Ambrosio’s note: This interview is another first for Franchise Chatter. It’s my first interview with an area developer (also known as a master franchisee). Area developers share some of the responsibilities of the franchisor with respect to the franchisees in their territory, in exchange for the right to sell franchises in their area and share in the fees and royalties. Area developers can also open and operate their own locations within their area.
This is a great option for an investor who really believes in a particular concept and has the deep pockets needed to develop an entire territory. This also requires a different skills set, because you’ll be marketing and selling franchises to potential investors and providing support to them once they’re in the system.
Jerry Cohn and David Tannen are experienced area developers with a strong track record of success. They have recently chosen to invest in the fitness franchise industry, which I personally find attractive because of the consistency of the membership revenue model. Lucille Roberts does some very impressive numbers indeed — much higher than what I’ve read for other fitness franchises.
Thank you Jerry and David for this eye opening interview!
Franchise Chatter (FC): Can you tell us the story behind your decision to sign an agreement with Lucille Roberts to develop 50+ health club franchises in Florida and Georgia? Why did you choose Lucille Roberts over all the other opportunities available to you?
Jerry Cohn (JC): After being involved with the development of Century 21 Real Estate in SE Florida plus establishing over 250 Pak Mail Franchises in the Southeast, we were looking for a new franchise development opportunity. We searched franchise businesses of all types and decided that fitness and health related franchise opportunities were the easiest to operate and offered the greatest opportunity for a franchisee to develop a long term stream of income, regardless of economic times.
The fitness industry is one of the fastest growing business opportunities worldwide. Today, people are more fitness and health conscious. Statistically, only a small percentage of the population belong to a fitness center, so the growth of the industry is really in its infancy.
After an extensive search, we found that Lucille Roberts Fitness for Women exceeded our requirements, with a 40+ year track record of outstanding cash flow per club.
FC: For those unfamiliar, please tell us what makes Lucille Roberts different from others fitness centers? What are its strengths over the competition?
David Tannen (DT): Lucille Roberts’ competitive edge is its low cost, at $5.00 per week/member, which includes all fitness center workout equipment, free baby sitting, Zumba and other forms of dance classes in a women’s only environment.
FC: Can you describe the ideal franchisee for Lucille Roberts?
JC: Either an active owner with the financial resources and business background who will develop 3-5 Lucille Roberts Fitness Centers or a semi-passive franchisee who may want to initially keep his job while he or his wife “manages the manager” of their Lucille Roberts club, as membership and cash flow increase.
FC: What is the ideal neighborhood and territory for a Lucille Roberts fitness center?
DT: Ideally, we look for a population of 100,000 within a 5 mile radius, with household incomes of approximately $50,000 and the majority of demographics in the 25-50 age range.
JC: Lucille Roberts has marketing programs, time tested for over 40 years, that has established Lucille Roberts as the leader in women’s only fitness. Those programs, including direct marketing, tv, media, PR and other proprietary programs, are provided to all franchise partners on an ongoing basis with corporate and regional assistance. We also offer our franchisees site selection assistance, an experienced lease negotiation team, proprietary operational software and the financial strength of a company that has been successful in women’s only fitness for over four decades.
Initial and ongoing training and support is provided at the regional and national level to help increase the profitability of each Lucille Roberts Club.
FC: What should your franchisees be prepared to do in order to maximize the revenue and profit potential of their Lucille Roberts fitness center?
DT: Lucille Roberts is in the membership business. Therefore, the marketing of memberships is an ongoing and never ending process. The success of a Lucille Roberts franchise is in direct proportion to its increase in memberships, together with providing a great workout experience and outstanding customer service.
FC: Can you tell us a bit about the initial investment and ongoing expenses to run a Lucille Roberts franchise? What is the profit potential?
JC: The initial investment, including the franchisee fee, build out, lease security deposit and working capital, is approximately $300,000. The amount will vary based upon size, required tenant improvements, rent, etc. The profit potential is based upon the franchisee’s willingness to incorporate Lucille Roberts’ marketing programs to increase memberships. The average Lucille Roberts Fitness Center has approximately 2500-3000 members spending approximately $30.00 per month/member. The average Lucille Roberts Fitness Center, of approximately 6,000 sq. ft., generates $877,000 total revenue with $194,000 net profit, which represents greater than a 22% return, or approximately 65% as a return on the initial investment, as disclosed in the FDD.
The reason for this unusually high return is that this business, unlike most other businesses, has no cost of goods. Memberships produce revenue and there are no direct expenses against the revenue, other than marketing, rent, general overhead and labor.
FC: What are your goals for your Lucille Roberts territory in the next few years and how do you plan to achieve them?
DT: The SE Territory, primarily Atlanta, SE Florida, Orlando and Tampa/St. Pete, south to Naples/Ft Myers, based upon our primary demographics, can support 50 to 60 Lucille Roberts clubs.
Our development model is multi-tiered. Through various advertising and PR channels, we plan on attracting individual investors, multi-unit operators and passive investors through the formation of limited partnerships or other investment vehicles that will provide the equity necessary to simultaneously open Lucille Roberts Fitness Centers in multiple locations.
FC: Is there anything else you wish to share about Lucille Roberts?
JC: Lucille Roberts is a fantastic organization. Over 100,000 members join its clubs per year with over 5,000,000 workout sessions annually. The members love its programs, design, equipment and dedicated staff. Women of all ages can benefit from working out in a fun, easy going, non-competitive atmosphere. Lucille Roberts creates a “social environment” that enhances the well being and fitness of its members. Lucille Roberts has established a brand for today, growing into tomorrow.