Opening a Gym: What to Consider Before You Invest

Dreaming about opening your own gym? Understanding the costs and challenges of owning a gym will help you figure out if you're really ready for it. Expenses for opening a business accumulate beyond initial startup fees; you must also pay for utilities, employee salaries, equipment costs, and more. Let's explore some of the key factors to consider before you start spending your hard-earned money.

Choosing Your Gym: Independent vs. Franchise

Opening a gym represents your passion to help others live a healthy lifestyle. But what type of gym do you want to provide—big-box gym or boutique facility? And, perhaps more importantly, how do you want to start your business—as an independent owner or by joining a franchise? There are pros and cons to both:

Pros of Going Independent

The biggest benefit of being an independent business owner is being your own boss. You have the choice of how to run your business and what you want it to consist of in all areas. This includes choosing the name of the business, your target audience, who you want to hire, hours of operation, how to design the inside, and more.

Also, you will not be responsible for additional franchise costs—there are no added royalty fees, marketing fees, or investments for using the franchise's name. You simply owe what it costs you to open and operate your business.

Cons of Going Independent

While the freedom and flexibility you get as an independent business sounds great, keep in mind that it doesn't come free. In many respects, starting your own business can be more difficult than owning a franchise. All the decisions fall squarely on your own shoulders—selecting a location, choosing a name, setting up a business plan, creating a marketing plan, hiring staff, etc. When you start your business, you must build your brand from the ground on up. It requires a lot of time, effort, and resources.

Pros of Investing in a Franchise

That brand you must build as an independent owner comes pre-made when you invest in a franchise. Customers gravitate to big brand names. When deciding on places to go, people often choose the brands they've heard of before. Brand recognition is a major benefit of owning a franchise.

A franchise is a license that a person buys from a business. This license authorizes you access to the brand name and trademark items. As a franchise owner, you can use the name of the business, policies, procedures, marketing initiatives, sales tools, and other training resources that the company offers.

Having access to these tools helps a gym owner grow their business faster. Other businesses have used these strategies and have seen them work.

Cons of Investing in a Franchise

However, these tools and resources are not free. As a franchise business owner, you can use the franchise name to sell and market your business. In turn, you must pay startup fees and licensing fees.

You must also follow their rules and regulations for running the business. You cannot make changes at your own free will. Going against franchise regulations could lead to the termination of your franchise license.

What It Takes to Invest in a Gym Franchise

If you are looking to buy into a franchise, here are some important factors to consider.

Initial Investment

The total initial investment is the startup costs required to open a franchise. The investment varies based on the franchise you choose. Low investments average around $100,000 while a high investment may reach $1,000,000 or more.

Anytime Fitness has an average initial investment cost of anywhere from $107,524 to $722,796. Orange Theory has an initial investment ranging from $563,529 to $999,121.

Liquid Capital

Liquid capital is simply cash or assets that can quickly turn into cash. This is important to franchisors because they want to make sure you can sustain opening a gym business. If you have enough cash to start and build the business, the chances of you going under are less.

Part of being a business owner is proving to the franchisor that you have enough money to cover living expenses and operating expenses as you build your business.

Franchise Fees

A franchise fee allows the gym owner to use the company's trademark brand—this is your brand recognition that can be helpful in drawing in clients. Franchise fees vary between companies. Going back to our previous example, Anytime Fitness franchise fees range from $21,000 to $42,500 and Orange Theory has a franchise fee of roughly $59,950.

Royalty Fees

Royalty fees for gym franchises typically start at 4% and can be as high as 8%. This fee applies to the gross sales that the business generates. It is an ongoing fee—often paid monthly or quarterly—and sometimes includes additional marketing fees.

General Expenses—Independent and Franchise

When you choose to start a gym from scratch, those franchise fees do not apply because you're not receiving the tools and brand resources that come with nesting under an established business. And it doesn't mean there is no cost at all. Here are the costs that apply to independent businesses and even to franchises.

Facility Costs

At the most basic level, this includes your building. Cost varies by location, size, and whether you rent or purchase. Additional costs include building improvements, remodeling, and repairs.

