I have a few buddies who want to open a gym in the city next to ours. It's an underserved market. We have the cash to invest. Does anyone own a gym or know someone that does. What is a typical ROI? Is it a bigger headache then it seems?

Are any of the others in the athletic trainer business, or have previous experience owning or more importantly running the books for a gym?

Wouldn't it be easier to franchise the boot camp/CrossFit and work out of a garage.?

I don't own one, but have been around those who do. The 2 friends who have done it,, both still have their gyms after 5+yrs, but both still have a "day job" as well. They aren't getting rich off the gyms, but they like doing it. Based on my observations:

-have an identity. Will you be weights focused? Cardio? Classes? Don't try to do everything, do a niche and do it well to start.

-get cheap, warehouse space and as much as you can

-to start out, let trainers/coaches freelance. Dont have them on your payroll if possible. Make them drum up business and use your space while you focus on getting membership numbers. The negative is you can't make them be there, but you can at least advertise the service is available and you can help connect.

-be open as many hrs/day as you can. If you can figure out 24 hr access, maybe with key card access , that is a major draw

-know your market. Are you in an area that $20/month appeals but you need 1000 members or $100/month but only 250 members?

-im not a fan of the fad franchises. Orange theory 9rounds, etc may be old news quickly. A classic gym you can maybe tailor with classes that are the latest trend seems like a better long term play.

-lease the cardio equipmemt to start. You usually get service plans and swap put at certain hrs. You don't want to have to be a maintenance man for that equipment at the start.

When I lived in CT, a guy I worked with and another I got to know pretty well owned a really nice gym in my neighborhood which skewed younger, higher income and was growing significantly. Those 3 things are usually the calling cards for the demographics of underserved when it comes to gyms so I'm guessing that's the sort of area you are looking at. The gym was spotless, had the latest and greatest in classes and equipment. They charged something like $150-$200 a month and were well subscribed making a substantial profit for about 2 years. Town had a CrossFit, one of he big boxes, a crappy YMCA, a Planet Fitness and a few smaller discount gyms.

They thought they were unstoppable because they were making a killing as probably the most expensive gym in town. Well... then a massive sports complex that offered everything they did, adult and kids sports, pretty much any training you want, childcare for next to nothing, easier parking and really clean facilities came in, charged $120 a month or $200 a month for a family and they shut down not 3 months after it opened.

That's how fast the economic rent can disappear with a gym even if you've got a great business plan.

ATM9000 said:

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When I lived in CT, a guy I worked with and another I got to know pretty well owned a really nice gym in my neighborhood which skewed younger, higher income and was growing significantly. Those 3 things are usually the calling cards for the demographics of underserved when it comes to gyms so I'm guessing that's the sort of area you are looking at. The gym was spotless, had the latest and greatest in classes and equipment. They charged something like $150-$200 a month and were well subscribed making a substantial profit for about 2 years. Town had a CrossFit, one of he big boxes, a crappy YMCA, a Planet Fitness and a few smaller discount gyms.

They thought they were unstoppable because they were making a killing as probably the most expensive gym in town. Well... then a massive sports complex that offered everything they did, adult and kids sports, pretty much any training you want, childcare for next to nothing, easier parking and really clean facilities came in, charged $120 a month or $200 a month for a family and they shut down not 3 months after it opened.

That's how fast the economic rent can disappear with a gym even if you've got a great business plan.

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Yep, my former gym here in North Dallas which was a great gym (Telos) is suddenly gone because of COVID. Catered to higher income folks and had been around for quite a long time. Granted, they had multiple amenities and a large footprint they were leasing/owned so that probably didn't help.

I would be highly cautious about opening a gym in this environment if you don't have the finances or patience to withstand it losing money for at least 6 months if not 12 months. Concern might be somewhat offset if it's an underserved market that doesn't care about COVID, but I would damn sure confirm that is the case.

FunkyKO said:

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Are any of the others in the athletic trainer business, or have previous experience owning or more importantly running the books for a gym?

Wouldn't it be easier to franchise the boot camp/CrossFit and work out of a garage.?

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Crossfits are the Starbucks of the gym world. On Hwy 69 in the middle of nowhere East Texas, there are 2 CrossFit gyms within about a mile of one another. Nothing else around them. Cracks me up every time I drive by them.

One observation.

With Gyms closed.....many have found something else to do. Running clubs for example.

My wife has found a running club 20 female members that was started because of covid. Starts with two. Then 4. Then 10. Etc. ....I honestly don't know if any of them will go back to a gym.

FunkyKO said:

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One observation.

With Gyms closed.....many have found something else to do. Running clubs for example.

My wife has found a running club 20 female members that was started because of covid. Starts with two. Then 4. Then 10. Etc. ....I honestly don't know if any of them will go back to a gym.

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That last sentence is my thought. I'm sure so many like me stocked up on home equipment during COVID and see little value in a gym now. That said, my 24 hour membership is stupid cheap(sub $12/mo) and I'm going to keep it just for when I'm traveling.

FunkyKO said:

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One observation.

With Gyms closed.....many have found something else to do. Running clubs for example.

My wife has found a running club 20 female members that was started because of covid. Starts with two. Then 4. Then 10. Etc. ....I honestly don't know if any of them will go back to a gym.

---

Yep, there is a WFH equivalent trend with gyms going forward I haven't seen discussed. We canceled our gym membership this month. I've always done some level of working out at home, but my wife has never been able to do it. Well, she just committed to a digital program for 2021 and I've already been using an app called Shred all year.

We have no reason to go to a gym anymore. Add in Apple Fitness+ that just got released with their built in user base, and I just don't see gyms retuning to where they were. COVID and technology have disrupted them ahead of schedule.

YouBet said:

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FunkyKO said:

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One observation.

With Gyms closed.....many have found something else to do. Running clubs for example.

My wife has found a running club 20 female members that was started because of covid. Starts with two. Then 4. Then 10. Etc. ....I honestly don't know if any of them will go back to a gym.

---

Yep, there is a WFH equivalent trend with gyms going forward I haven't seen discussed. We canceled our gym membership this month. I've always done some level of working out at home, but my wife has never been able to do it. Well, she just committed to a digital program for 2021 and I've already been using an app called Shred all year.

We have no reason to go to a gym anymore. Add in Apple Fitness+ that just got released with their built in user base, and I just don't see gyms retuning to where they were. COVID and technology have disrupted them ahead of schedule.

---

Pre covid probably could have seen the wife and I keep a gym membership forever. Post covid, we bought a bigger house and are putting in a gym in the basement (if we can ever find bumper plates). Not sure we'll ever have a gym membership.

YouBet said:

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FunkyKO said:

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One observation.

With Gyms closed.....many have found something else to do. Running clubs for example.

My wife has found a running club 20 female members that was started because of covid. Starts with two. Then 4. Then 10. Etc. ....I honestly don't know if any of them will go back to a gym.

---

Yep, there is a WFH equivalent trend with gyms going forward I haven't seen discussed. We canceled our gym membership this month. I've always done some level of working out at home, but my wife has never been able to do it. Well, she just committed to a digital program for 2021 and I've already been using an app called Shred all year.

We have no reason to go to a gym anymore. Add in Apple Fitness+ that just got released with their built in user base, and I just don't see gyms retuning to where they were. COVID and technology have disrupted them ahead of schedule.

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Yep. By no means am I trying to be a dream crasher for the OP. But a shift has happened.

How big a shift? How long?

I have no idea.

But it's happening. It's psychological as much as it's physical.

Op. Do some research. Maybe gyms come back after vaccine??? When all rhetoric dies down????

Will the target market be the same?

Only a gym owner could answer that.

This isn't earth shattering stuff but, people don't pay ridiculous amounts of money for CrossFit or Orange Theory for the workouts... they do it for the community.

Big impersonal places like 24 hour fitness are going to hurt from the WFH shift, but places that offer something more than a place to pick up heavy things will continue to draw people in the door.

