FDD Talk 2015: The Snap Fitness Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

In this FDD Talk 2015 post, you’ll learn the following:

• Section I – Background information on the Snap Fitness franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Snap Fitness franchise, based on Item 7 of the company’s 2015 FDD

• Section III – Presentation and analysis of Snap Fitness’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:

• average number of members for the 981 Snap Fitness clubs (110 corporate and 871 franchised) that operated for a full 24 months as of December 31, 2014

• historic member ramp-up (member levels for the 6th month and 12th month of operations) of the 112 clubs (69 franchised and 43 corporate) that opened in 2012 and 2013

• personal training revenue for the 326 clubs that operated for a full 24 months as of December 31, 2014 and reported a minimum monthly average of $1,000 in personal training revenue (the level Snap Fitness management estimates represents an active personal training program)

• projected revenues, expenses, and cash flow for a Snap Fitness club based on 400 members, 600 members, and 800 members

• historic club transfer performance (the average percentage change in memberships year-over-year for the 62 club transfers in 2013, from the first month of club purchase)

Section I – Background Information

Peter Taunton had an idea he thought a bunch of people would like. The health club craze had, in his opinion, gotten a bit out of control with the variety of services, equipment, and expensive prices that went along with it. What about people who just want a place where they can go for a simple workout that doesn’t cost them an arm and a leg in membership fees?

He was among the first (along with the guys from Anytime Fitness) to see the huge potential in small fitness gyms – no tennis courts, no pools, no racquetball courts, and so on, including no locker rooms. He was hoping this kind of no-frills approach would appeal to a large group of consumers. Now with more than 1,500 locations in 48 states and 6 countries (Canada, Mexico, India, UK, New Zealand, and Australia), he was clearly right.

In addition, the privately-owned chain headquartered in Chanhassen, Minnesota is available whenever someone wants their workout, as most locations are open 24/7. Here’s how Snap Fitness gets its workout on the fitness industry:

A Forceful Founder

Peter Taunton was named “Entrepreneur of the Year” by Ernst & Young for his successful innovation, financial performance, and personal commitment not only to his business but also the community. What he brought to the fitness arena were three not-so-secret weapons: Making fitness fast, convenient, and affordable.

Rapid Expansion

Snap Fitness already has more than 1,500 locations around the world, with hundreds more in the pipeline. The latest country to sign a master franchise agreement is Spain, where as many as 200 locations are planned to open in coming years.

Last year Snap Fitness signed off on a master franchise agreement in the United Kingdom. Meanwhile, Snap Fitness India is on the move, planning to add 300 more clubs to its already 50+ locations by the close of 2017.

The NASCAR Connection

Snap Fitness is definitely going for a very particular demographic, and apparently that demographic overlaps, at least in part, with the fan base of the hugely popular NASCAR auto-racing. One of several drivers the chain sponsors is Landon Cassill.

In the 2015 Coca-Cola 600, Cassill’s Snap Fitness car was decked out for Memorial Day by featuring thousands of club owners, personal trainers, and members all over the car. In addition, Cassill promoted fitness awareness among his fans when, after the race, he ran 14 miles to the NASCAR Hall of Fame.

He’s become incredibly fit himself, regularly competing in triathlons, which he credits to the guidance he’s received from his local Snap Fitness club.

The Veteran Connection

Snap Fitness also meets its demographic by supporting veteran causes. For example, all summer long from Memorial Day to Labor Day, the chain is running a special where consumers can purchase a 30-day trial pass for just $8.95, good for 24/7 access to all Snap Fitness locations.

For each pass sold during that time, Snap Fitness will donate $1 to Folds of Honor, a foundation providing scholarships to the families of soldiers disabled or killed in active duty.

Section II – Estimated Costs

• Please click here for detailed estimates of Snap Fitness franchise costs, based on Item 7 of the company’s 2015 FDD.

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis