FDD Talk 2015: The Crunch 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 Crunch Fitness franchise opportunity, including relevant news updates

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

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

• 2014 net membership revenue, personal training and retail revenue, other revenue, total gross revenue, refunds and cash over/short, total net revenue, total cost of goods sold, payroll and benefits, sales and marketing, club expense, rent and occupancy, total operating expense, and cash operating profit for the highest performing Crunch fitness club, the median performing club open 6 to 12 months, the median performing club open 13 to 24 months, and the median performing club open 25 to 36 months

• 2014 average number of members, average monthly revenue, average gross revenue, and average months open for the highest performing Crunch fitness club, clubs open 6 to 12 months, clubs open 13 to 24 months, and clubs open 25 to 36 months

Section I – Background Information

With an economy on the rebound and an increasingly health-conscious consumer base, the gym, health and fitness club industry is experiencing strong growth, and competition is fierce, to say the least.

Crunch was started by Doug Levine in an old basement aerobics studio in the East Village of New York City back in 1989, focused largely on group fitness programming. As the company’s website noted, that first location “had no locker rooms, the air conditioning didn’t work and after hours break-ins were perennial events.”

From those humble beginnings, however, it set itself apart from the start with innovative and edgy offerings such as Hip-Hop Aerobics, Co-Ed Action Wrestling, and Cyked Yoga Cycling.

Now the chain includes more than 100 gyms worldwide, with 72 franchise locations in MA, CT, FL, TX, WA, OR, CA, NJ, VA, NY and Australia.

The company is headquartered in NYC and is co-owned by New Evolution Ventures and private-equity firm Angelo Gordon.

Here’s how Crunch continues to put itself on the leading edge of workout programming for more than 425,000 members:

A Revolutionary Concept

Crunch had a singular mission early on that flew in the face of many more traditional approaches to exercise – make workouts fun. Working out should be something more than just being “serious” about fitness. Clearly, people loved it. It’s a fusion of fitness and entertainment that many find downright exhilarating.

A Fresh Philosophy

To put it simply, Crunch is founded on a No Judgments philosophy. That means you won’t get disapproving glares from instructors, no goals shoved down your throat, no picture-perfect (and unrealistic) ideal of what the human body should look like.

It’s an inclusive approach that works with all types where they’re at. The Crunch experience is designed to empower, encourage, and entertain.

Fitness in the Digital Age

January 2014 saw the launch of Crunch Live, a subscription-based online library of workout videos based on some of the chain’s most popular classes. Whether it’s yoga, pilates, kick butt cardio, hip-hop, or strength training, Crunch Live allows people to sweat it out anytime, anywhere, with more than 35 online workouts.

Keeping It Fresh

Crunch is constantly on the lookout for the next workout that will “wow” its customers. The hunt for the next hit class means Crunch is always trying new things, innovating with new concepts that pack a punch and keep people highly engaged.

One of its latest offerings being tested, Transformer with Disq, is based on the practices of Dutch speedskaters who have found a way to add a strength-building component to just about any movement. The device used is worn around the ankles and waist, consisting of a pulley system that can be dialed up or down for resistance that turbo-boosts a cardio and strength workout.

Another recent offering in the wake of the World Cup and in advance of the 2016 Summer Olympics is the Brazilian Crunch workout, with elements incorporated from Samba, Capoeira, and even soccer.

Section II – Estimated Costs

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

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