YouBet said:

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ATM9000 said:

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When I lived in CT, a guy I worked with and another I got to know pretty well owned a really nice gym in my neighborhood which skewed younger, higher income and was growing significantly. Those 3 things are usually the calling cards for the demographics of underserved when it comes to gyms so I'm guessing that's the sort of area you are looking at. The gym was spotless, had the latest and greatest in classes and equipment. They charged something like $150-$200 a month and were well subscribed making a substantial profit for about 2 years. Town had a CrossFit, one of he big boxes, a crappy YMCA, a Planet Fitness and a few smaller discount gyms.

They thought they were unstoppable because they were making a killing as probably the most expensive gym in town. Well... then a massive sports complex that offered everything they did, adult and kids sports, pretty much any training you want, childcare for next to nothing, easier parking and really clean facilities came in, charged $120 a month or $200 a month for a family and they shut down not 3 months after it opened.

That's how fast the economic rent can disappear with a gym even if you've got a great business plan.

---

Yep, my former gym here in North Dallas which was a great gym (Telos) is suddenly gone because of COVID. Catered to higher income folks and had been around for quite a long time. Granted, they had multiple amenities and a large footprint they were leasing/owned so that probably didn't help.

I would be highly cautious about opening a gym in this environment if you don't have the finances or patience to withstand it losing money for at least 6 months if not 12 months. Concern might be somewhat offset if it's an underserved market that doesn't care about COVID, but I would damn sure confirm that is the case.

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For sure.

But just to be clear, these guys could have weathered a storm like this. What happened to these guys is they had a great business plan and strategy... they just didn't see all of the potential competitive threats either in the market or that could come in. The point is it is hard to see and understand true competitive threats in the fitness space such as grassroots things like running clubs or even people home basing their fitness adoring COVID or interactive apps and such like fitness mirror or what Peloton can offer.

For these guys, they had a great thing in their bubble and niche. But also around them was a lot of upper middle class families with young kids. Then this 400k sq ft facility opened up that they didn't see coming and took all of that market and about 30% of their clients too practically overnight. They went from being a perfect fit for many to really be uncompetitive overnight. And the place wasn't necessarily built to compete directly with what they did. But it provided everything they did for their market then some better and cheaper than they could so they got wiped out. The fitness business is highly competitive and is the type where it is really hard to project its' competitive forces.

The Pilot said:

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YouBet said:

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FunkyKO said:

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One observation.

With Gyms closed.....many have found something else to do. Running clubs for example.

My wife has found a running club 20 female members that was started because of covid. Starts with two. Then 4. Then 10. Etc. ....I honestly don't know if any of them will go back to a gym.

---

Yep, there is a WFH equivalent trend with gyms going forward I haven't seen discussed. We canceled our gym membership this month. I've always done some level of working out at home, but my wife has never been able to do it. Well, she just committed to a digital program for 2021 and I've already been using an app called Shred all year.

We have no reason to go to a gym anymore. Add in Apple Fitness+ that just got released with their built in user base, and I just don't see gyms retuning to where they were. COVID and technology have disrupted them ahead of schedule.

---

Pre covid probably could have seen the wife and I keep a gym membership forever. Post covid, we bought a bigger house and are putting in a gym in the basement (if we can ever find bumper plates). Not sure we'll ever have a gym membership.

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Check getrxd or fringe fitness. Bought ~180lbs (2x45s, some 25s and 10s) from there for about 350 $ around Black Friday. Pretty good stuff and I like em so far

Chickenman4 said:

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I have a few buddies who want to open a gym in the city next to ours. It's an underserved market. We have the cash to invest. Does anyone own a gym or know someone that does. What is a typical ROI? Is it a bigger headache then it seems?

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Now that we've all pontificated quite a bit here what is the target demographic, type of gym, amenities offered, etc?

There are a variety of gym types that cater to different needs ranging from CrossFit (lower barrier of entry) to "medical grade"/hospital based gym (very high barrier of entry).

