How To Open Your Own Gym Part 1
Fitness is booming and with the increasing number of corporate wellness programs and health insurance incentives, opening a gym appears to be full of opportunity. However, with all of the different options (trends, facility type, commercial gym equipment, programming, etc.), taking that first step in opening up a gym can be daunting. This three-part series should shed some light on where to begin and provide resources for learning more about the gym business.
What type of facility should I open?
Deciding what type of facility you’d like to open is an excellent starting point. There are nearly limitless options, ranging from the one-stop shop that offers something for everyone to niche facilities.
Aligning the type of facility you’re planning on opening with the area demographics is paramount. For example, if the area you’re opening in has a median resident age of 55 and the population is more than 60% female, you probably don't want to open up a mixed martial arts facility that focuses on private grappling sessions.
Most government or small business assistance organizations have a portal to access detailed demographic data in your area. In the United States, a resource called Stats America provides demographic data on the state, county and metro area level.
Of course, possessing a certain degree of passion for the type of facility you’re planning on opening and the clientele you’ll be assisting aids in overcoming adversity. Your genuine excitement and the enjoyment that you derive from running a business you truly believe in is one of the biggest advantages to succeeding.
- Make sure your facility caters to the area demographics.
- Play to your strengths (e.g. don’t open a Pilates studio if you’re an avid indoor cyclist).
- Be passionate about the business and love what you do.
Should I open an independent facility or purchase a franchise?
Depending upon your experience, you may feel confident in starting the business from the ground up with little to no outside support. This is an exciting approach, and it gives you the freedom to offer whatever you’d like inside of your gym. However, creating a strong brand and minimizing start-up costs may become a challenge.
First-time business owners and/or those new to the fitness industry may feel more comfortable purchasing a franchise. This strategy is usually a little more palatable compared to opening an independent facility as the concept has a proven track record, step-by-step support, and low start-up costs. However, what you’re gaining in support and purchasing power may limit your creativity in terms of the products, services, equipment, etc. that the franchise allows inside your facility. You may also need to budget for monthly royalties on top of an annual franchise fee in your business plan.
There are pros and cons for each approach, so be sure to utilize a strategy that works best for your needs. A quick internet search turns up hundreds of different fitness franchise opportunities. You may also consider joining an industry organization, like IHRSA, for access to industry reports and resources that can give you more insight into these topics.
- Independently owned facilities can offer more freedom/flexibility but may lack brand recognition.
- Franchises offer a great deal of support but there is a cost associated with this infrastructure.
- Do what’s best for your specific needs.
How should I fund the project?
Business practices and financial disciplines are extremely varied. There is no financial Holy Grail when it comes to planning the financial end of your gym business. However, making sure that your financial strategy fits within your means, is conducive to continued growth, and is free of any hidden fees should be part of any plan.
One of the most common funding options is the use of a Small Business Administration (SBA) loan. This will likely offer the most competitive rates and allow you to allocate funds to be used toward tenant improvement (TI) costs (flooring, lockers, mirrors, etc), and equipment. However, the application and approval process is rather extensive and may not work with your business timeline.
Some gym owners prefer utilizing equipment leases or finance options directly through the fitness equipment manufacture, as this offers a great deal of convenience. However, rates may not be as competitive compared to an SBA loan or a third-party leasing/financing company but the terms are generally very straight forward and have no hidden fees. Unfortunately, the lease amount is only applicable to the company’s equipment so TI and other essential equipment cannot be included.
Gym owners looking for leasing convenience with a little more freedom may have better luck going through a third-party company because they sometimes offer rates that are more competitive than what fitness equipment manufacturers are able to extend. Some of these companies even cover TI expenses and other equipment costs. However, residual lease (no ownership of the equipment at the end of the agreement) practices that do not offer a buy out option are commonplace and can leave gym owners in a tough spot. Good buyout options allow the leaser full ownership of the equipment and possess a higher percentage of equity in the business compared to what’s offered in residual values.
Whether you’re utilizing a traditional loan, leasing to own or utilizing a residual lease, make sure to partner with a fitness equipment manufacture whose products hold a high resale value and have spare parts that are readily available.
- Ensure that your financial strategy is within your means and conducive to continued growth.
- Read the fine print and be cognizant of any early pay-off penalties.
- Know the difference between leasing to own and a residual lease.
- Partner with an equipment manufacture that has a high resale value and continues to manufacture parts for older models.
Learn about location and floor planning in Part 2 of the series.
Find out about the importance of equipment choices in Part 3 of the series.