Also, you're going to need equipment and furniture, from treadmills and free weights to desks and chairs. Filling your space will likely require a significant investment, one that will vary based on the size of your gym. A larger gym may bring in more clients, but then you'll also need more equipment.

License and Permits

Opening a gym requires having a business license and insurance. Insurance covers liability, theft, workers' compensation, and business insurance.

In this process, you will need help creating contracts and membership agreements. Writing contracts and reviewing all legal documents will require hiring a lawyer.

Consider outsourcing professional skills to help build a financial foundation and projections. This will help you track finances and learn the budget to prepare for adjusting. Your business plan will change as time goes on.

Utilities

These costs include water, electricity, phone, internet, HVAC maintenance, and more. You also need gym management software to operate your fitness facility.

Salary and Miscellaneous Expenses

Employee salaries are a major expense. Some staff members might even request a higher salary based on their qualifications. Consider asking yourself the following questions:

• Will your personal trainers be independent contractors or employees?

• What pricing options will you offer personal trainers?

Personal trainers also need continuing ed that you may choose to pay for. Investing in a professional team from the get-go will only make your start more successful. Make sure your trainers know how to build their business because their success plays into your success.

Lastly, don't forget about credit card processing fees, cleaning supplies, and even office supplies like pens, printer paper, and staples. Keep a backup of on-hand operating cash for miscellaneous day-to-day expenses such as if you run out of on paper before the next order shows up or if you want to provide snacks for employees.

Marketing and Advertising

Having a website for your business is obvious. The cost of building and maintaining a website can vary. There are plenty of simple and free website platforms available, but if you do not have experience in creating websites and you really want to shine, consider outsourcing the job.

Along with having a website you need to be active on social media. Social media includes any paid advertising you might do. There are many effective forms of digital advertising and even old school direct mail.

Advertising isn't cheap, but it is key to boosting membership sales and providing effective communication of the services offered. Get your marketing plan in place and start advertising before your gym opens so you can start your business with gym members already on your roster.

Develop Your Gym Business Plan

To cover all these expenses and still make money, you must have a solid business plan in place. There are many business models to choose from, but first, figure out what will serve your target market best. Whether you want a big-box gym or small boutique training facility, you must do market research.

Knowing what type of gym business will attract the most people is crucial. Demographics and interests of the people around are a factor critical to long-term success. Determine the types of customers you want to attract to your business and go after them.

Research locations that would fit your business model best. Or research the demographics of the area you want your gym to be in. Both will help you make the best decision on what type of gym would be most successful.

Once you decide on the type of gym and location, you need to understand the underlying concept of the business. Dial-in on the problems it solves for potential customers. Define the objectives of the business to help plan marketing initiatives. Knowing your target audience allows you to advertise more effectively and build brand awareness, which leads to more foot traffic and revenue generation.

The U.S. Small Business Administration has a business plan tool you can use to create an outline of how you will run your business. You'll want to consider the following:

• Gym name and location: Who are your competitors? What external factors can influence your business? Will you be opening a CrossFit-style gym, commercial gym, yoga studio, etc.?

• Promotion and marketing: Who will be your target audience/customers? What demographics will you target in your advertising?

• Gym startup costs and funding: How much will it cost to open a gym? What fitness equipment will you purchase? Free weights, cardio equipment, machines, etc.?

• Legal structure and licenses: Do you have your business license, building permits, and other legal paperwork in order?

• Expectations of revenue: Where should your club's revenue be at three months, six months, nine months, and so forth? Set these business fitness goals ahead of time.

• Break-even point: When do you expect to break even? Future pace your financial projections and costs based on the money you have available.

• Matching your staff: Be sure to match your professional team with your customers. What type of employees would serve them best? Will you refer to personal trainers as coaches or trainers? Will you offer group fitness classes?

Are you planning to open your own gym someday or want to be the lead fitness professional for a successful team? First, consider achieving ISSA Master Trainer status to ensure you have all the necessary qualifications to help serve your members.