You are obviously on the lower to medium of this spectrum so then it comes down to things in the middle like:

• Are you just going to be an old-school, non-interactive weight gym and keep things simple which will, in turn, could limit your demographic? If not, you are looking at smart equipment which I'm sure cost a pretty penny but are practically a requirement now. There are still some old school weight gyms around but doubt you are going to make any money on that.
• Are you going to have classes with instructors?
• Will you use gym software to track membership and A/R or are you just going to do it manually? I'm sure there is SAAS stuff now for gyms you can simply subscribe to and stand it up pretty quickly.
• Are you going to have a kitchen or grill and provide a basic menu?
• Kids program?
• Swimming pool?
• Weight footprint vs aerobic footprint for equipment considerations?
• Any courts? Basketball, tennis?

Look at a UFC Gym franchise. It's a unique user base and well known brand. You aren't competing against the rest of the market. The one where I live is always packed.

SoupNazi2001 said:

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The Pilot said:

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YouBet said:

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FunkyKO said:

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One observation.

With Gyms closed.....many have found something else to do. Running clubs for example.

My wife has found a running club 20 female members that was started because of covid. Starts with two. Then 4. Then 10. Etc. ....I honestly don't know if any of them will go back to a gym.

---

Yep, there is a WFH equivalent trend with gyms going forward I haven't seen discussed. We canceled our gym membership this month. I've always done some level of working out at home, but my wife has never been able to do it. Well, she just committed to a digital program for 2021 and I've already been using an app called Shred all year.

We have no reason to go to a gym anymore. Add in Apple Fitness+ that just got released with their built in user base, and I just don't see gyms retuning to where they were. COVID and technology have disrupted them ahead of schedule.

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Pre covid probably could have seen the wife and I keep a gym membership forever. Post covid, we bought a bigger house and are putting in a gym in the basement (if we can ever find bumper plates). Not sure we'll ever have a gym membership.

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That's great and all but this is a way more expensive route than working out at a gym. For people who do a lot of lifting it is hard to replicate all the equipment. Most people don't do that though. I personally hate working out at home and like to get out. People avoiding gyms is similar to dining in restaurants and is primarily fear based and it will go away.

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You might be surprised how much little you can outfit a home gym, thank you FB marketplace and Craigslist. We bought a Landice tread & peloton for combined $350. Our biggest sole expense is likely the rubber flooring ($500). We aren't body builders so don't need more than 300 lbs of plates and still have our running group to gather with and get a sense of community from. Our gym avoidance isn't fear based. It's based on convenience.

The Pilot said:

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SoupNazi2001 said:

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The Pilot said:

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YouBet said:

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FunkyKO said:

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One observation.

With Gyms closed.....many have found something else to do. Running clubs for example.

My wife has found a running club 20 female members that was started because of covid. Starts with two. Then 4. Then 10. Etc. ....I honestly don't know if any of them will go back to a gym.

---

Yep, there is a WFH equivalent trend with gyms going forward I haven't seen discussed. We canceled our gym membership this month. I've always done some level of working out at home, but my wife has never been able to do it. Well, she just committed to a digital program for 2021 and I've already been using an app called Shred all year.

We have no reason to go to a gym anymore. Add in Apple Fitness+ that just got released with their built in user base, and I just don't see gyms retuning to where they were. COVID and technology have disrupted them ahead of schedule.

---

Pre covid probably could have seen the wife and I keep a gym membership forever. Post covid, we bought a bigger house and are putting in a gym in the basement (if we can ever find bumper plates). Not sure we'll ever have a gym membership.

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That's great and all but this is a way more expensive route than working out at a gym. For people who do a lot of lifting it is hard to replicate all the equipment. Most people don't do that though. I personally hate working out at home and like to get out. People avoiding gyms is similar to dining in restaurants and is primarily fear based and it will go away.

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You might be surprised how much little you can outfit a home gym, thank you FB marketplace and Craigslist. We bought a Landice tread & peloton for combined $350. Our biggest sole expense is likely the rubber flooring ($500). We aren't body builders so don't need more than 300 lbs of plates and still have our running group to gather with and get a sense of community from. Our gym avoidance isn't fear based. It's based on convenience.

