

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    My mate runs a fairly large gym in Sydney.

    They are profitable as any business is if run by the right person.

    Was decimated during covid, but he merged 2 similar gyms, cut overheads and doubled the number of memberships. Came back strong.

    He's the type of guy that makes all businesses work. Made millions in Crypto whilst his gym was barely getting buy. So he never misses a beat.

    His recent comments on gyms were, "it's hit saturation point, only see margins getting thinner, better opportunities elsewhere".

    If that helps. Not that it doesn't work, only that profit ratios and growth in market has drastically dropped.

    Perhaps covid created some opportunities, however the cycle for gyms is at or near peak. So in 5-10 years you're buying into a down trend.

    You don't really see the true rewards of a business till year 7. Doesn't leave much room to enjoy the spoils of all the hard work.

    Unless you love gyms, look at new markets with less competition, and commencing growth cycle.
     
    Last edited: 8th May, 2022
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  16. Rentvester

    Rentvester Well-Known Member

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    Managing the gym doesnt mean they have got insight into financials. Often owners dont let the manager know whats going on with the company. I have close relationship with gyms and wouldnt touch a anytime/jetts etc with a 100 foot pole. Gyms can be successful but not as a franchise in general, unless you want to buy a job (then expect 1-200k profit after working long hours).
     

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