You have a successful gym business with a growing market presence and are now considering expanding your empire – congratulations! Below, we explain the advantages of a franchise model, whether it is viable for your business, and outline the steps involved.
Advantages of a Franchise Model
Australia is the most franchised country in the world. In the Franchise Council of Australia’s 2014 survey, there were approximately 1,160 franchises in Australia, employing over 460,000 people, with an estimated sales turnover of $144 billion. Needless to say, franchises form a large part of the Australian economy.
If you decide to franchise your gym, you allow others to use your well-established business model and branding to run their own gym business and pay you a fee in return.
Some advantages of a franchise include:
- You (the franchisor) have the benefit of a growing business network with the potential to expand quickly, nationally or internationally;
- Your franchisees will have invested their money, time and resources into the business, and will be motivated and committed to growing and maintaining its reputation;
- You will have a continuous stream of revenue from franchise fees, with the franchisee covering other establishment and ongoing costs (such as gym equipment purchase or hire and repair, utilities, and insurance);
- You will not be heavily involved in the management of each franchise, as this responsibility will lie with the franchisee. However, you have the advantage of mandating strict practices and procedures at the outset.
The franchise model will not necessarily suit every gym. There is also competition already out there, particularly in the low-fee and/or 24-hour market. You will want to make sure that you have a distinctive business model.
Should I Franchise My Gym?
Key questions to ask before you set your business up as a franchise include:
- Has your gym business been operating for at least five years? Small businesses have about an 80% chance of failure in these first five years, so you should be outside this ‘test phase’ before you consider franchising.
- Is your gym business distinctive and does it have an established reputation in the market?
- Have you already had an expression of interest from a potential franchisee?
- Will your gym’s business model be easy to replicate on a large scale?
- Is your gym established enough, and do you have the money and resources at hand, to run a pilot test?
If you can confidently answer ‘yes’ to these questions, your gym may be ready for franchising. Of course, you should always consider whether franchising is the right step for you based on your circumstances.
How to Setup a Gym Franchise
1. Get Professional Advice
Before you set up your franchise, you should first speak to a franchise lawyer and accountant. The advice you receive will help you develop your franchise plan and strategy and should cover:
Your accountant or financial advisor can run through the costs involved, including legal document drafting, registration of trademarks, systems development and advertising your new franchise.
You will need to consider what fees and obligations you will impose on the franchisees. Will they pay you in monthly or annual instalments? Will they have to meet any reporting requirements?
You will also need to consider the exclusivity and location of the franchises. For instance, you may allow a particular franchisee the exclusive right to an area within a certain kilometre radius.
You might also be specific about who you want as a franchisee. For example, you may want to have strict criteria about who can be a franchisee of your gyms, such as people with a background in health and nutrition or sports science. You should take time choosing your franchisees, to ensure they will be the best ambassadors for your business. Your advisor may also suggest whether you should lease premises that can be sub-let, or licensed, to your franchisees.
Franchising means you will be sharing many of your business secrets and providing your franchisee with the right to use your intellectual property and brand. To protect this, you will need the relevant intellectual property protection. For example, what are the steps to registering your trademark? How will you protect your business name?
You should also obtain advice on how to market your franchise. Will you provide your franchisee relevant marketing material? Alternatively, will your franchisee have the flexibility to produce their marketing collateral?
Business Systems and Processes
The business systems and processes will form a large part of your ‘Operations Manual‘ that you will provide to each franchisee. The manual will also cover marketing, training and human resources components.
Franchising Code of Conduct
The Franchising Code of Conduct highlights some of the mandatory requisites a franchisor and franchisee must abide by when conducting negotiations.
Step 2: Preparing Your Franchise Documents
Under the Franchising Code of Conduct, every franchisor must provide the franchisee with:
- An information statement;
- A disclosure document;
- The franchise agreement; and
- A copy of the Franchising Code of Conduct.
Step 3: Get Your Franchisees on Board
Once you are ready to start accepting applications from franchisees, you will need to get the word out to attract a large pool of candidates. Consider attending the Franchising & Business Opportunities Expo to advertise and connect with potential franchisees.
If you need assistance franchising your gym or have any questions, get in touch with our franchise lawyers on 1300 544 755.