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Australia’s fitness industry is growing as we become more and more aware of the benefits of exercise and a healthy lifestyle. Subsequently, there are many courses available to help you become a qualified fitness instructor or personal trainer. Therefore, you may be wondering how to turn your passion into a profitable business by opening a gym. This article will unpack the key considerations when starting a gym.
What Business Structure Should I Choose?
There are many different types of business structures to choose from. Selecting the right structure for your circumstance is important to help you get started on the right foot.
When determining the right business structure, you should consider:
- how you will protect your assets;
- how much it costs;
- what the tax implications are; and
- if you intend to grow.
Features of Different Business Structures
The four main business structures and their key features are outlined below.
| Sole Trader | Partnership | Company | Trust | |
| Features | An individual carrying out business. | A legal structure where two or more people operate a business as partners. | An entity that has a separate legal existence from its owners. | Business carried on by a legal owner (trustee) for beneficiaries. Income is distributed according to the terms of the trust deed. |
| Cost | Simple and cheap to set up. You will need to register for an Australian Business Number (ABN). | Simple and cheap to set up. You will need to register for an ABN and draft a partnership agreement. |
Initial fee to register with the Australian Securities and Investments Commission (ASIC) and ongoing compliance fees. If you have more than one shareholder, you should have a shareholders agreement. |
There are legal fees associated with drafting the trust deed, stamp duty and if you wish to have the additional protection afforded by a corporate trustee. |
| Liability | You are personally liable for all debts and responsibilities. | You will have joint liability with the other partners. This means you are all equally responsible if the business goes under. | A company is considered a separate legal entity from its owner. This means that the company is responsible for all transactions. The shareholders or directors are not. | A trust can be considered its own entity but the trustee may still be held accountable if the business goes under. |
| Growth | The business will not be able to grow practically if you hire employees. | You can continue to add partners in accordance with the partnership agreement. | You can provide shares in your company in exchange for money to be invested in your company. | At the end of the financial year, you need to distribute profits to the beneficiaries. |
| Tax | You will pay normal income tax. | Partners pay tax on their share of taxable profits. | Company taxed at a flat rate (usually between 27.5 -30%). | Beneficiaries who are entitled to trust income pay tax on those amounts. |
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Creating a Brand
Choosing a memorable business name and creating a unique logo are key to building a business’ reputation and securing long term customers. Once you have chosen a business name and designed a logo, you should make a point to protect them. Unfortunately, registering a business name and domain name does not afford you with protection. However, registering a trade mark will provide exclusive rights over your name and logo.
Trade marks are signs that distinguish the goods and services provided by your business from other businesses. Therefore, trade marks help customers directly recognise your brand.
The key advantages of registering a trade mark are that they:
- are a useful marketing tool for brand recognition;
- ensure a secure brand identity if you wish to open further gyms or franchise;
- prevent competitors from copying or using your trade marks;
- provide you with legal rights is someone else starts a business with the same name; and
- provide 10 years’ of protection and the option to renew.
Selecting a Premises
Choosing the right premises for your gym is undoubtedly one of the most important decisions you will make. Understanding your target demographic is essential so you can cater to their needs. You should do market research to determine where there will be lots of foot traffic and a high concentration of gym goers. Significant factors to consider when searching for a premises include the:
- size of the space and the facilities;
- location’s proximity to transport, shopping centres and competitor gyms;
- capacity of the gym to handle growth;
- rent costs; and
- term of the lease.
Once you have found the ideal location to open your gym, you should have a lease drawn up between the landlord and yourself. A lease is a legal document that sets out the rights and obligations between yourself and the landlord. It is important to have a lease in place so that your rights and obligations are clear. Therefore, in the event of a dispute, it is clear what the answer or process should be.
Memberships
Your customers will be the life and blood of your business. Understanding your target market and their needs are crucial when marketing your gym and putting membership packages together. You will need to consider:
- if you want to offer customers a free trial;
- the length of memberships;
- what the membership will include; and
- the flexibility of the membership.
Once you have developed your membership packages, it is crucial you put a contract in place that outlines the terms and conditions of your gym. Your membership terms and conditions should outline:
- how fees are calculated and paid;
- what happens in the event of late payment;
- what happens if a customer cancels their membership;
- whether customers can assign their memberships to someone else;
- who is responsible in the event of injury; and
- how disputes will be resolved.
Hiring Staff
A growing gym will require more hands on deck than just yourself. Having a team of qualified trainers to assist as you expand is critical to the success of your business. Checking your employee’s qualifications is an important first step to see what part of your business they should work in.
Retaining these employees is also crucial to your business. Therefore, a good idea may be to offer ongoing training, so your business keeps up with the latest fitness trends. Once you have an employee ready to work, you should discuss the terms of their employment with them. Then, you should formalise this in an employment agreement. Your employment agreement should include:
- a description of how much your employee will be paid;
- a description of the hours that they are required to work;
- a restraint of trade clause;
- a confidentiality clause;
- information on termination; and
- information on leave.
Regulatory Considerations
Opening a gym will present a range of occupational health and safety hazards that you need to be aware of. You have a duty of care towards your members and employees. Therefore, to maintain high standards of health and safety, you need to consider:
- the working condition of your machinery;
- the positioning of equipment;
- how best to prevent injuries; and
- how classes are taught.
Key Takeaways
Opening a gym is a great way to transform a hobby into a business venture. Before diving into working with clients, it is important to put the right structures in place to protect your business going forward. This may include:
- choosing the right business structure;
- registering a trade mark;
- finding a premises;
- drafting membership terms and conditions for your members; and
- hiring skilled employees.
If you would like assistance on starting a gym, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.
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