FDD Talk 2018: Anytime Fitness Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

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

• Section II – Estimated initial investment for an Anytime Fitness franchise, based on Item 7 of the company’s 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for an Anytime Fitness franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Anytime Fitness outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of Anytime Fitness’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• average number of members for Anytime Fitness centers that were open for at least 12 months as of February 28, 2018

• projected enrollment fees; membership fees; vending revenues; personal training revenues; rent; equipment lease; personal training expenses; royalties; processing/credit card fees; bad debts; utilities; insurance; proximity card costs; advertising funds; local advertising; Anytime Health fees; vending product costs; maintenance; Global Access fee; Healthy Contribution fees; club management software fees; annual conference fee; miscellaneous expenses; manager salary and payroll costs; and income before depreciation, interest, taxes, and debt expense for Anytime Fitness centers with 500 members, 1,150 members, and the average number of members

Section I – Background Information

14 Things You Need to Know About the Anytime Fitness Franchise

Celebrating Another Year of Record Growth

1.  Anytime Fitness started off 2018 on a high note after experiencing another year of record growth in 2017. Last year, Anytime Fitness opened 200 gyms in the U.S. and sold an additional 250 territories. The brand was also recognized as the “Fastest Growing Gym in the World” by Club Business International magazine for the 10th consecutive year.

2.  Tom Gilles, national sales director for Anytime Fitness, said, “As cheesy as it may sound, the phrase that defines 2017 for Anytime Fitness has to be ‘continued excellence.’ From my lens, we were able to set our franchisees up for success all year, from beginning to end. Last year was also incredibly strong for us from a development perspective. From a sheer numbers standpoint, we sold another 250 territories in the U.S. alone, and opened 200 gyms. Considering that this is year 16 for us, we’re very proud and humbled by that sustained growth. And that success is a testament to – and speaks volumes about – our franchisees, our founders and the viability of the Anytime Fitness franchise model.”

3.  Additionally, Anytime Fitness became the first U.S. fitness franchise to be granted a license in China. Last summer, the brand announced that it had plans to open 300-500 gyms in China by 2020. Dave Mortensen, president and co-founder of Anytime Fitness, said, “We are confident our business model paired with the China capacity, will prosper thousands of gyms. We’re in the business of building communities and helping people achieve their goals, something that transcends across borders.”

4.  Maurice Levine, the master franchisee for China, Singapore, Malaysia, and the Philippines, plans to build a culture of fitness in China in order to tap into the large Chinese market where very few people have a gym membership. Levine will be creating the first Wellness University in Shanghai for career development and certifications of personal trainers.

5.  Levine said, “Our goal is to bring fitness to the Asian community and support people on their journey to get to a healthier place. While the atmosphere and amenities are upscale, the gym is inviting, unintimidating and priced right. It brings a much-needed service to the community. It’s accessible, affordable, provides supportive coaching and is a great place for community members to get to know each other while achieving their fitness goals.”

Opens 4,000th Gym

6.  In mid-March 2018, Anytime Fitness celebrated the opening of its newest gym in Shanghai, China — the brand’s 4,000th gym overall. The brand held a grand celebration that included a Chinese dragon dance and a ceremonial groundbreaking at the Shanghai gym. At the time of the grand opening, there were 11 other Anytime Fitness locations operating in China.

7.  Maurice Levine, the master franchisee for Anytime Fitness in China, said, “We are based in community areas within walking distance of where people live and work and we reach out to people in a way that is non-intimidating, relatable and personable. Less than 1% of the 1.4 billion people who live in China are members of a health club. We are poised to introduce high-quality health and fitness programs throughout the entire country.”

Announces Plans to Become the Only Franchise on All Seven Continents

8.  Around the time that Anytime Fitness opened its 4,000th location, the brand’s CEO and co-founder Chuck Runyon said that it was formalizing agreements with master franchisees to open 75 gyms in Morocco over the next 10 years. The deal marks the brand’s entry into the African fitness market.

9.  By the end of 2018, Anytime Fitness will be operating on six continents and Runyon has his sights set on becoming the first franchise with locations operating on all seven continents. According to Runyon, “We’ve already begun exploring options for Antarctica. It’s going to happen – and sooner than you might think. It may sound like an audacious goal, but we’re very serious about it.”

10.  As new gyms continue to open around the world at a quick pace, Anytime Fitness says that it will keep promoting its mission to “improve the self-esteem of the world.”

Company History

11.  Anytime Fitness was founded in 2002 by Chuck Runyon, Dave Mortensen, and Jeff Klinger in Minnesota. The business partners first met in the early 1990s while working for the same fitness club in St. Paul. In 1995, the three of them purchased and ran Southview athletic club for seven years. After selling Southview in 2001, Runyon, Mortensen, and Klinger developed the idea for Anytime Fitness after surveying the expectations that long-term members of large gyms had for their fitness clubs.

