Recently, a gentleman from South Carolina, and owner of a string of health clubs, called me to discuss the pros and cons of ownership versus subcontracting his juice bar.
My initial response was that it has always been my experience that it is far more profitable to own and manage your own juice bar. But was it really the right decision for him? I thought it best to review his business plan, gauge his personal tolerance levels, and then explain all of the pros and cons so that he could decide on his own.
I think we can all agree that juice bars should provide more than just tasty beverages. Juice bars should be a source of sound nutrition; support a healthy diet, and help members to achieve total fitness. After all, total fitness requires exercise and nutrition. By offering a juice bar to your members, you can provide the nutrients necessary to help them accomplish their goals. In addition, having a juice bar in your facility will help to bring in new members, since prospective members are always shopping for value-added services.
Let’s do the math
First, understand your situation and ask yourself; “How many members walk through my door each day?” This is one factor that will determine whether you should have a juice bar in your facility. Obviously, if your membership is small you will have fewer people to support your juice bar. Most business plans count on selling to 10% of the folks who are working out. Given that the average gross profit per shake is about $3, it is relatively easy to estimate your gross profit revenue. Now, there are companies that provide programs to help you exceed 10% penetration levels so that even clubs that have just a couple hundred workouts a day can have a profitable juice bar. But, stick to the 10% calculation when developing your plan.
Now that you’ve done the math and you’ve decided to proceed forward, ask yourself the following 10 questions. Answer them honestly to determine whether it is right to manage in-house or to lease the space.
1. Greater Profits: The number one reason for managing your own juice bar has to be greater profits. There would be no independent subcontractors if they weren’t making more money than the rent you charge. How important is increasing your bottom line?
2. Total Control of Your Facility: This may or may not be important to you. Ask yourself if having another entity controlling space within your facility is acceptable to you.
3. Choice of Image: You have worked very hard determining the look and image for your health club. A juice bar is part of the total package. Wouldn’t it be nice to choose the juice bar concept as well? An independent contractor will probably come with his or her own concept.
4. Products Offered: Offering your customers only pure and natural products will bolster your reputation for providing total fitness. Is this important to you? Is this important to your members?
5. Hours of Operation: Is it important to determine when your members can rely on accessing a Recovery Shake?
6. Initial Cost: The last thing you want to do is shell out a bunch of money for an expensive build-out and then struggle to make your money back. Get estimates for a build-out and determine how long it would take to pay off your initial investment.
7. Food Handling: As with any food business, having properly trained, certified employees is required. Anyone who manages the juice bar for you will need to be educated and certified.
8. Theft: Consider the shrink. What is an acceptable level? My tolerance level is 1%, what is yours?
9. Focus: Do you have the time right now to focus on developing a new business within your existing business? Do you have the energy?
10. Employees: Finding the right person to manage your juice bar is critical. Do not expect to try to do it yourself. You have far too many other responsibilities. Do you have this person already working for you, or do you need to find him or her?
Your answers to the above questions should provide you with solid direction in making the important decision of whether to own or subcontract. By the way, the gentlemen from South Carolina decided to lease space in one club so that he could concentrate on other things. Number 9 was the deciding factor. After measuring his results for one year, he will determine a course of action for his other clubs.
Dan Young is President of Performance Food Centers, Corp. He is accomplished in juice bar concept and design as well as being certified in personal training and sports nutrition. He can be contacted at 866.632.1927, or visit www.performancefoodcenters.com
