(FranchisePick Franchise Blog) Thanks to the readers and contributors of FranchisePick.com, our pages contain a wealth of great franchise buying advice from insiders and franchise owners you’ll find nowhere else. If you’ve got a question, post it and you might get a thorough and insightful answer, such as this one regarding the purchase of an existing Curve fitness franchise. Thanks to Kunst for his/her response.
RMZ asked:
“I am considering purchasing an existing 2.5 year old franchise in a community of 4200 (2500 women with the median age being 45.5) that has one other full-service gym.
The current owner is absentee and has actually moved to another state. Current membership is 223 with 07 gross sales of around $80K, expenses of $55 and cash flow of $22K. The owner has not advertised at all in 07, but spent about $2,000 in advertising in 06. 07 gross sales are about 25% less than 06.
“The asking price is $30K. What do you think?”
Curves for Women franchise owner Kunst replied:
“One of our clubs is similar to this. About 10,000 population and 231 members. One full-service independent gym. Our revenue and expenses are higher (your club must be at $29/month; ours is at $39). P&L profit about $16,000 last year. The problem with this situation is the population. As with all gyms, 1/3 to 1/2 of your members are going to leave each year. That means you’re keeping them on average 2-3 years, which is good, reasonable, and normal. The problem is replacing them. It is true in general that Curves membership levels are down significantly over the last several years, and the main reason is that it’s hard to replace the members you lose. In a larger community, there are fresh faces all the time, but in a smaller community like the one you’re talking about, this is probably not the case. One reason the owner hasn’t advertised is probably because everyone knows Curves is there and either is a member, was a member, or knows people who are members. The best marketing for that kind of community tends to be people-gathering events, which is more demanding of time than money.
“Here’s what I recommend to anyone considering buying a resale club:
1. Get a 2007 P&L from the owner, preferably with each month in a separate column. Analyze that puppy until you fully understand it.
2. Make sure you understand the membership numbers and how they relate to revenue. Look at product sales. If this area has been neglected, it may be an improvement opportunity for you.
3. Ask for the membership numbers by month since the club opened. You will probably see an initial spike that reached a peak and has been dropping for some time. It may or may not have leveled out.
4. Marginal (i.e., new and cancels) membership changes pretty much go straight to the bottom line. If membership drops, revenue drops with it.
5. Sometimes a new owner can energize a club and raise it to a higher level. Sometimes not. Do some due diligence and make the case both for and against this.
6. Talk to everyone you can about the club. If possible, talk to the employees. Talk to members. Have your wife join if that is feasible, or work out there on a travel pass if she is a member at another club. Most important of all, talk to every Curves owner in the area. Most will be very willing to take the time to answer your questions and give honest advice.
“Is $22,000 an adequate return for you? Make sure that number is real. If you don’t have to spend a lot of time, that’s a pretty good return on $30,000 but it’s not enough to live on. Because we have four clubs, we do just fine on per-club profits that would not be sufficient for most people if they have only one club. Are you going to maintain the same staffing structure? How do you intend to run the club? It usually doesn’t work well when the female owner isn’t engaged enough. Our comparable club has 3 employees and my wife manages it by phone and by being in there 1-2 times a week. Our other clubs have managers and she spends about the same time on each of them. She does not work in any of the clubs on a regular basis. She is an absolute expert on every aspect of Curves operations, which gives a solid foundation you won’t have at first.
“We have really good employees who have been with us (4 clubs) on average nearly 3 years. Employee turnover is no fun, so make sure you have a handle on this and a plan for how you would handle someone leaving.”
WHAT DO YOU THINK? COMMENTS WELCOME.
Tags: Curves, CURVES FOR WOMEN, Curves franchise, Curves resale, fitness franchise, franchise, franchise resale, franchisesShare This
