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Tips and Considerations (#1 – 5) Before Opening a Fitness Studio or Facility

I have worked with a number of clients over the past few years in opening up their own fitness studio (franchisee or otherwise) or CrossFit affiliated gym.  This article is the first in a three part series (15 tips and considerations total) aimed at helping people that are considering taking their passion for fitness from a hobby and turning it into a career.  The items discussed below are some of the best practices that I have observed in clients that were successful in their first fitness venture.

1. Write a serious business plan.  Creating a thorough business plan is one of the best ways to really force yourself to look at the financial prospects of owning a business, and is a great way to identify weaknesses prior to committing endless time, energy and money into a venture that may not be as viable as it seemed when discussing with your friends or significant other.  In my experience, my most successful clients from day 1 of opening are those that had the most well thought out business plan because they have better identified weakness prior to opening and made the proper adjustments accordingly.  As part of any business plan, you should include a line by line budget for Years 1 through 5 of the business, including granular detail on expenses associated with operating the business.  

2. Understand that everything costs more than you think.  The business plan will help you understand the initial costs (equipment, build out, etc.) and ongoing costs (payroll, rent, software, etc.) of opening and running a fitness facility.  It will also force you to think about insurance, legal, employment taxes and other costs that tend to get overlooked by business owners just starting out.  My rule of thumb is to come up with a conservative budget for Years 1 and 2 of the business, and then add 20% to the final expenses line item.  The expenses, at first, will always be higher than you expect.  

3. Identify and retain your “go-to” employees/managers.  Hillary Clinton once said, “it takes a village. . . ” – surely she was not referring to owning and operating a gym, but she might as well have been.  If you are the only person that everyone looks to when things go wrong, you will quickly burn out and the studio will likely fail.  The employees need an inspirational leader, and you will most definitely lose much of your inspiration after working 70+ hour weeks for what may amount to minimum wage (at best) over the first several months of operations.  It is important that you retain at least 1 or 2 key employees that you can count on to be there from the beginning.  You must take initiative to train these key employees in every facet of the business.  While generally I do not recommend just handing out equity in the business to key employees from day 1, you may consider a Phantom Equity or Bonus Plan to incentivize your key employees to work to make the business profitable.  Many of the successful gym clients I work with have Bonus Plans in place for their key executives based on the overall profitability of the gym. 

4. Find the right partners, and document your business deal.  Let me first say, if you can afford to go it alone and not have business partners, I encourage you to do so.  In my experience, gym partnerships end badly 75%+ of the time.  Inevitably, one partner thinks they are doing more than the other, and they start unilaterally taking actions that damage the relationship.  Often times, friendships spanning many years are destroyed.  Before going into business with someone, spend time discussing much more than the money each person brings to the table; spend time discussing the vision of the business, decision making, how profits will be distributed, who makes hiring decisions, who makes equipment purchasing decisions, can an owner sell his ownership in the business to another person, etc.  I find the most successful business partnership are those between owners that have complementary skill and talents, and understand where each of the partners adds the most value to the business.  There is a laundry list of issues that should be discussed and agreed up before partners go into business together. 

5. Find the right lawyer – someone who is familiar with issues faced by studio and gym owners.  This tip is even more important if you have partners.  Once you decide on the business deal with your partners, each of you will need independent, legal representation to properly document your business agreement in an Operating Agreement (for LLCs) or a Shareholder Agreement (for corporations).  One of the attorneys will also need to form the LLC or the corporation which will actually operate the business.  The attorney for the business will also need to review and negotiate your lease (be careful about sound/noise provisions!), possibly review your financing arrangement, and review and negotiate your Franchise Agreement (if you are going to be a fitness franchise owner).  Ask the attorney what other studios and club facilities he or she has worked with, and consider asking for a few references before commencing work with that attorney. 

© Horwood Marcus & Berk Chartered 2022. All Rights Reserved.National Law Review, Volume V, Number 211
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About this Author

Aaron D. Werner, Horwood Marcus Berk Law Firm,  Acquisition Attorney, Chicago, IL
Partner

AARON WERNER provides strategic, business-oriented advice to high-growth companies and investors as they navigate legal and business challenges.  Aaron's strong base of market knowledge on deal terms and strategies for navigating difficult situations comes from a decade representing clients in their most critical moments, including mergers, acquisitions, joint ventures and venture capital financing transactions. 

Aaron typically serves as outside general counsel to emerging companies in the technology, healthcare, media and entertainment, and...

312-606-3211
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