FDD Talk 2016: The Gold’s Gym 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 Gold’s Gym franchise opportunity, including relevant news updates

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

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

• 2015, 2014, 2013, and 2012 average, high, and low gross revenue for the company units, franchised units, and all Gold’s Gym units that had operated for at least two full years as of December 31 of the given year

• 2015 average gross revenue for the top quartile, 2nd quartile, 3rd quartile, and 4th quartile of company units, franchised units, and all Gold’s Gym units that had operated for at least two full years as of December 31, 2015

• 2015 average gross revenue, payroll costs, occupancy costs, other costs, and EBITDA for the 91 Gold’s Gym company units that had operated for at least two full years as of December 31, 2015

Section I – Background Information

Gold’s Gym Moving Forward in 2016

With expansion continuing both in the U.S. and worldwide, the Gold’s Studio launch, and turnovers in the upper echelons of management, Gold’s Gym hasn’t slowed down in 2016 after celebrating 50 years in 2015.

In July 2016, the fitness chain announced rapid expansion plans in Australia, and purchased four 24 Hour Fitness locations in St. Louis, Missouri, for swift expansion in the St. Louis metro market.

Schwarzenegger Celebrates With Gold’s Gym

The golden anniversary was celebrated in August 2015, with iconic bodybuilder, actor and politician Arnold Schwarzenegger taking center stage as he was inducted into the Gold’s Gym Hall of Fame. Schwarzenegger started with Gold’s upon his move to the U.S. from Austria in 1968 at the age of 21.

“When I first came to America, I went to Gold’s Gym before I even went to my first apartment. Gold’s Gym became my home; it was like a family to me,” Schwarzenegger said at the celebration. “At the time, physical fitness wasn’t mainstream, but look at what we have accomplished in these 50 years; now everyone is working out. Remember that you all are a part of the fitness crusade that we started 50 years ago.”

Numbers of Male, Female Patrons Evenly Split

The company was founded by Joe Gold in 1965 with a single location in Venice Beach, California, that utilized homemade equipment. Gold’s Gym International, now owned by Irving, Texas-based TRT Holdings, now has more than 700 gyms around the world.

The co-ed gym chain boasts that it’s the world’s largest chain of mixed-gender gyms, with relatively evenly matched numbers of male and female members. Locations feature cardio and strength training equipment and offer group exercise classes. Some gyms also have studios for basketball, swimming and boxing.

Turnover in Gold’s Gym Senior Management

Gold’s Gym President Aaron Watkins and Executive Vice President of Operations David Fowler departed the company in January 2016.

“As of this morning, former President Aaron Watkins and Executive Vice President of Operations David Fowler are no longer with Gold’s Gym,” Jim Caldwell, president of parent company TRT Holdings, wrote in a memo to staff. “With the rapid evolution of our brand and changing landscape of the industry, we felt that new leadership was in the best interest of the company. Both Aaron and David have put a lot of heart and hard work into growing Gold’s Gym and we are very grateful for all of their contributions.”

Watkins started with Gold’s Gym International in 2006 and became president in November 2013. Fowler had been with the company since 2007. In August 2016, Watkins was named CEO of Dallas-based Texas Family Fitness.

Brandon Bean, chairman of Gold’s Gym International and chief financial officer for TRT Holdings, was appointed CEO. He has been with TRT Holdings since 2007 and was named Gold’s Gym International chairman in 2013. He previously worked with Goldman Sachs.

Konstantinos “Dean” Pappous was named chief operations officer in March 2016. He brings 20 years of experience in the health club industry, including 18 years with 24 Hour Fitness.

Campaign Will Highlight Gold’s Studio Services

Gold’s Gym launched a campaign in July 2016 to go along with its new Gold’s Studio group fitness services. The company revealed three broadcast spots – “Gold’s Fit,” “Gold’s Cycle” and “Gold’s Amenities,” as well as a redefined plan for the studio. The campaign is led by Dallas-based Greenlight, which Gold’s Gym uses for creative and strategic planning, and Coffee Productions.

The campaign will run for the next year, and the gym will also use direct mail and radio broadcasts to reach consumers. Gold’s plans to launch an annual promotional campaign in November 2016 with a theme of “Challenge.”

The Gold’s Studio fitness services gives Gold’s Gym an edge against some of its competitors by offering a boutique setting for studio classes in areas such as Pilates, CrossFit and cycling.

Public Speaks Out Against Ad From Egyptian Franchisee

Gold’s Gym came under fire in August 2016 when a sub-franchisee in Egypt, Gold’s Gym Dreamland, posted an ad featuring an image of a pair, accompanied by the phrase “This is no shape for a girl.”

The company was criticized for body-shaming and sexism and for initially trying to back-pedal the ad; it later issued a strong apology and said it would take legal action against the sub-franchisee.

“We are appalled by the message they have sent to women around the world and have requested that Facebook remove their profile,” Gold’s Gym Egypt wrote in its apology. “We have also proceeded with legal action.”

Section II – Estimated Costs

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

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