From time to time, we make guest appearances over on the popular podcast, All Things Franchising, where we share our insights on gym franchising and the fitness industry as a whole.
If you haven’t tuned in yet, All Things Franchising is hosted by Linda Ballesteros of Mpower Franchise Consulting, a consulting company that helps new business owners through the process of researching, choosing, and opening a franchise that’s best fit for them.
You can check out their podcast series here & the full podcast interviews with The Fitness CPA, here. We recommend giving it a listen, as we won’t be able to encapsulate everything here.
During the depths of COVID-19, The Fitness CPA Founder Eric Killian, CPA spoke with Linda about the future of franchise businesses, specifically when it comes to buying and operating a franchise post-pandemic.
In today’s post, we’re taking a look back at some of the key takeaways from that podcast and revisiting the question: Should You Buy a Fitness Franchise?
Is a Fitness Franchise Still a Good Investment?
As we get back on our feet post-COVID-19 (and continue to battle rising inflation), first-time entrepreneurs and experienced business owners alike are starting to explore their options for how to invest their cash.
After all, more millionaires were made in the recovery of the great depression than at any other time in U.S. history.
For entrepreneurs looking for a risk-averse business model, franchises are typically seen as safer investments to consider.
As experienced accountants who deal with a wide variety of business owners, we see less risk in the franchise model.
This does not mean franchises are without risk. They aren’t.
However, if we compare the success of business owners who try to do something on their own compared to those who buy a franchise model, statistically we see less failure among those who opt for franchises.
This is primarily due to the built-in processes and systems you acquire, as well as the built-in reputation and brand equity you assume.
That’s why as we wade ourselves out of economic uncertainty, the fitness franchise is a really reasonable response to the post COVID-19 era.
Having a brand to support and back you as you dip your toes back into entrepreneurship may help minimize the risk until the future is completely clear.
What are Franchisors Doing Differently to Support Franchisees After COVID-19?
When it comes to fitness franchisors, there is what we call the “One-Third” rule.
One-third of fitness franchisors blow it out of the water – meaning, they do a great job.
One-third of fitness franchisors do an acceptable job.
One-third of fitness franchisors are below acceptable or downright poor.
However, we were pleasantly surprised throughout COVID-19 to see that even those franchisors that fall into the lower bracket stepped up their support and responses during and after the pandemic.
Whether that consists of providing legal and consulting support or offering temporary royalty abatements, we saw many franchisors doing their part to aid franchisees as much as possible through what turned out to be a really challenging time.
How Do You Weed The Good From the Bad When It Comes To Franchisors?
Post COVID-19, the due diligence phase is more important now than ever.
You really need to make sure what you think you’re buying is actually what you’re getting.
Our strongest recommendation is to get in touch with as many franchisees as you possibly can.
And we don’t mean only the ones that the franchisor gives you!
Franchisors will put you in touch with their success stories. And that’s great! You should talk to them.
However, you also need to look at the franchisees that weren’t given to you as a reference.
Start with franchisees in your local area (simply get in touch with the owner), and ask a few important questions:
How does the franchisor support them?
How were they supported by the franchisor both during the pandemic and now?
What would you do differently, knowing what you do now about the franchise model?
Do you consider your investment into the franchise a success?
You want to dig in to find out how supportive and flexible the franchisor really was before going into business with a franchisor that won’t have your back.
TIP: We recommend you get in touch with at least 5 franchisees that aren’t on the franchisor’s reference list, and ask these questions. You will get more forthcoming, candid answers from those who come highly recommended.
Should You Buy a Franchise Now?
With economic pressures hitting individuals and families across the United States, we think there are only two reasons why you should open a fitness franchise this year:
#1 – You’re Passionate
You cannot see yourself doing anything else. You have a passion inside of you that must be quelled, and you’re ready to back yourself in to make it happen. You have a fire in your belly to ride the ups and downs as they come – they will come! – as well as dig in deep to make a name for yourself in what’s become an incredibly competitive industry.
OR
#2 – It’s a Good Investment
You are approaching the purchase from an investor standpoint. In this case, you need the numbers to work out. The rent is reasonable, the overhead costs look good, and the demographics will support your model.
While both approaches require heavy due diligence, we strongly recommend working with a CPA to ensure the numbers stack up when approaching the purchase purely from an investment point of view.
TIP: Read our popular article on 10 Reasons Why You Shouldn’t Open a Gym to find out why you shouldn’t open a fitness business this year.
As an Existing Franchisee, What Should You Be Doing Now?
As we continue to turn the corner into the back half of the year, there are a few things franchisee owners can do now to set themselves up for next year.
1. Stay Hungry – Keep Expenses Low
One of the biggest points that we want to share is to stay hungry.
During COVID-19, we had a lot of business owners who went into survival mode. They were willing to do anything it took to make their business survive.
We want you to keep that same hunger now.
Watch your expenses. Don’t add back all of the fat you trimmed during COVID-19. And don’t reward your employees before you’re able to do so.
This is an important point. You need to make sure the basics are taken care of (i.e. you can comfortably afford rent) before taking on more expenses.
If you did really well through the pandemic, and are continuing to do so, this may not be applicable to you.
But for the majority of fitness businesses, it’s important not to jump back into excess expenses too quickly.
2. Explore Your Options
Just because the pandemic is over, doesn’t mean that financial opportunities to save money aren’t still there. They are!
Just recently, one of The Fitness CPA clients was able to wipe $40,000 off their debt simply by paying a specific amount up front now.
$40,000 in debt – gone!
It’s important to speak with your lenders to find out what options are available. You will never know until you ask.
3. Apply For The Employee Retention Credit!
If you are an existing client of The Fitness CPA or subscribe to our newsletter then you will know more than most about the Employee Retention Credit (ERC). We can’t stop talking about it – and for good reason!
Our clients have received an average $57,000 in refunds from the Employee Retention Credit (ERC) so far this year. And many have received much more!
Check out our Ultimate Guide To The Employee Retention Credit to learn everything you need to know about getting back thousands of dollars for your fitness business.
Want to listen to the rest of the All Things Franchising podcast? You can check out the full episode over on their website here. Happy listening!
Fitness is such a big part of who I am. Maintaining a healthy lifestyle, eating well (mostly paleo), hiking, backpacking, mountaineering, practicing yoga and Crossfit are all important cornerstones of life. But I love ice cream and cookies too much to say no!
I love helping owners make sense of their business and finding ways to grow it. It’s an honor to help you see situations, scenarios and opportunities from all sides so you can make informed decisions.
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