Home | I'm neutral on it | Financial summary of a Curves franchise looks good for owner/operators
A look at a Curves franchise numbers does paint a rosey picture, but is it rosey enough?

Financial summary of a Curves franchise looks good for owner/operators

Here are financial results from a Curves franchise. EBITDA is somewhat higher than I expected assuming these numbers accurately reflect the state of the business. It’s in Sarasota, FL and they project growing from 373 to to 500 members by the end of 2005. It’s large for a Curves, 2900 sq feet, and has the standard 12 workout stations and 12 recovery stations (those bouncy platforms). Let’s look at the numbers provided by the franchisee seller:

Gross Revenue EBITDA TOTAL EXPENSES before interest, taxes, depreciation ASKING PRICE (includes franchise fee)
$132,000

$76,000

$56,000

$150,000

Selling price per member: $402
Reason for selling: Doesn’t want the responsibility (sounds fishy considering the owner bought the franchise last year)

If these numbers are accurate, and place is run mostly by the part-time employees, then it’s asking price is only about 2x EBITDA, which sounds cheap. It doesn’t say if the expenses include the owner’s salary, but it’s probably safe to assume that it doesn’t. The owner has several part-time employees, but they must be “really part-time” because this franchisee only has on allocated $56,000 or $4,666 a month for rent, fees, operational expenses and owner’s/manager’s salary.

4-10-2005 Update:

This particular franchisee is earning its first year a 37% return on their $40,000 investment assuming $60,000 is allocated to either the owner’s salary or expenses for a full-time qualified manager. 37% is an excellent return. Keep in mind I’m working from unaudited and anonymous information. And as we saw from our Quiznos example, the devil is in the numbers things are usually more expensive than they appear.

This particular franchisee looks like a good deal. It is earning in its first year a 37% return on their $40,000 investment assuming $60,000 is allocated to either the owner’s salary or expenses for a full-time qualified manager. 37% is an excellent return. Keep in mind I’m working from unaudited and anonymous information. And as we saw from our Quiznos example, the devil is in the numbers things are usually more expensive than they appear.

positives

  • national “buzz”
  • low opportunity for employee theft
  • customers tend to have a positive experience
  • realistic possibility of positive cash flow the first year of operations
  • a Curves franchise has very flexible real estate requirements
  • it is a healthy, socially enriching venture

negatives

  • 8% of all the franchisees out there are actively trying to sell their franchise (according to Curvesresales)
  • If there is a profit margin, then competitors will quickly move in. Competitors will inevitably have a better business model, better facilities, and construct an improved workout system with better equipment. That will pressure Curves membership rates, retention and recruitment.
  • Numerous clubs for sale have low membership levels, under 150 members
  • Members may get bored of the same workout routine
  • Typical health club equipment needs to be replaced in as little as every 3 years

I’ve changed my mind on Curves and think it is a very worthy and likely worthwhile venture. The modified womens-only workout system with a friendly, personable, and fun atmosphere is a winning formula. And Curves seems to have packaged it right. My biggest concern is obtaining and maintaining a profitable level of members in the face increasing competition.

(See our first post on Curves a few days ago for more background information and pictures)

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.
10 comments
unhappy
unhappy

well hopefully you didn't buy a franchise but if you did HOW DO YOU LIKE IT NOW SUCCER!!!!!!!!!!!!!!!!!!!!!!!!! go to unhappyfranchisee.com and see the real story about curves and all the hundreds upon hundreds of law suit for fraud against howie and curves international

R.O.
R.O.

