Gym franchise advice/finance

[FuwaFuwaUsagi]

 have you ever read about a franchise on their page or brokers page and read "This franchise sucks"?

ROTFLMAO.  That was my exact impression after perusing the FDD. 

Actually we have discussed this particular offering before in this forum so I saw no need to revisit it.  Your commentary is essentially spot on, the royalty structure is different than you indicated, but it matters not, there is no discernible innate value in this concept and the FDD reveals that in many ways.  About the only useful thing I could discern is there is a residual value to the reciprocal nature of the franchise that is attractive to the transient community.   If that is your target market than this may bear consideration. 

Other than that they make money off the equipment, etc, etc.  The number of ex-zees is alarming and I think the fact hat several tried to cut and run and go indy should tell you they are not seeing  a value proposition. 

Here is a fairly good measure of a franchise.  Consider how many McDonald's zees would be willing to rip down the golden arches and start a XYZ-burger - I would guess none, zero, nada, because they know those golden arches drive customers to the door.

Now ask yourself how many of gym-X would be willing to tear down that sign and put up a XYZ-Fitness sign.  I bet you would find a lot willing to give up the limited benefit of branding in the fitness industry for more flexibility and no royalty payments and jazzed up equipment cost.

The difference is, in the one example there is an innate value in the franchise, in the second it is a concept that has no relevant identity in saturated me too market place. 

There are other issues, but they are systematic in regard to business in general and not just this particular enterprise.

[domtylerlovett]

Thanks Fuwa - I really do appreciate all your advice.  I actually couldn't find that much about the specific franchise on this forum but I've read what's there, and studied posts regarding the same industry.  A good point by jerichox about only hearing what I want to hear; It's difficult not to be blinded by what seems to be such an awesome idea, and it's a lifesaver to be brought down to earth - albeit with a thud!

I see no harm in me looking further into this, but now with eyes wide open.  I'm sure that some instances of some franchises must work, but only if the zee understands exactly what's going on, and conducts seriously deep due diligence.  I found it almost entertaining that some "independent" franchise forums with fixed (i.e. not google adwords) adverts for places openly discourage too much due diligence.  Surely that must be transparent to even the most na?ve?!

(1) Can I just ask how you got hold of a copy of the FDD?  I couldn't see any easy way to get a recent one without giving the zor a bit too much detail, or by paying a site to get one that's over 2 years old.

(2) I'm desperately looking for statements from ex-zees.  Surely they can do it anonymously to avoid any battle, and surely the zor can't "hide" them all from the internet.  If anyone finds any links to such articles I'd really appreciate it if you posted them here.  Just an appropriate search string for Google would be great!

Really many thanks for everyone's time and efforts, especially Fuwa

Dom

[michael webster]

Go here: http://134.186.208.228/caleasi/Pub/Exsearch.htm

Type in anytime fitness, and you should get 9 years worth of FDDs.

[domtylerlovett]

Many thanks Michael - makes for interesting reading.  Will go through properly over next week or so.

Regards, Dom

[FuwaFuwaUsagi]

The only way I would consider a franchise in this market vertical is if I was dealing with a transient community where the ability to transfer your membership is important. In the States there are areas like that.  

So I am not sure if you are English as in across the pond or originated there and now live in the colonies.   If you are in the colonies then I would suggest you really look very, very hard at the macroeconomic situation regarding commercial real estate.    The real estate lease or purchase you negotiate is to a large extent going to dictate your success or failure.  And you need a jolly good marketing plan that is custom tailored to your exact location.  

I remain of the opinion that commercial real estate remains overvalued and many concepts that were viable 15-20 years ago would struggle with current lease obligations.  As they say on securities, past success is not indicative of the future.  20 years ago I never heard of a triple net lease, in fact the first jerk-off that insulted my intelligence by putting one in front of me damn near got female dogged slapped by me.    I am seeing  a lot of give on leases in this area again which is appropriate.

If I was to go after backers, I would do this as a real estate play.  In essence I would spend my time finding a great under valued location and pitch it as a chance to acquire a good property, pay off the mortgage while waiting a decade or more for the market to realize that properties true value.  In essence your partners would be investing in the real estate, your health club would be empowered to service the debt.  At some point there comes a sell point and you would need to be cognizant of it.

When you review the FDD take a look at the earning section.   I would think that alone would be enough to dissuade you.  Note for instance what the recommended cost per square foot is for a lease and compare it to what is in the earning section.  It has been a  while since I looked at his concept but as I recall the zees were paying more than the zor recommended.

When you read the FDD also consider the following:

What is USP for this concept?

What is it about this concept that makes you willing to part with a substantial part of your profits for a me too concept in a  saturated market place where the industry is well developed and understood by the public?  

What percent of your clients do you think you will obtain as a direct result of being an franchisee of Anytime Fitness over any other name out there?  

What macroeconomic or demographic factors are at play that make you feel this is the appropriate time to enter a this market place?  

Do you feel the market is saturated or  undeserved and what evidence do you have of it?

Next, set down the FDD. drink a coke, watch WallStreet and then reread the FDD and FA pretending you are the most heartless SOB who ever walked the face of the earth.  Realize you are not dealing with consumer law here so the assumption is that you understand and agree to the terms of the contract.  Ask yourself, in your heartless SOB persona, how can I twist what is written here to wring money out of my zee?  Where can I juice them?   And then decide if the risk reward is favorable.

Regards...

[Brian]

I was in the Fitness Industry as a Franchisee for close to 5 years.  The Fitness Industry is certainly in flux right now.  The old Health Club Business Model (bodybuilders and club diva's) is a dying breed.  User friendly clubs are now, and will be the standard for years to come.  What you will need to consider will be the startup costs, and the total square footage requirement for your facility.  This will be critical.  Health Clubs are very capital intensive, the more square footage you have the more equipment you will need, along with higher rent.
A quick summation:
1) Figure out which business model you believe in.
2) Figure out what your capital requirements will be, and if you can afford it.
 3) Find a Franchise that will meet these two issues.

[honitel]

Hello domtylerlovett,

I believe you have potential to start your business, with your skills and experience its ideal for you start on, in terms of financial, yes it is a hardest part in building a business. Lucky for those who has money and they can directly start. And besides, gym franchise is hard! Lot of things, equipments to put into list which clearly some are expensive!