Different states have different legal definitions of what a franchise is. However, under Federal Law, three elements must be present in order for a franchise to be recognized. The three elements are the following:
1) Franchisee has the right to use the franchisor’s trademark;
2) The franchisor has significant control or assistance with the franchisee’s operation;
3) The franchisee has to pay the franchisor for the right to be a franchisee. [i]
Hence, under Federal Law, a franchise fitness center is basically a business situation or arrangement through which an individual is allowed to operate a fitness center under the brand name of some other company. The individual planning to start a division, the prospective franchisee, buys the franchise from a company, the franchisor. This franchisor then, generally, supplies equipment, signage, marketing materials, business support, and operation manuals.
There are number benefits of opening up a franchise when compared to an independent gym facility. Franchises allow for growth under an already established brand name making it easier to see profits in shorter amount of time. According to some franchise operation agreements, it is also good for the franchisor as the franchisor doesn’t have to put in its own resources in hiring staff, buying property, and running operation in another branch while simultaneously working hard on its independent brand name noticed.
If you are an aspiring gym owner and are struggling with deciding whether or not to open your own independent fitness center or to seek out a franchise operation, of course you need to weigh in the pros and cons of both paths. To help you with your decision, below are some of the pros and cons of operating a franchise fitness center.
The main benefit of running a gym under an established company is the association which you get with an established and reputed company. As stated above, you will likely receive business plans, procedures, policies, and rules ready made from the franchisor. Therefore, a large part of your installation and initial setup work is already done for you when opting for a franchise fitness center.
In most cases, the franchisor will choose the location, provide equipment and set up the gym for you. Additionally, you will already have a likely membership base as some of your future customers will choose a gym solely on the basis of its brand name.
Another advantage of owning a franchise is that the franchisor will be responsible for various manual or tutorials related to the gym. All the material is already made and you simply need to supply it to the staff. Additionally, you may have a franchise fee that covers the franchise owner’s responsibility for advertisements and marketing.
The cons of a franchise fitness center are almost the same as any other franchise ownership. With a franchise, you have to work under certain limitations. Franchisors are generally very strict about showcasing their won products and services and you will have to follow their set of guidelines when operating your chain center. Thus, this control diminishes your own business creativity.
Another downside of a franchise includes the high cost that you have to pay to the franchiser to use the brand name. With everything out there, there are good and bad apples. The same is true within the franchise community. There are some franchisors that are not very reliable and are difficult to connect with once your place has been established. Additionally, you will have to pay a certain percentage of the income to the franchisor irrespective of the gym’s profit or loss scenario. Usually, you have to pay a large upfront license fee, other than the 5-20% of revenue that you give to the franchisor. Also, you may need to show some financial proofs or meet financial benchmarks set by the franchisor in some cases.
Another con is that you will not have control over the brand name. It is always good to be associated with established brand, but you run the risk of tying your fortunes with that of the franchisors. As such, any publicity blunder performed by the franchisor, or other uncontrolled franchisees, could hurt your business. The marketing and publicity of your business is closely tied with that of the franchisor and so is your profit or loss according to the overall business performance of the fitness brand.
As with all business decisions, do your homework and due diligence. Don’t just jump to it because seems attractive or you get emotionally attached to a certain idea. Although, due diligence takes time, be true to your future self and make sound judgment. Becoming a franchisee can be compared to getting married. If you do not do what you are supposed to or want to get out of it the agreement because the franchisor is not doing what they promised to do, the process can be as painful as getting a divorce.
Topic for Discussion:
If you are a franchisee, what would you say are the pros and cons of owning a gym franchise?
[i]Vinson Franchise Law Firm, U.S. Franchise Law Basics, on the Internet at http://franchiselaw.net/startups/usfranchiselawbasics.html, visited on August 4, 2013.