Welcome back to our two-part series on our guide for opening a gym franchise in 2021, based on a recent podcast appearance on All Things Franchising.
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 best fit for them.
Last week, we spoke about what it takes to be a successful fitness business and franchise owner, as well as what you can do now in order to have your ducks in a row when you’re ready to buy.
If you haven’t read that post, we recommend doing so first.
In today’s post, we going to answer more practical questions to consider for those who are ready to buy a gym franchise soon.
Let’s jump in.
Last week, we mentioned that those who are first to market now will likely strike more favorable terms with the franchisor when the time does come to buy. Right now we’re projecting July-September 2021 for the momentum to start swinging back in the favor of fitness business owners and that it will take into 2022 for a full recovery.
So, are prospective franchisees able to negotiate with gym and fitness franchisors (and their teams of attorneys, accountants, and advisors)?
You can and should absolutely negotiate the Financial Disclosure Document (FDD) in certain areas, and now is the perfect time to come to the table with the franchisor.
The Financial Disclosure Document (FDD) is a financial disclosure document that outlines the relationship between the franchisor and franchisee. It contains a lot of legal language but at its core, defines the deal points.
The best advice we can give is to find an advisor or accountant who has done this before in your niche before you sign the deal, not after.
You’ll want to work with an expert to find deal points that are most favorable for you.
A few things to consider asking for in negotiations:
- · Reduced royalties for the next 1-2 years
- · A discount on the initial franchise fee
- · Increased radius restrictions
- · Additional operational support upon opening
- · Assistance from the franchisor’s commercial real estate attorney in negotiating better lease terms
Everything is on the table, but it’s important to find the points that make the deal palatable for you.
Don’t ask for every deal that comes to mind… think about and negotiate the points that will actually make a difference for you.
And make sure you ask the help of an expert now, not afterwards. We see all too often clients come to us for help after they’ve signed the deal, at which point we can do little to help.
What are a few tips you would give someone looking to buy a gym franchise soon?
My #1 tip is to talk to as many experienced people as you can to help you make this decision.
To start, we recommend talking to existing franchisees. Seek out 3, 4, even 10 franchise owners who can answer the hard questions for you and solidify that this is the right concept for you.
Do not accept the franchisor’s information at face value.
Franchisors are going to put a positive spin on the information they share. It will be selective, and every regional market has different economics that can mean the difference between success and failure.
It’s your job to find the negatives. Find the skeletons in the closet before committing to the brand.
The next person you want to seek out is an advisor like a franchise consultant, attorney, accountant or all three.
We can’t stress this step enough – bring in the experts, now! The preliminary work is the most important work you do when signing up as a franchisee, so don’t wait until it’s too late to bring in expertise.
An accountant can help you engineer the most favorable deal in terms of lease negotiations, royalty fees, assist in setting up the best legal and tax structure, plus much more to set your franchise up best for success. And then you’ll need an attorney to make it all legal.
And last but not least, talk to your closest friends and family. Here at The Fitness CPA we like to say “every business is a family business.“ Opening up a gym franchise is not going to be easy. You’re going to work long days and those closest to you will feel the lingering effects.
I like to tell people that being a business owner is great! You get to work any 12 hours of the day that you like! (Ha!)
It’s important to make sure that any business you choose to open, and especially if it’s a franchise, fits in with your ideal life and lifestyle, and that you have space for the commitment that it’s going to require.
If you still have doubt or general questions about purchasing a fitness business or fitness franchise in the upcoming months, feel free to reach out to our team as we’re always happy to help.
Until next time!
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- Why You Haven’t Heard About The Employee Retention Credit Yet - May 25, 2021
- Why Gym, Studio, & Fitness Owners Qualify for Thousands in ERC $$$ (even if you don’t think you do) - May 24, 2021