The cost of a gym franchise: is it worth the potential rewards?
When you think about opening a gym, you usually have two options: start your own or buy a gym franchise. Both have their appeal, but which is better? Is getting a gym franchise worth the gym franchise cost you will incur?
The pros of getting a gym franchise
Getting a gym franchise has several advantages, especially for first-time business owners.
You get built-in brand recognition
As the owner of a franchise gym, you would have full rights to use the brand name of your gym's parent company. You could use associated designs, trademarked taglines, and all other associated branded assets. If the franchise is top-rated, this can significantly help you out.
If you start your gym, chances are you will need to spend a significant part of your budget on your marketing efforts, potentially to no avail. People don't know your brand; they are more likely to choose brands they have heard of and trust. It may take months or even years to get proper brand recognition.
You already have a successful business model
Creating a business model is inexpensive but takes a lot of trial and error. If your blueprints, procedures, policies, or other operating procedures for a gym franchise cost need to be corrected, you may lose a lot of money.
When you get a franchise, you already have a robust business model that's likely been honed by years of experience and actual customer interaction. You already know it's working; they didn't franchise for no reason. This proven, successful business plan can spare you lots of hard work and prevent potential financial losses.
Your employees get job training
When you start a gym, you will likely have to train all of your employees. Whether they are certified employees, you need to introduce them to fit your brand and policies.
If you own a franchise, the parent company usually handles the training. The staff will be sent to a training facility to learn how to represent the brand on-site. This should turn them into more efficient employees while sparing you the high cost of from-scratch training expenses.
You enjoy lower equipment costs
If you get a franchise, you may get a connection to manufacturers that offer you lower equipment costs. Sales fees can be reduced significantly, and you will also get a discount. This usually only applies to more extensive gym franchises, though.
For example, let's say that a treadmill from the manufacturer costs about $8,000 to purchase. If you get the equipment through a franchise, you may lower that cost to $5,000 for every unit you buy. This will significantly reduce your investment costs.
The cons of getting a gym franchise
Regarding costs, there are specific cons to consider before getting a gym franchise. These are:
Investment costs are high
On occasion, starting a gym franchise can be even more expensive than opening your independent gym. First, you must pay the license fee – which is typical for every business. You also need a certain amount for your equipment, facilities, and marketing.
Depending on the gym, the franchise will often charge between $10,000 and $40,000 for your license. This covers your ability to use the branding of that particular gym, including its name, logo, and branded assets. These companies have to be sure that you will represent them well.
Before they even approve your license, though, you usually need capital between $250,000 and $500,000. Otherwise, they may disapprove of you. This is a significant difference from starting a gym from scratch. If you have 100,000 or less to invest, you may be better off just starting your gym and not a franchise.
You pay ongoing royalty fees
When you own a franchise, you must accept that a certain amount of your revenue goes straight to your franchisor. The company owning the franchise is entitled to around 5-10% of your total earnings, though depending on the company, they may take as much as 20%.
These are referred to as royalty fees, and you will have to pay them whether you make a profit. Even if your gym is not that profitable during the first few months, the estimated fees still have to be paid.
You are accountable for corporate policies
As an independent gym owner, you would set your company's membership, customer service, and employment policies. If you are a franchise owner, the gym's corporate office decides on the most significant policies.
You will only partially control your gym's operation or customer interactions. These things may be decided by a corporate entity entirely unfamiliar with your customer base, which can lead to dissatisfaction.
Verdict: is franchise ownership worth it?
Whether a franchise is worth the cost will depend on various factors. If you have the investment money and can handle the royalty fees, then a franchise may save you time and cash in the long run. On the other hand, if your investment budget is low and you want more business control, you may benefit more from starting your gym.