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Agreed. I love the gym; I just don't love it to pay what we were and being forced to wear a mask.

Outfitting a gym at home is totally doable. All we did is convert a spare bedroom by not having furniture in it. Instead we have:

• A Greg LeMond Revmaster bike
• Bowflex Selectech dumbbells
• Perfect pushup
• Bench
• Exercise ball
• Variety of other small things
• 32 in TV on wall with a Roku or Chromestick

Unless you are a body builder this is all you really need. About to swap out the old carpet and replace with vinyl flooring and then throwing down a mat/rubber flooring to complete it.

If you work out every day and driving just 10 minutes to the gym, over a 10 year period you are saving 1200+ hours with a home-gym.

Not that it would necessarily be a deciding factor, but it more than offsets the "hidden cost" of the space of an at-home gym.

"That said, my 24 hour membership is stupid cheap(sub $12/mo) and I'm going to keep it just for when I'm traveling."

OP read this from above and take it to heart if you do open a gym. No one ever cancels a $10-$12 gym membership just in case. You can run their credit cards monthly for 20 years even if they never show up.

That's ultimately why most things have moved to a subscription service (even things that have no business being one) -- the dirty little secret that everyone actually knows is that it generates incredible revenue from a new source - people who no longer need/use the service but don't pay attention to their finances.

Proposition Joe said:

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That's ultimately why most things have moved to a subscription service (even things that have no business being one) -- the dirty little secret that everyone actually knows is that it generates incredible revenue from a new source - people who no longer need/use the service but don't pay attention to their finances.

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I know this is a common adage, but I'd suspect most subscription service companies aren't doing high 5's in the boardroom when they get numbers of people not using their service and are probably way more concerned about what it says about their business long term vs their extra revenue.

Use the the poster with the $12/month membership as an example. Yeah it's revenue, but they've not said 24 Hour is great and I'd venture to say is highly unlikely to recommend it to somebody if they have such a glowing endorsement of saying it's cheap so I keep it in case I'm traveling and there is one nearby. Not a great vouching for your offering.

People not using your subscription base service is a sign you are either not growing or about to not grow because even your users think you aren't relevant enough to use.

Businesses move to a subscription because it makes revenue more predictable, not scheming that their customers go on autopilot.

The two aren't mutually exclusive.

Sure you'd prefer to have a growing user based and few inactive/close-to-dormant accounts.

But that doesn't change that auto-renew, low $ monthly subscriptions from users that are no longer actively using your product are an absolute cash-cow. So much so that the the finance companies actually now market services to make you aware of just how much you are spending per month on things you don't actually use.

500,000ags said:

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Businesses move to a subscription because it makes revenue more predictable, not scheming that their customers go on autopilot.

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"Revenue more predictable" in what way?

Why would they not just prefer to have the money up front, isn't that as predictable as it gets?

First, is that it reduces seasonality. Second, is that a churn rate can be applied to ongoing subscriptions. If I have X customers at Y price, with a Z churn. That's all the data I really need to understand my revenue profile going forward. Otherwise, you are required to make assumptions on customer interactions, conversion rates, unit economics, etc.

500,000ags said:

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Businesses move to a subscription because it makes revenue more predictable, not scheming that their customers go on autopilot.

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Por que no los dos?

Are you saying a low monthly price spread out over multiple months isn't used to entice more consumers?

Are you saying that a relatively low monthly charge that doesn't "register" as a big purchase so that consumers gloss over the charge on their monthly bill rather than cancelling isn't used to keep dormant users paying for something they don't actually use?

Yes, more data is preferred. Yes, more "active" users are preferred. But you're kidding yourself if these subscription based services aren't laughing all the way to the bank over customers paying for a product they don't actually use.

I mean, otherwise the service would auto-pause when not in use, right? Wouldn't be that hard for any subscription service. Don't come into 24-hour fitness for a month? System pauses your sub until your next visit. Don't use Netflix for the month of October? System doesn't charge you.

