Building A Gym Brand, Part 2: investment, franchising or licensing
Understanding the pros and cons between taking on investment, setting up a gym franchise or a gym license business is a key step for any fitness entrepreneur with a strong concept with potential for scale.
The typical path leading up to this inflection point in a business's history involves a gym or studio owner setting up by themselves, possibly with some form of angel investment from friends & family before considering options for additional sites within 24-36 months, all being well.
Retaining part-ownership by taking on outside investment often appears a natural progression from this point, be that in the form of private angel investors, some form of crowdfunding via an online platform such as Seedrs, or from the gym’s own extended customer networks.
If the new investors have deep enough pockets, or can bring in others with deeper pockets than they when the time comes, then there is no reason why this approach can’t result in scale of 5-10 sites within 5-8 years in one city, as seen in several of London’s more prominent boutique fitness studio success stories such as Frame, Barrecore, Heartcore and TEN Pilates.
This option means the gym brand owner gives up a degree of control over the business in exchange for the liquidity and will be answerable to these new stakeholders. Provided the relationship is a healthy one, and stays that way, this may well be the path to least resistance for many gym entrepreneurs.
Scaling a gym business is always going to result in some sacrifice of independence however, there's no avoiding that, the only way to truly retain control is to grow organically by hitting upon a magic formula for low overheads with consistently positive sales figures. This approach is likely to equate to a far slower growth trajectory though and some will have their sites set on bigger targets.
Enter gym franchising Stage Left, a massively popular choice in the US where it has been embraced by would-be small business owners without the entrepreneurial experience, knowledge or means develop their own brand from the ground up.
Both this route and that of licensing requires the new gym concept to be codified in terms of design, equipment, training method and operational standards (see our article on that subject here).
Franchises therefore come with clear guidelines on the design, equipment choices, type of fitness training, internal operations, branding and marketing of each gym, meaning the franchisee has comparatively little to worry about at a strategic level.
In exchange for much of the thinking being done for them, the franchisee pays a gym franchise fee that could be anything from euro 15,000 - euro 50,000, depending on the prominence of the brand in question, as well as a percentage of revenues each month.
The franchisee is also responsible for covering all other ongoingbusiness costs, any improvements to the space, new signage, equipment, IT equipment and travel expenses for a franchisor representative to deliver the staff training on-site.
A middle path between these two options is a gym license system, essentially a lightweight version of a franchise, with less regulations, lower fees, less of the work done for the licensee by the licensor than in the franchisee <> franchisor relationship and generally more freedom for the license holder in how they operate their business. From the licensor’s perspective however, this equates to far less control over their brand as it scales, which has its own risks.
In this instance, the gym brand licensor relies on solid legal advice in order to protect their intellectual property (IP), ensure they have all possible copyright protection in place as well as trademark protection in each country they begin operating in. Overall, the license route is far less complex from a legal perspective than the franchise option, making it less financially onerous for a young business.
This is the option we have taken with Biofit, a license model, with an eye on potentially moving up to a franchise model at some stage in the future once the brand is more mature and funds allow.
So, if you are interested in opening a licensed Biofit gym or fitness studio in your home country, contact us via the form below, we would love to hear from you!