Franchise Pick

Before Buying a Franchise, Don’t Trust, But Verify (Part 2)

by Sean Kelly on June 27th, 2007

(FranchisePick.Com)  Way back in Don’t Trust But Verify (Part 1), I posted the comment of a franchisee-to-be of a certain fitness franchise chain who made the ominous comment that the concept was “too good to fail.”  Several others provided some good insights that prospective franchisees of any concept - especially fitness chains - would do well to heed.  The most important thing to know ahead of time is how you’re going to attract customers, how you’re going to retain them, and what it’s going to cost to do so.

Roger of GymBuzz.com said:

…The fitness business is not a casual investment. The business will not just come to you because you are open.

All of the women’s fitness companies teach their franchisees that “beat the streets” social marketing is what is absolutely necessary. However, it seems like the franchisees that are less than happy with their franchise purchase are those who are placing a great deal of expectation on their franchiser to drive business into their gyms via some form of advertising. No matter whether you invest $100,000 or $500,000 the reports from the successful gym owners all focus on the owner’s level of physical activity and not what kind of ad support they get from their corporate office.

As an area developer from Butterfly Life told us (http://gymbuzz.com), “above all, you must have the passion and personal drive to succeed in the fitness business. Success in the fitness business requires much more than your cash investment, it also requires hard work to make a profitable gym.”

Caveat Emptor: If you are looking for a place to invest your money for profits that requires little of your “sweat equity” then fitness is not the business you should be looking at.

Claudia, who is a franchise owner who is shuttering her women’s fitness workout franchise this week, shares this advice:

My club is closing this Friday. I have spent $95,000 to date and would need another $75,000 to get me to 2 year break even point. Be very sure you do your homework and are aware of the true cost of running this business. It is a great concept but not branded and won’t sell its self. There are many things to consider before you do this. Go to the Chamber in your town they have people who will help you do a plan to know just how much it will take to operate and make your club profitable. It is not the amount the say I can assure you….

… Even the $2500 they tell you that needs to be invested in advertising won’t get anything close to that. By the way they don’t tell you up front that you need to budget that but after the fact they do. In my experience is is closer to $4000 a mth. I am not telling you not to do it I am just saying go into it with you eyes wide open and have at least $175.000 to get you to break even. You should also know that when the year contract is up you have a proven 37% attrition rate to overcome.

According to Claudia, the franchisor says that franchise owners can open and operate their business for as little as $45,000 and with as few as 175 or so members. She states that that’s “simply not true.”  

After training you are basically left on your own… It’s a great concept and the members love it. But if you don’t have at least $150,000 to sustain all the advertising you have to do don’t do it.

Complaints that franchisors underrepresent the actual investment necessary are common in franchising.  Sometimes it’s a valid complaint.  Other times it can be a matter of inflation, or local ordinances or costs.  And often times franchisees themselves are not realistic about their ability to finance a worst-case scenario.  In any event, franchising can be a great way to own and operate a business… but you’ve got to do it with both eyes open, and do your own research from several sources.

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POSTED IN: CONTOURS EXPRESS, x Franchise 101, xBuyer Beware