Recently, an owner of several health clubs called me to discuss the pros and cons of ownership versus subcontracting his juice bar.
My initial response was, “Indeed, it is much more profitable to own/manage than to lease the space.” But, was it really the right decision for him? I thought it best to review his business plan first, gauge his personal tolerance levels and then explain all of the pitfalls so that he could decide on his own. Here is some applicable info if you too are undecided.
Let’s Do the Math
First, understand your situation and ask yourself: “How many members walk through my door each and every day?” Based on this one calculation, you can determine what minimum profit levels you should expect. Given that the average gross profit per shake is about $3.50 and average penetration levels are 5-10 percent, it is easy to estimate your total gross profit revenue. Now, simply compare this to your initial investment of your build-out and you can determine your ROI.
Obviously, if your membership is small you will have fewer people to support your juice bar. There are companies that provide programs to help you exceed 10 percent 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 percent calculation when developing your plan.
Now that you’ve done the math and you’ve decided to proceed forward, consider the following points to decide to manage yourself or lease.
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.
2. Total Control of Your Facility: Ask yourself if having another entity controlling space within your facility is acceptable to you. Will he or she share your vision?
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 most likely come with their 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 or Protein Bar?
6. ROI: The last thing you want to do is shell out a bunch of money for a build-out and then underestimate the breakeven point. Be realistic with your business plan.
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 Serve Safe Certified.
8. Theft: Consider the shrink. What is an acceptable level? My tolerance level is 1 percent, what is yours?
9. Focus: Do you have the time right now to focus on developing a new business within your existing business?
10. Employees: Finding the right person to manage your juice bar is key. You have far too many other responsibilities. Unless you have a juice bar integrated within your front counter and minimal walk-ins per day, don’t expect to manage yourself.
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 I spoke of earlier decided to manage his own space and has expanded to his other clubs.
In My Humble Opinion
Whatever the direction, juice bars should only offer healthy natural products. Juice bars should be a source of sound nutrition, support a healthy diet and help members to achieve their performance goals. 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.
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 1. 888.PFC.9151 or visit http://www.performacefoodcenters.com.