The gym and fitness centre industry generated $1.4 billion in revenue in 2015. Over the past five years, the structure of the industry has changed dramatically, including the emergence of 24-hour gym chains and budget gyms. Moreover, franchise growth has also fuelled revenue, driven by the opening of new gyms by Anytime Fitness and Jetts Fitness, both offering affordable and competitive gym memberships. While market growth is strong, there is increasing market saturation and a shift towards cheaper 24-hour gyms.
If you are looking to buy a gym or join a gym franchise or network, there are some considerations you should take into account. While the gym and fitness centre industry is lightly regulated, you need to understand the consumer protection laws that apply, as well as your leasing and employment obligations.
Rent, Commercial Leases and Equipment Leasing
Most operators in the gym and fitness centre industry lease rather than own their premises. This is because a gym or fitness centre often requires facilities with plenty of space, often in high foot-traffic areas with expensive rental costs. Fitness centres and gyms also face high equipment expenses in the form of weight lifting, resistance training and cardiovascular training equipment.
Gym equipment can become dated quickly if not maintained often. For this reason, many gyms lease their gym equipment, which reduces the initial capital investment. Equipment leasing for gyms is beneficial as it also allows upgrading of equipment when better equipment becomes available. Equipment lease contracts should clearly set out machinery maintenance expenses and the agreement to replace outdated equipment. If you are looking to have a gym lease or equipment leasing agreement reviewed or drafted, our leasing lawyers are experienced dealing with retail and commercial leasing lessors and landlords.
Gym contracts are regulated by Australian Consumer Law (ACL). The ACL sets out a number of consumer protections, including confidentiality, misleading communication, high-pressure sales tactics, membership contracts and disclosure of terms. Our contract lawyers have reviewed a number of gym contracts are are aware of unfair contract terms that may penalise your business. Such terms as automatic membership renewal or difficult clauses in cancelling memberships should be carefully reviewed to ensure it does not breach the ACL.
Employment of Personal Trainers and Staff
It is estimated that for every dollar spent on capital costs, $6.81 is spent on wages. With this significant cost, it is no surprise that low-cost gyms have fewer staff on during off-peak periods. If you plan to hire personal trainers or staff, you should be aware of the differences between an employee and a contractor. This difference will set out your obligations as an employer regarding superannuation, taxation and equipment.
Moreover, personal trainers are required to be certified to qualify for professional indemnity insurance. You should be aware of your insurance obligations for your employees and those who work in your gym as personal trainers.
Key Takeaways for Buying a Gym
The Gyms and Fitness Centres industry faces a high level of competition. If you are planning on buying a gym or setting up a gym franchise, you should be aware of your legal obligations such as leasing and employment. Costs may also arise for insurance, marketing, brand royalties for international franchises and machinery maintenance expenses. Our business purchase lawyers can assist reviewing your contracts – get in touch.