Charging Annual Fees: How to Do So Successfully
Clubs of all sizes are implementing a one-time member charge, often called an annual fee, and sometimes called a facility enhancement fee or capital reserve fee. Basically, these annual fees allow the club to collect a preset amount once a year, typically for use in club improvements such as buying new cardio equipment, replacing carpeting, making renovations or other much-needed improvements.
This annual fee is a way to increase revenue without increasing dues. The actual amount charged could be similar to the monthly membership dues and vary based on the type of membership and/or if it’s a single, couple or family.
It’s important that the fee be clearly stated and discussed as a positive at the membership sale. It should be included in the membership contract and agreed to by the member. Also, be sure the staff is fully aware of the fee — discuss the fee and its uses in your staff meetings so everyone can answer member questions if the need arises. If there’s ever a dispute, question or challenge to this type of fee, generally it’s due to miscommunication — not legality.
A very common method we see is to bill the first annual fee in the third month — approximately or within 90 days — of a person joining. This not only creates additional revenue for the club within a short time period, but also helps make a stronger commitment on the members’ part to utilize their membership. Thus, it helps with retention of the member for a longer period of time. And members that are using the gym or fitness center also tend to bring guests or refer friends, creating even another benefit to the business.
Logistically, your facility’s club management software should easily allow the inputting of the appropriate fee per membership and the assigned billing date. Some software allows pre-programming of this fee to set into the member’s record automatically based on the assigned membership type.
There are multiple ways you can approach billing annual fees electronically:
- Charge the same amount every year, and make it applicable to all members whether they pay monthly or pre-pay. To clearly separate these funds from the regular dues billing, run the maintenance file on a different day, i.e. if you normally bill on the first of each month, process the maintenance fee file on the 15th.
- Break out the billing. For instance, for all members who join from January 1 through June 30th, designate that their billing will occur on July 15th. For all members who enroll between July 1st and December 31st, their annual billing will occur on January 15th.
- Bill the fee based on the membership type. In essence, all “gold” members get charged on April 1st, “silver” members on July 1st, and “bronze” members October 1st.
Forecasting the expected revenue is important to owners and managers for budgeting and cash flow analysis, so reports allowing managers to preview the annual billing files are a must. Run a report that lists all members, their membership type and the billing amount. Next, run a report to compare the file versus the regular monthly EFT billing to verify that all members are included. Along with this, run and review a problem report to show any missing account information, recent returns or invalid amounts.
No matter how it is charged, annual fees 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 to help keep your club and equipment up to date. That’s a win-win for you and your members.