The health and fitness industries are booming. Both industries remained relatively strong through the COVID-19 pandemic (though many fitness brands had to find alternate ways to meet their customers’ needs during mandatory closures), and recent data suggest that both industries are poised for success in 2023 and beyond.
So, is 2023 the year to invest in a health or fitness franchise?
While the overall industry figures may be appealing, your ability to succeed as a franchise owner ultimately depends on several factors that are unique to you and the franchise opportunity you choose to pursue. More businesses are franchising every day, and, simply put, some are better suited to managing a franchise system than others. As a franchisee, you must be confident not only in yourself but also in the franchise system supporting you. If your franchisor can’t uphold its end of the bargain, you could find yourself struggling while others in your industry succeed.
10 Important Considerations for Prospective Health and Fitness Franchisees
So, what do you need to consider when pursuing a health or fitness franchise opportunity? Here are 10 key factors to examine when conducting your due diligence from franchisee lawyer Jeffrey M. Goldstein:
1. The Franchisor’s Experience in the Industry
When buying a franchise, one of the main benefits of investing in a franchised system is the ability to rely on the franchisor’s experience in the industry. With the current profitability and long-term forecasts for the health and fitness industries, many entrepreneurs are jumping in. As a prospective franchisee, it is often (though not always) best to focus your search on systems that already have a strong reputation in the industry.
2. The Franchisor’s Experience in Franchising
Along with industry experience, it is also important to consider a franchisor’s experience in franchising. Operating a franchise system is very different from operating a gym, home health business or medical staffing company. Just because a company has been successful at the unit level, this doesn’t necessarily mean that it has the capabilities required to operate effectively as a franchisor.
3. Your Interests and Capabilities
Along with considering the franchisor’s capabilities, it is important to consider your interests and capabilities as well. Are you interested in opening a health or fitness franchise because you are passionate about patient care or personal fitness? Or are you solely considering these industries because of their profit potential? Do you have prior business experience? Or, will buying a franchise be your first experience as a business owner? Ultimately, you need to try to choose the franchise opportunity that is best suited to your individual circumstances.
4. Your Financing Options
How will you finance your health or fitness franchise? While there are several options here too, you need to choose the option that makes the most sense for you.
5. Available Territories and Local Competition
The health and fitness industries are both highly competitive. As a franchisee, your ability to succeed will depend heavily on both: (i) your ability to market effectively; and (ii) the geographic area in which you are able to market your franchise. This means that you need to be aware of the local competition, and it also means that you need to have adequate territorial rights and protections so that you are not at risk of facing additional competition from within the franchise system.
6. Initial Franchise Fee, Royalty Fee and Advertising Fund Contribution
The initial franchise fee, royalty fee and advertising fund contribution are all costs that you will incur as a franchisee—and that you would not incur as an independent business owner. When performing your financial analyses and projections, it is critical to take these additional fees into account. While there is some uniformity within the health and fitness industries, these fees can still vary significantly between franchisors—so comparative research will be an important aspect of the due diligence process.
7. Total Initial Investment and Timeline to Profitability
In addition to considering the fees you will need to pay to your franchisor, it is also important to consider the total initial investment and your timeline to profitability. The costs of opening different types of health and fitness franchises can vary significantly, and the amount you need to invest will play a role in determining your financing needs, your financial risk and your likelihood of long-term success as a franchisee.
8. Brand Recognition and Growth of the Franchise System
Along with the franchisor’s experience, the other main benefit of buying a franchise is being able to benefit from the franchisor’s brand recognition. Opening a gym or home health services business under a well-known brand name can drive business to your franchise from day one. You won’t get this benefit if you choose a new franchise system, though some new franchisors offer lower pricing and other incentives to try to offset their lack of brand recognition.
The growth of the franchise system is another important factor to consider. Is the franchisor experiencing positive or negative growth? Is the franchisor targeting your geographic area for expansion? These are key factors that will impact the value of your investment as well.
9. Insights from Current and Former Franchisees
When considering any franchise opportunity, one of the best ways to gain insights into the system is to speak with current and former franchisees. There are several questions you can ask to gather the information you need to make an informed buying decision.
10. Terms of the Franchise Agreement
Finally, when buying a health or fitness franchise, you also need to carefully consider the terms of the franchise agreement. You can (and should) hire a franchisee lawyer to review the franchise agreement for you—and to negotiate unfavorable provisions of the franchise agreement as necessary.
Request a Free Initial Consultation with Franchisee Lawyer Jeffrey M. Goldstein
Are you thinking about buying a health or fitness franchise? If so, we invite you to contact us for more information. To schedule a free initial consultation with franchisee lawyer Jeffrey M. Goldstein, please call 202-293-3947 or request an appointment online today.