Interesting, I am thinking of starting a Curves and have so far interviewed four other Curves owners, two in Los Angeles, where I live, one in Central Texas, where I hope to live, and one in Vegas, where I used to live, and every one of these people said it was the best thing they ever did and they are very happy. The owner of the Curves I attend said she would be so happy for me, she would fly out to be with me on my opening day! She said Curves has changed her life for the good and would do the same for me. But, she really works her Curves. She is there every day at least half the day, and takes time to talk to each member and make us feel welcome. She also hosts bimonthly lectures on topics of interest to women, done by various professionals, ranging from plastic surgery to meditation. It is not a cakewalk. There are many factors that can make a franchise fail, outside of the franchise itself being a poor choice. It might be a poor location/building, an overly saturated area (this depends on pop. density, NOT miles) or even a lazy or naive owner, or simply a poor match-up of franchise type/brand with owner personality/style. If only 8% of Curves franchisees are trying to sell (and I know of two for sale in Texas due to the owners becoming moms and wanting to stay at home, so it's not all due to failure), that's pretty encouraging to me, when I know that most businesses started up freestyle (non-franchise) fail within the first three years. To me, a 92% success rate sounds great! I certainly feel confident about being in that successful majority, and doing what it takes to get there. I may not end up deciding on a Curves. But I will say, sometimes, I feel very nervous to read these posts, because I wish there were really a way to tell who is posting these things, if they might be from Butterfly, Slim 'n Tone, or Ladies Express or something...I just think of how Whole Foods CEO, John Mackay, was caught anonymously bashing Wild Oats on internet stock boards. He was caught right before the takeover of Wild Oats by Whole Foods, but he had been doing this, in actuality, for 8 years! You just never know. It's best to do one's own research, and not take internet threads for the gospel truth, including what I'm saying right now, of course. A diligent person will call many franchisees, from the UFOC, (as Don suggested; a great idea) and talk with the franchisor, going to Discovery Day if you can (where you check out the main office), and also, consider reading Street Smart Franchising, which is an excellent book to teach you what to look for in yourself and in any franchise you may look at. Best wishes and happy hunting!

Don
Don

As a franchise consultant, executive and broker with over 30 Years experience I will tell you stay away from Curves unless you are a great salesperson and can develop your own program that works. The Curves concept just doesn't work. If you don't believe me get a copy of their UFOC and call other franchisees or better yet visit some franchises. One key question is always "You you do this if you had it to do again. Would you recommend it to a client. I thought I should mention that many of the franchises avaliable today are promoted to rip people off. Sorry to be so negative but its hard to find a good business to buy today but if you do always consult an franchise attorney. Chect out list on www.franchisetimes.com web site. Also www.blluemaumau.com is a good site. Hopes this helps.

chris
chris

Does anyone have any current, (1Q, 2Q, maybe 3Q) info on Curves as an investment. Currently looking at clubs in the west l.a. area. Any owners out there with feedback regarding their investment?

chris
chris

I own a Ladies Workout Express and think it is a great investment. Much better than Curves and better quality also.

Ginny
Ginny

Do you have any updated information on this topic? I have been a Curves owner for a little over a year. We thought we had researched the facility we bought pretty thoroughly, but at this point we find we have made a colossal mistake. Our membership level was represented as being 350 when we bought it, their computer records seemed to back that up, after accepting ownership we mysteriously lost almost 60 members and found that several more were on the active list even though they had not been paying. Our franchise area is very saturated, there are several Curves within a 15 mile radius, which severely limits our ability to increase our membership. I have been working at this club for over a year and have not been able to take any income out of it. We have only one employee. We are at the point now where we will probably be forced to close. I am heartbroken. We poured our hearts and souls into this venture, we followed all of the advice Curves provided on running our franchise, and we are losing everything. Are we alone? I know of at least 3 other Curves franchises in MA that have closed recently. Do I have any recourse? Is there anything else I can do?

Jes
Jes

The resale prices have come down substantially. Are you still supportive of the business? I'm about an inch away from making an offer on a resale . I see a slightly decline membership but hear that they have another boost up their sleeve for jumpstarting new members and adding a new twist .... they routingely add a new piece of equipment or start a new program and something else new is about to come out. Would love your comments........... thanks.

Ryan
Ryan

I guessed at the time spent per machine and I was off (the actual time is 30 seconds, totalling up to 1.5 minutes if they go through the circuit 3 times). Thanks, I'm learning too! So, the theoretical capacity of a Curves is 26 people (13 machines with 13 recovery boards). I stand corrected! Thank you and I've update the article to reflect it. The capacity issue was not a big driver in my overall evaluation, but I don't want to promulgate any misleading information so thanks for the correction. Many are passionate about Curves and I may have not given it its due analysis. So I revisited my review of Curves and am a bit more positive on it as a business. It is interesting to see the resale asking prices and reconciling that with the net income of the franchise.

Nellie
Nellie

"What I don’t get is how can 12 workout stations support a base of 500 members? A person would probably spend 5 minutes per machine, so at peak hours the most you can move through 40 people from 5:30pm - 7:30pm." This ignorant statement is a big indicator that you've done little research into the Curves franchise. I'm not even going to correct your HUGE mistake. I wouldn't trust a single thing you post on this blog now... and no one else should either.

devon
devon

Do you have any other numbers for Curves?  It is one of the franchises I am looking at.  Thanks.