12.  Soon after opening the Anytime Fitness location, Eric Keller, a former employee of Southview athletic club became interested in the Anytime Fitness business concept. Keller became the first franchise owner and was provided with support in site selection, marketing strategies, equipment selection, and membership sales. Following the success of the first franchise location, two more former Southveiw employees opened their own franchises in different areas of Minnesota.

13.  Since then, Anytime Fitness has continued to grow both domestically and internationally. In 2014, Roark Capital Group acquired a large minority share of Anytime Fitness. Today, there are over 4,000 Anytime Fitness locations in the United States, Canada, Mexico, Australia, New Zealand, United Kingdom, Ireland, Grand Cayman, Poland, the Netherlands, Spain, Qatar, India, Italy, Chile, Japan, Singapore, Malaysia, and the Philippines.

Entrepreneur’s Franchise 500

14.  Anytime Fitness ranked No. 17 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Anytime Fitness franchise costs, based on Item 7 of the company’s 2018 FDD.

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

• Please click here for detailed information on Anytime Fitness’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  1,957
• Outlets at the End of the Year:  2,090
• Net Change:  +133

2016

• Outlets at the Start of the Year:  2,090
• Outlets at the End of the Year:  2,231
• Net Change:  +141

2017

• Outlets at the Start of the Year:  2,231
• Outlets at the End of the Year:  2,355
• Net Change:  +124

Company-Owned

2015

• Outlets at the Start of the Year:  30
• Outlets at the End of the Year:  33
• Net Change:  +3

2016

• Outlets at the Start of the Year:  33
• Outlets at the End of the Year:  33
• Net Change:  +0

2017

• Outlets at the Start of the Year:  33
• Outlets at the End of the Year:  33
• Net Change:  +0

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

• The franchises offered are for the operation of boutique fitness centers designed to operate with the potential for minimal overhead under the trademark Anytime Fitness or Anytime Fitness Express.

• The franchisor began offering Anytime Fitness franchises in October 2002. It began offering Anytime Fitness Express franchises in October 2006.

• As of the issuance date of the 2018 FDD, Anytime Fitness requires you to staff your standard Anytime Fitness center or Anytime Fitness Express center for a minimum number of hours per week and it may require you to offer personal training services to your members, both of which may be done by you or by qualified staff that you hire.

• Anytime Fitness may also require you to use a telephone answering service during the time your Anytime Fitness center is not staffed.

• Through an affiliate, Anytime Fitness has developed an access and security system that allows members to have access to an Anytime Fitness center 24 hours a day, automated tanning and vending services, and reciprocal benefits between centers. In limited cases, Anytime Fitness may allow your center to not be accessible 24 hours a day.

• The center will be an Anytime Fitness center unless Anytime Fitness designates it as an Anytime Fitness Express center. Generally, an Anytime Fitness Express center will be a center located in an area having fewer than 7,000 people living within a 3-mile radius of the center.

• Anytime Fitness centers will typically have 4,000 to 6,000 square feet, while Anytime Fitness Express centers will typically have 1,500 to 4,000 square feet.

Part 1 – Statements of Annual Projected Revenues and Earnings for an Anytime Fitness Center

• The following are statements of projected annual revenues and earnings for a franchised Anytime Fitness center.

• These projections are for an Anytime Fitness center that has been in operation for at least 12 months. They assume that at the end of the first year you have a fixed number of memberships, and, even though most of the clubs continue to increase their memberships after the first year, that you remain at that level for the entire year, adding as many new members as the number of members that leave. (During the first year, it will take you time to build your member base.)

• Anytime Fitness has listed below three projections, one based on a center having 500 members, one based on 865 members, and one based on 1,150 members.

• They are based on revenue information provided to Anytime Fitness by its proprietary software and designated billing processor for its franchisees in the United States in 2017.

• Of the 2,158 Anytime Fitness clubs open for at least 12 months as of February 28, 2018, the number of members for these clubs ranged from 177 to 3,316. As measured on February 28, 2018, the 2,158 clubs open at least 12 months had an average member count of 865; the member count on this date ranged from 3 to 3,352 and the median was 774.

• The first example, for a 500-member club, is intended to give you an idea of the revenues, expenses, and projected income of a club that performs well below the average, but is still profitable.

• Of the 2,158 Anytime Fitness clubs open for at least 12 months as of February 28, 2018, 1,851 (86%) had an average of over 500 members, as measured on February 28, 2018.

• The 865-member example will give you an idea of the revenues, expenses, and income of a club that is able to maintain, throughout the year, the average number of members of the 2,158 Anytime Fitness clubs that were open for at least 12 months, as measured on February 28, 2018.

