Franchising is fast becoming one of the most popular ways to do business with hundreds of different franchise models currently operating. For most would-be business owners, joining a franchise system has many benefits. It offers the ability to become part of an established brand, enjoy group buying power and have the additional assurance and protection of a franchisor to step in and provide training and support when necessary.
The fitness industry is certainly no exception, with many prospective franchisees drawn to the numerous franchise opportunities available. From personal training and weight loss centers to full-scale gym facilities, there is literally a model for everyone.
A well-structured and efficiently-run fitness franchise can provide immense advantages for both the franchisee and franchisor. It’s often described as being in business for yourself but not by yourself. However, choose the wrong franchise model or fail to complete the necessary due diligence, and you may find yourself in the business relationship from hell, with little to no chance of escape.
When evaluating the many fitness franchise options, consider the following:
Is there a clear and distinct product offering differentiation? You are, after all, buying a business to open in your local market with the aim of attracting customers. If your chosen franchise is unable to differentiate itself in some way and appeal to a distinct group of customers, you will ultimately be competing in a commodity market. If a competitor franchise opened across the road, would you be confident that your product was unique enough to still attract a viable number of customers, year after year, until the end of your franchise agreement?
The success of many small businesses is through a strong and loyal niche market, rather than trying to be all things to all people. In a commodity market the usual differentiator is price, which can possibly have a huge impact on the profitability of your potential business.
How rigorous is the franchisor’s recruitment process? Do you get the feeling they would sell a franchise to anyone, or did they really screen you to make sure you are the right person for the business? Fitness is a people industry, and building a sustainable member base requires that you care about your customers and ensure that they are achieving results. Without committed and passionate franchisees who were heavily screened to ensure their suitability, the brand reputation will be damaged and the value of your business will be impacted.
You should also be strongly encouraged to seek independent advice regarding your purchase. A credible franchisor will ask you to sign an advice statement certifying that you have taken advice from your attorney, accountant or business adviser before they permit you to purchase a franchise outlet.
What is the ongoing royalty payment? All franchise systems require you to make an ongoing monthly royalty payment to the franchisor for the use of the brand and access to the franchise systems. Most fitness franchises charge a flat fee with the suggestion that you benefit from a fixed cost, with any additional revenue going into your pocket. The reality, however, is that under this model, the franchisor has no incentive to grow your business, as they are paid regardless of whether you are profitable or not breaking even. Once franchisor revenue becomes effectively fixed, the focus of their efforts becomes on selling additional franchises. This means you could soon be competing for customers with members of your own franchise group, as additional outlets open in your neighbouring suburbs.
The success of many food and retail franchises such as McDonald’s lies in the fact that the franchisor is heavily invested in the success of each franchisee, and their focus is on individual store profitability. Franchises that can translate this model to the fitness industry have a much stronger likelihood of long-term success.
Once you have determined the most appropriate franchise model for you, it is always a good idea to speak to current franchisees. Their contact information should be included in the Disclosure Document. If not, you should be able to obtain it from the franchise website. Speak to as many existing franchisees as possible to get a good sense of the relationship between them and the franchisor. Are they happy with the support and training provided? Is the marketing material effective? Is their business as profitable as they had hoped?
Regardless of the franchise system you select, the success or failure of your business will inevitably be determined by you. Be cautious of claims stating you can generate passive income or that your business will run itself. Building a business is hard work. In joining a franchise you increase the chances of a return on that effort, as you will have a system to follow and a network of other business owners who you can learn from and share knowledge with.
While there is no guarantee of success, your chances are certainly increased under a franchise system, especially if you take the time to choose the right model for you.
Dave Hundt is the CEO of Australasia Franchise Group, a private equity firm operating a diverse range of businesses specializing in the franchise sector. Based on a proven record of success, AFG’s latest offering for the fitness industry is franchising now. Visit www.enviefranchise.com for more information or visit booth #345 at this year’s Club Industry show.