Is the practice nefarious? Not really... But it's certainly a well known and strategized revenue stream.

You are looking at it with a Dave Ramsey, personal finance lens. IMO, people buy stuff/services they don't need/use regardless of the revenue model. Consumer and enterprise businesses use a subscription revenue model to make revenue more predictable and maximize their valuation since investors pay a premium. Those two are way more important than some "dirty secret" of duping non-active, paying users.

Proposition Joe said:

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That's ultimately why most things have moved to a subscription service (even things that have no business being one) -- the dirty little secret that everyone actually knows is that it generates incredible revenue from a new source - people who no longer need/use the service but don't pay attention to their finances.

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Just a reminder... you originally said this which is ludicrous.

For a gym, once again it means no new referrals, no upsells for training classes, at your gym's juice bar or whatever else. And worst, it means your service has lost relevance to a client. That's bad bad news for your market offer. And, ironically, Netflix IS releasing customers who are dormant for like 9 or 10 months now.

Subscription services are a win win in that they give a company data on your preferences and can keep their services most relevant to you as somebody who should be a repeat user instead of guessing at the market... it also lowers the cost of retaining a customer. For a customer, a subscription service that's working right should be making it where I don't even have to or want to shop around for their service. I'll gladly pay a little extra for that in a lot of cases.

A bit of a tangent, but a few years ago, I took my wife out for her birthday to a really really nice restaurant in Manhattan she had really wanted to go to. Couple cocktails before dinner, nice bottle of wine during dinner, 5 courses, basically all of that. Food and drinks were all fantastic, service? Nice... but just a little bit off. Little things like they brought us dessert and then dropped the coffee at our table after we finished it. I never complain at a restaurant, but after gratuity, it was like a $600 meal so in my opinion, service needs to be damn near perfect. Manager came by and asked how everything was and I said it was ok... just the service while nice was pretty uncoordinated. He apologized profusely etc etc. Anyhow, next day he dropped me an email, offered comped 1st course and cocktails next time we came in... and there was a next time and it was a great meal.

Alright, that was long-winded, but the reason it is relevant is a good manager wouldn't look at that situation where the customer experience wasn't quite right and laugh all the way to the bank. It's reputation destroying if you take that attitude and don't listen to feedback. Subscription services are like restaurants... they are a service and I guarantee you they don't laugh all the way to the bank when users aren't utilizing their services either. Dormant customers aren't the right customer experience either... you will eventually lose that customer, you'll probably never earn them back and they'll never refer your service. Management of these companies don't plan for massive dormant revenues as a cash cow, they focus on how to get them utilizing service again which is why zombie accounts aren't as large as you probably think they are.

It was indeed hyperbole of me to say that's why most things have moved to a subscription model.

But to act like the act of still collecting monthly subscription fees from dormant users isn't a revenue stream for these companies is being purposely naive.

There's literally multiple services now being offered by credit card companies to "make you aware" of all of your little subscriptions. Why would a credit card company -- that wants you spending -- be developing utilities to assist you in being aware of services that you 100% have no desire to be rid of?

Yes, all service providers prefer that every user they have is actively using their service and more than happy to pay the fee for it every month. But that doesn't mean that they aren't thrilled to still be deriving revenue from users that really don't take advantage of the service, forget they even subscribe to the service, or were drawn in by the reduced/free promotion and forget to cancel before it expires.

There's a reason services that offer a free 30-days want that credit card # on file - and it ain't because they think you'll love the service so much that you'll just be too excited to remember to give it to them again.

It's because they know a decent % of the people will forget about it and get billed a month - maybe two or three - before noticing and cancelling.

(There's also a decent percentage of software products that have shifted to the monthly subscription fee because they figured out they were generating far more revenue than they would selling the same product as a package up front. Why bother asking $200 for the full version of MS Office with a usable product cycle of 3-4 years when you can charge $15/month for life?)

Our gym has built a community which is why we kept it up even during Covid. They have well attended events both social and competitive(like meets and adventure
Races and some more creative)