• Of the 2,158 Anytime Fitness clubs open for at least 12 months as of February 28, 2018, 850 (39%) had an average of over 865 members, as measured on February 28, 2018.

• The 1,150-member example will give you an idea of the revenues, expenses, and profitability of a high achieving club.

• Of the 2,158 Anytime Fitness clubs open for at least 12 months as of February 28, 2018, 371 (17%) had an average of over 1,150 members, as measured on February 28, 2018.

Revenue, Expense, and Profit Assumptions for Anytime Fitness Clubs 

• Enrollment fee revenues/cost of proximity cards:  Anytime Fitness assumed, based on data reported to it by its designated processor, that 48% of your members will be replaced through attrition (which is in line with the industry average). The average enrollment fee is $49.

• Membership revenues:  Based on reports from Anytime Fitness’s designated processor, the average monthly membership fees paid under each membership agreement to Anytime Fitness franchisees was $36.58 per member and the median monthly membership fees paid was $35.78 in the 12 months ended on February 1, 2018, for clubs that were open for 12 months or more as of February 28, 2018. These clubs had an average of 697 members who joined as monthly members and a median of 646 members who joined as monthly members.

• The average “pay per visit” member fees paid to Anytime Fitness franchisees was $7.83 per member per month and the median “pay per visit” member fees paid to Anytime Fitness franchisees was $6.08 per member per month in the 12 months ending on February 1, 2018, for clubs that were open for 12 months or more as of February 28, 2018. These clubs had an average “pay per visit” member count of 168 members and a median “pay per visit” member count of 101 members in the 12 months ending on February 28, 2018.

• Vending revenues:  The projected amounts for vending revenue reflect the per membership revenues that Anytime Fitness’s corporate-owned clubs receive from vending.

• Personal training revenues:  Anytime Fitness franchisees typically collect a percentage of what the members pay for these services. Anytime Fitness has projected training revenues equal to $117.97 per member per year.

• Compensation models for trainers vary widely. In the 500 and 865 member models, Anytime Fitness projected that personal training expenses, including compensation to your personal trainer, equal 60% of your personal training revenues.

• Anytime Fitness did not include Training Suite Fees as an expense because it does not currently require you to use the Training Suite.

• Once personal training revenues reach a certain level, some clubs have added a Member Experience Manager to oversee the personal training program. Therefore, in the 1,150 member model, Anytime Fitness assumed you have this additional expense and therefore projected personal training expenses at 70% of personal training revenue.

• Rent:  The assumption is for 5,000 square feet of space, with the gross rent paid being $17.94 per square foot per year.

• Equipment:  This amount assumes you have a center with 5,000 square feet, and 1,000 square feet within the center is reserved for functional training containing no large exercise machines (such as treadmills or elliptical machines).

• Anytime Fitness assumes you will purchase $140,000 in equipment and enter into a 4-year lease purchase agreement for your equipment, paying approximately 15% down, and financing the balance.

• Processing and credit card fees:  5% of membership fees and 1.5% on enrollment fees and personal training fees

• Bad debts:  3.3% of membership fees

• Utilities:  $4.00 per square foot, and includes gas, electric, water, cable, Internet, and telephone

• Advertising Funds:  $300 per month to the General Advertising Fund

• Local Advertising:  $10,000 per year (minimum). Anytime Fintess’s projection assumes your spending on local advertising increases by 1.5% of your revenue as you have more members.

• Anytime Health:  Franchisees will be selling Anytime Health (web-based services) memberships and will keep everything charged above $0.50 for individual members. Maximum amount franchisees pay to Anytime Fitness for these memberships:  $225 per month ($675 if you own 3 or more centers).

• Healthy Contribution:  The average total fees per club for the last 6 months of 2017 was $0.60 for each member participating in a Healthy Contributions program.

• Club Management Software Fees:  $179 per month for the Club Management Software

• Miscellaneous Expenses:  This line item includes janitorial services, legal and accounting fees, cell phone, supplies, licenses, one registration to the Annual Conference and minimum travel expenses to attend that conference, and other similar items.

• Salaries (500-member club):  Assumes that the franchisee acts as the manager of the center and does not receive a separate salary. Assumes zero employees.

• Salaries (865-member club):  A manager is hired to oversee club operations and is paid $2,000 a month, plus commissions and limited benefits, so that with payroll costs, the total cost for a manager will be $35,000 per year. Assumes that you would pay for staffing equivalent to 1.5 times a single manager.

• Salaries (1,150-member club):  Manager receives a salary of $2,000 a month, plus commissions and benefits. Assumes that you would pay for staffing equivalent to 1.5 times a single manager.

• Some states or municipalities may require that you have an employee on premises whenever your center is open, and Anytime Fitness has a minimum staffed hours policy that requires you, or a staff person, to be in the center for at least 30 hours per week.

500-Member Club

Revenues:

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