Fitness franchises came into vogue about a decade ago; and, since then, the range of fitness-oriented franchise concepts available for purchase has exploded. From full-service 24-hour fitness centers to children’s gyms and rock-climbing centers, if you are looking for a franchise opportunity in the fitness industry, there is a very good chance that there are options available.
Like all franchises, buying a fitness franchise comes with certain inherent risks. This includes risks that apply to the owning a franchise generally as well as risks that are unique to operating a fitness center or gym. If you are thinking about buying a fitness franchise, here are seven considerations to keep in mind:
1. Initial Term and Renewal Rights
Opening a fitness franchise typically involves a sizeable initial investment. Remodeling costs, fitness equipment, point-of-sale equipment and other initial costs can easily reach the hundreds of thousands or millions of dollars. In order to protect this investment, it is important to ensure not only that the initial term of your franchise is sufficient, but also that you have adequate protections at the time of renewal.
2. Grounds for Termination
In this same vein, it is also critically important to understand your franchisor’s rights of termination. Franchisors typically reserve broad termination rights, including the right to terminate for non-payment of minimum royalties, so you will minimally want to ensure that you have adequate cash on hand to meet your financial obligations without relying on income from your franchised business during your initial months of operation.
3. System and Brand Modifications
With an equipment and brand-centric franchise, system and brand modifications can carry substantial financial costs for franchisees. When reviewing and negotiating your franchise agreement, you will want to make sure that you have adequate protections against mandatory “upgrades” at your expense.
4. Maintenance, Security and Liability
Unmaintained fitness equipment can present injury risks for gym members, and inadequate security can lead to civil liability claims as well. Regardless of what your franchisor requires with regard to key card access, staffing and hours of operation, it will be important for you to make informed decisions based upon your potential liability exposure. In this regard, purchasing adequate insurance coverage will be critical as well.
5. Lease Rights
Do you have enough guaranteed parking spaces? Are you protected against another gym opening in the same building or strip mall? Can you maintain your lease for as long as you own your franchise? In addition to carefully considering the terms of your franchise agreement, you will need to have an attorney review and negotiate the terms of your lease as well.
6. Mandatory Supplier Provisions
While franchisors will often sell supplier programs as “benefits” of their franchise system, the reality is that mandatory supplier provisions can create headaches and potential problems for franchisees. What if your members want certain pieces of equipment? What if you buy the same equipment cheaper from another supplier? These types of practical concerns can heavily influence the legal terms that are acceptable.
7. Geographic Encroachment
Finally, while you cannot protect against a competing fitness brand opening a location nearby (other than through including an exclusivity provision in your lease), you may be able to protect yourself against competing against other franchisees in your chosen system. Understanding your territory rights is crucial as a fitness franchisee.
Discuss Your Fitness Franchise Opportunity with Franchise Lawyer Jeffrey M. Goldstein
Jeffrey M. Goldstein is a national franchise lawyer who has decades of experience representing prospective and active franchisees. If you are thinking about buying a franchise, call (202) 293-3947 or contact our firm online for a free initial consultation.
