FDD Talk 2017: What You Need to Know About the Gold’s Gym Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

In this FDD Talk 2017 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 2017 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Gold’s Gym franchise, based on Items 5 and 6 of the company’s 2017 FDD

• Section IV – Presentation and analysis of Gold’s Gym’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:

• 2016, 2015, 2014, and 2013 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

• 2016 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, 2016

• 2016 average gross revenue, payroll costs, occupancy costs, other costs, and EBITDA for the 115 Gold’s Gym company units that had operated for at least two full years as of December 31, 2016

Section I – Background Information

13 Things You Need to Know About the Gold’s Gym Franchise

Strong First Quarter Domestic and International Growth

1.  During Q1 of 2017, Gold’s Gym signed nine new franchise agreements for the U.S., with 23 additional locations currently under development in 12 countries. The new agreements will expand the brand’s presence in new and existing markets across the world, including Tennessee, New York, California, Egypt, and Australia.

2.  Also during Q1, Gold’s Gym opened 17 new locations both domestically and internationally, bringing its total number of gyms up to 737.

3.  Brandon Bean, CEO of Gold’s Gym, said, “2017 is off to a strong start as we continue to focus on expansion, innovation and delivering a one-of-a-kind member experience across the globe. Franchisees continue to be attracted to our state-of-the art facilities, experienced support team and strong brand recognition around the world as the best fitness experience in the business.”

4.  Gold’s Gym says that these new deals and openings are part of its aggressive growth plans – there are plans to open 45 new gyms by the end of 2017. The gym franchise recently opened its first location in Rabat, Morocco and debuted a flagship location in Amman, Jordan, which is the largest Gold’s Gym in the world at 140,000 square feet.

Launches Branded Training Sneaker

5.  In early June, shoe company Vibram released a limited edition of its FiveFingers V-Train cross training sneaker featuring the iconic branding of Gold’s Gym. The shoe launched on Vibram’s website for $115 and comes in both men’s and women’s sizing.

6.  According to Vibram, the shoe is built to withstand the most rigorous of indoor and outdoor workouts and features Vibram’s V-Train sole, which is built to provide the flexibility of a barefoot shoe and increased support for high-impact training, as well as the brand’s XS Trek technology, which helps provide traction and durability.

7.  Craig Sherwood, SVP of franchise and licensing for Gold’s Gym, said, “The launch of a Gold’s Gym FiveFingers cross training shoe with Vibram offers another meaningful way for fitness enthusiasts to connect with us beyond the walls of our gyms.”

Signs Multi-Unit Agreement to Expand Presence in Nashville, Tennessee Area

8.  In early April, Gold’s Gym announced that it had signed a multi-unit franchise agreement with Tennessee Fitness LLC, which is owned by Robert Dennis and brothers Andrew Davis and John Davis, to bring five additional Gold’s Gym locations to Middle Tennessee. The new locations will be opening throughout five counties in the Middle Tennessee region, including Wilson, Davidson, and Williamson counties.

9.  Tennessee Fitness LLC already owns and operates seven Gold’s Gym locations throughout the Tennessee market. Brandon Bean, CEO of Gold’s Gym, said that the company is proud to have “partners like Tennessee Fitness LLC who have a genuine passion for the fitness industry and the Gold’s Gym brand.”

Company History

10.  Gold’s Gym was opened in 1965 by Joe Gold in Venice Beach, California. Gold was a fitness legend who took the knowledge and expertise he gained from training at the famous “Muscle Beach” to open his gym, which was eventually dubbed “the Mecca of bodybuilding.” The gym gained international fame when the documentary Pumping Iron – a bodybuilding documentary starring Arnold Schwarzenegger and Lou Ferrigno – was released in 1977.

11.  Prior to this surge in the gym’s popularity, Gold sold the at-the-time failing gym to Bud Danits and Dave Saxe in 1970. Danits and Saxe ran the gym unsuccessfully for nearly two years and eventually sold it to gym member Ken Sprague in late 1971. Sprague managed to save Gold’s Gym and was the first owner to sponsor and hold bodybuilding competitions. His promotional skills and film industry contacts helped build the establishment’s profile.

12.  Gold’s Gym was once again sold in 1979, this time to Peter Grymkowski (a Mr. World body building champion). In 1980, Grymkowski and his brother, who eventually became the company’s licensing director, began franchising Gold’s Gym. Grymkowski owned Gold’s Gym until 1999. It is currently owned by TRT Holdings and there are now over 700 locations around the world.

Entrepreneur’s Franchise 500

13.  Gold’s Gym has ranked on Entrepreneur’s annual Franchise 500 list almost every year in the past decade except in 2017. The company’s highest rank was No. 63 in 2008, while its lowest rank was No. 210 in 2014.

Section II – Estimated Costs

• Please click here for detailed estimates of Gold’s Gym franchise costs, based on Item 7 of the company’s 2017 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Gold’s Gym’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

• The franchisor provides two types of financial performance representations in this Item 19. The first reflects information on Gross Revenue (defined below) for the 2013, 2014, 2015, and 2016 calendar years, and the second reflects more detailed revenue and expense information for 2016 for certain of the franchisor’s affiliates’ Gold’s Gym Facilities.

• All of the Gold’s Gym Facilities whose results are reflected in this Item 19 are full amenity Gold’s Gym Facilities and none are Gold’s Gym Express Facilities.

• The franchisor derived the figures for Company Units based on their internal unaudited financial statements. It derived the figures for Franchised Units based solely on the information that the franchisees gave to it.

Part 1 – Statement of Average Gross Revenue for the 12-Month Periods Ended December 31 of 2016, 2015, 2014, and 2013 ($ in thousands)

• For purposes of the Gross Revenue disclosures in this section, for each year in the charts below, the franchisor looked at the total number of Gold’s Gym Facilities operating as of December 31, then excluded those Facilities that had not operated for at least two full years as of December 31 (to eliminate start-up volatility).

December 31, 2016

Company Units