Should Our Club Charge an Annual Fee?

annual fee

If your health club is not currently charging an annual fee, this is the time to consider it and potentially implement it for 2018. Clubs of all sizes are either starting with or incorporating a one-time charge into the billing cycle, often called an annual maintenance fee, facility enhancement fee or capital reserve fee. Basically, this additional billing allows the club to collect a preset amount one time per year, toward improvements such as new cardio equipment, replacing carpeting, doing renovations or other needed improvements.

It’s important the fee be clearly stated and discussed during the membership sale as a positive. It should be included in the membership contract and agreed to by the member. This once-a-year fee is a way to increase revenue, without increasing dues.

The actual amount could be charged similar to the membership dues and vary based on the type of membership and/or if it’s a single, couple or family. If you’re an existing club and thinking of adding such a charge, it’s recommended a letter be sent out to the membership base at least 30 days in advance of the first charge. Or you could opt existing members out of the charge, and just start with new, incoming members.

Often promotional flyers and posters are put up in-house to promote the planned improvements and show how the added income will be spent. Showing a timeline and keeping to it will keep members’ confidence high and show good faith on the owner’s behalf.

Logistically, the facility’s club management software should easily allow the inputting of the appropriate fee per membership and the assigned date the billing will occur. It can be pre-programmed and set into the member record automatically based on the assigned membership type. Like regular EFT billing, the annual fee would be collected electronically. A common amount is $20 to $60 depending on the club, average dues, demographics, or if there’s a defined purpose.

Charge the same amount every year, and make it applicable to all members — whether they pay monthly or prepay. To clearly keep it separated from the regular dues billing, have the maintenance file done on a different day, i.e. if you bill normally on the first of each month, process the maintenance file on the 15th.

Another way to handle the annual billing is to break out the billing two times a year. For instance, for all members who join from January 1 through June 30, half the billing will occur on July 15. Likewise, for all who enroll between July 1 to December 31, their annual fee would occur on January 15.

Again, a smart club management software will easily accommodate this and allow for proper tracking of the transactions. A third option is to bill the fee 90 days after a member starts. This will bring in the additional revenue even sooner.

Reports allowing managers to preview the annual billing files are a must-have. Forecasting the expected revenue is important for budgeting purposes and to properly predict cash flow.

No matter how it is charged, an annual fee can and should be a positive. On average for a site with 1,000 members, at even a basic amount of $29 a year, that’s $29,000 of additional income.

Make sure all staff are fully aware of the fee, talk about it in staff meetings and properly disclose it to members. If there’s ever a question, generally it’s due to miscommunication — not legality.

 

Carole Oat is the national sales manager for Twin Oaks Software and a former club owner and operator for 15 years. She can be reached at 860.829.6000 or by email at coat@tosd.com.

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