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Earnings Claims of Top Franchises Revealed

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FDD Talk 2013: Average Member Numbers and Projected Annual Cash Flows for Snap Fitness Clubs (2013 FDD)

by Franchise Chatter on May 24, 2013

in Fitness Franchises, Franchise Earnings

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Highlights of Snap Fitness’ Item 19 Financial Performance Representations (2013 FDD)

Historic Member Numbers at Snap Fitness Clubs (Table 1)

  • The chart below shows the average number of members for the 920 Snap Fitness Clubs that operated for a full 24 months as of December 31, 2012, including 48 corporate and 872 franchised locations. The average is based on the average members per month from January to December 2012.

Historic Personal Training Revenue for a Snap Fitness Club (Table 2)

  • Not all clubs offer personal training and clubs are not required to report personal training revenue to Snap Fitness. The information below reflects the personal training revenue reported through the Snap Fitness member billing system for 482 of the clubs that operated for the full 24 months as of December 31, 2012 and reported at least $1,000 of personal training revenue.

Statement of Bases and Material Assumptions – Projected Annual Cash Flows for a Snap Fitness Club (Table 3)

  • The chart below reflects a franchisee’s projected revenues based on 400 members, 600 members, and 800 members. These revenue and expense projections are based on Snap Fitness’ experience with affiliate and corporate Snap Fitness clubs and the information obtained from the company’s designated billing provider.
  • In preparing these statements, Snap Fitness assumed that market conditions will stabilize or improve and that unemployment rates will remain stable or decrease.
  • Snap Fitness 247 Franchise PhotoAnnual Membership Operating Revenue – Based on membership data from Snap Fitness’ authorized billing software, a club will generally have 70% as many memberships as members. In other words, if you have 600 members, on average, you could expect to have approximately 420 memberships.
  • Typical membership fees are $29.95 to $39.95 for a single membership and $49.95 to $59.95 for a joint membership and $69.95 to $79.95 for a family membership.
  • You set your own membership prices (except for National Accounts and certain promotional programs). Membership rates vary between clubs. For example, you may offer discounts on membership pricing for pre-paid memberships, corporate discount programs, and other special promotions. If you offer tanning, you may also offer tanning memberships.
  • Under the Franchise Agreement, Snap Fitness has the right in the future to establish maximum or minimum membership rates, subject to applicable law.
  • The numbers in the chart reflect an average membership rate of $46.54 per month, which is the average amount of membership dues for the 920 clubs included below based on the information entered into the billing system.
  • The revenue numbers in this table assume that you collect membership fees for each active membership.
  • Enrollment Cards/Access Fees Collected – You will also charge enrollment and access fees for new memberships. The figures in the chart assume that you would collect on average $50 for a new membership and a 70% attrition rate. This amount will vary depending on how many new members join the Club and whether the enrollment and access fees are reduced or waived.
  • Vending Machine Sales – Snap Fitness must approve all vending machines and you must participate in the company’s system-wide vending program and use their approved vendor.
  • Personal Training Revenue/Commissions – The figure in the chart assumes that you offer personal training in your club and that personal training revenue is approximately 15% of your monthly membership revenue.
  • The estimate of personal training commissions assumes your personal trainer receives 70% of the personal training fees as commission.
  • Personal training varies widely by club depending on the ability to find qualified and motivated personal trainers and management of the personal training program.
  • Occupancy – The recommended size of a club is 3,000 to 4,500 square feet. Snap Fitness’ projection is based on a 3,000 square foot club with gross rent of $16.00 per square foot. If your rent is higher or you choose to lease a larger space, your costs will be higher.
  • Equipment – This amount assumes an equipment package of $200,000 and that you lease the equipment under a 60-month lease agreement with a 13% interest rate and that you paid in advance a 20% down payment and taxes, shipping, and installation.
  • Enrollment/Access/Ongoing Membership Maintenance Fees – The amount is based on a $45 vendor software fee, 4% transaction fees, the $0.55 monthly per membership maintenance fee, $5.20 per membership for the membership agreement fee, $5.00 per member for an access card, and $1.00 per member for the online services fee.
  • Utilities/TV/Phone/Internet – These amounts are based on the experience of Snap Fitness with its corporate and affiliate clubs and may vary depending on your location and operations.
  • Insurance – The insurance cost is based on participation in the SAPP insurance program.
  • Advertising and Marketing – The amount for advertising and marketing is based on spending 6% of monthly membership revenue on marketing activities. This amount would include local ad co-op contributions in markets where an ad co-op has been established. Snap Fitness generally recommends spending 4%-6% of total revenue on marketing.
  • Wages and Payroll Expenses/Membership Sales Commissions – If you manage the club, you will not have wage or payroll expense (except the amount you pay or distribute to yourself). The estimate of wages, payroll expense, and commissions assumes you would have one club manager who works 30 to 35 hours per week at the club.
  • Your payroll expenses will vary depending on the payroll taxes, workers’ compensation expense in your state, and any benefits you provide to your manager.  If you are an absentee-owner or operate in a state that requires additional staffing, your wage and payroll expenses could be significantly higher.

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