Guidant Financial Group Blog

Forbes magazine recently published an article about a fitness franchise that has seen huge success in recent years even while many other clubs are feeling the burn of a slowing economy. Potential franchisees may want to take notice. The franchise is Snap Fitness. It operates on a no-frills concept that might make it more accurately termed as a fitness pit-stop (or "fit-stop" if you will) rather than a gym. Locations are small and offer limited machines, provide no classes or child care and few locations even have shower facilities. Customers are in and out quickly—a benefit for both them and the minimal staff.

Bulked-up gyms such as Bally’s—which has filed for chapter 11 bankruptcy twice in the last year—are seeing declining membership numbers and major losses as consumers tighten their belts...or perhaps their belts are just getting tighter from lack of exercise. In either event, those who still want a place to work out and who don’t need abundant staff to motivate them and whip up wheatgrass-infused protein frappe are moving to discount clubs such as Snap, which charges only $35 a month for dues.

Founder and CEO Peter Taunton, “believes Snap will attract more franchisees with so many people looking for work. He's also betting Snap will attract 300,000 new members this year as fitness buffs ditch costlier gyms,” according to the article.

Here are a few excerpts from the article about the company and franchising options:

Snap in 2008 had operating income of $10 million, almost double what it did the
year before, on $30 million in revenue, up 67 percent. The company sold 483 franchises in the first 11 months of the year.

Franchisees can break even on 275 members in as little as three months. Once a lease is signed, a club can be outfitted and opened in ten days.

Most of the 820 [franchise] owners paid $175,000 to open a Snap Fitness club, and many are in rented space. The capital outlay includes $120,000 for equipment, TVs, a card key system, a surveillance camera and a one-time $15,000 license fee.

Franchisees pay Snap a royalty fee of $400 a month plus 50 cents for each membership. Snap, the parent, also collects a one-time $5 fee for each security card issued; it gets another $5 for ‘billing setup.’ (Curves, the women's chain, charges a $30,000 license fee and a monthly royalty fee of up to $800.)

Franchisees also pay $255 per month for insurance, bringing fixed monthly fees to $655. Though the facilities are open to members 24/7, many locations are staffed only 25 to 40 hours, minimizing payroll costs.

Some franchisees run the gyms as a side business; 60 percent of them are
absentee owners with other full-time jobs. Franchisees have online access to
revenue reports and visit counts. They can view live footage of their clubs
remotely. "Running these gyms is a breeze," Taunton tells prospective
franchisees in a weekly conference call. "All you need is an Internet browser."

The modest start-up fees and minimal effort required on the part of the owner make this an attractive option for potential franchisees—particularly those who find fast-fitness more appealing than fast-food. The economic crunch will put added pressure on other gyms, whose extra overhead make it harder to provide competitive prices for what is still essentially a luxury good. Beyond that, Snap Fitness may appeal to those who resent socializing and just want a convenient place to run in, run in place and then run out.

One thing seems to be clear: in a slow economy, efficiency and affordability are of paramount importance. Guidant can help on both counts with 401(k) small business financing and SBA loans, which can help interested individuals set up their own franchise...in a snap!