FDD Talk 2016: The Blink Fitness Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

In this FDD Talk 2016 post, you’ll learn the following:

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

• Section II – Estimated initial investment for a Blink Fitness franchise, based on Item 7 of the company’s 2016 FDD

• Section III – Presentation and analysis of Blink Fitness’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:

• average and median year-end membership, gross sales, personnel costs, supplies and maintenance, utilities, other club expenses, EBITDAR, rent and occupancy costs, and EBITDA (plus royalties, technology and support services fee, brand fund, and local marketing) for the 35 Blink Fitness gyms that were open and operating for at least 1 full year as of December 31, 2015

• average and median year-end membership, gross sales, personnel costs, supplies and maintenance, utilities, other club expenses, EBITDAR, rent and occupancy costs, and EBITDA (plus royalties, technology and support services fee, brand fund, and local marketing) for the 24 Blink Fitness gyms that also had been open and operating for at least 2 full years (but less than 3 full years) as of December 31, 2015

• average and median year-end membership, gross sales, personnel costs, supplies and maintenance, utilities, other club expenses, EBITDAR, rent and occupancy costs, and EBITDA (plus royalties, technology and support services fee, brand fund, and local marketing) for the 9 Blink Fitness gyms that also had been open and operating for at least 3 full years (but less than 4 full years) as of December 31, 2015

• average and median year-end membership, gross sales, personnel costs, supplies and maintenance, utilities, other club expenses, EBITDAR, rent and occupancy costs, and EBITDA (plus royalties, technology and support services fee, brand fund, and local marketing) for the 3 Blink Fitness gyms that also had been open and operating for at least 4 full years as of December 31, 2015

Section I – Background Information

Blink Fitness is the new kid on the block when it comes to workout spaces. It was founded in 2011 by a team of veterans from the high-end fitness segment. What they were aiming for was a good alternative that falls between the luxury end of the spectrum and the bare-bones low-priced end of the spectrum.

The company website lists out 52 locations open or about to open, largely in the New York City area, most of which are company-owned, but plans on opening at least 300 locations by 2020 through franchising.

The company just announced its franchising program less than a year ago to turbo-charge its expansion plans into many more communities than could be reached through only company-owned locations. It started off 2016 with its first two franchise agreements:  with The Bairrada Group and AMP Capital Corp., with both companies planning to open their first Blink locations in New York, but willing to look at other markets as well.

Here’s how Blink Fitness is keeping customers engaged and coming back for more in the highly competitive fitness industry:

More Than Muscle

Blink is taking a unique approach to fitness where it places “Mood Above Muscle,” which is a core philosophy running through the five core elements that go into its “Feel Good Experience.” Working out just makes you feel great, which is the emphasis since seeing real physical results can take more time and patience than many people have, so the focus on the immediate mood benefits makes sense.

The five elements of the chain’s value proposition include 1) Mood Lifters: Blink staff brighten your day with respect and enthusiasm; 2) Designed with Mood in Mind: Blink facilities are designed to be spacious and well-lit so you’ve got plenty of room to move and breathe; 3) Color Me Happy: Blink facilities are painted in colors known for their mood-lifting abilities; 4) Everyone Cleans: This means everyone at Blink goes all out to make sure the facilities are clean (a top priority among gym-goers); 5) Music Matters: Blink puts a lot of thought into the music it plays so that it helps boost your workout and further enhance your mood.

Franchisee Support

Blink provides franchisees with 150 hours of training, both classroom and on-the-job, which is quite a bit more than its competitors provide to their franchisees. And its leadership team has the expertise to back up that training with real experience from both the fitness world as well as franchising in general.

Market Potential

Since something like 85% of the U.S. population doesn’t belong to any kind of gym, Blink looks at that as untapped market potential. The fact that Planet Fitness, a competitor in the value-based fitness segment, went public is taken as a good sign of growth potential.

Gym memberships were a major casualty of the Great Recession, but one area in which growth was ultimately spurred was the value-based segment. Mid-priced gyms were hit so hard that many closed and sold their facilities off to the up-and-coming value-based companies.

Section II – Estimated Costs

• Please click here for detailed estimates of Blink Fitness franchise costs, based on Item 7 of the company’s 2016 FDD.

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis