Question

Many of you will some day own your own business. One rapidly growing opportunity is no-frills workout centers. Such centers attract customers who want to take advantage of state-of-the-art fitness equipment but do not need the other amenities of full-service health clubs. One way to own your own fitness business is to buy a franchise. Snap Fitness is a Minnesota-based business that offers franchise opportunities. For a very low monthly fee ($26, without an annual contract), customers can access a Snap Fitness center 24 hours a day.

The Snap Fitness website (www.snapfitness.com) indicates that start-up costs range from $60,000 to $184,000. This initial investment covers the following pre-opening costs: franchise fee, grand opening marketing, leasehold improvements, utility/rent deposits, and training.

Suppose that Snap Fitness estimates that each location incurs $4,000 per month in fixed operating expenses plus $1,460 to lease equipment. A recent newspaper article describing no-frills fitness centers indicated that a Snap Fitness site might require only 300 members to break even. Using the information provided above and your knowledge of CVP analysis, estimate the amount of variable costs. (When performing your analysis, assume that the only fixed costs are the estimated monthly operating expenses and the equipment lease.)

Using the information from part (a), what would monthly sales in members and dollars have to be to achieve a target net income of $3,640 for the month?

Provide five examples of variable costs for a fitness center.

Go to a fitness-business website, such as Curves, Snap Fitness, or Anytime Fitness, and find information about purchasing a franchise. Summarize the franchise information needed to decide whether entering into a franchise agreement would be a good idea.

Answer 1

Answer)

Variable ccosts for 300 members:

(300×$24)-($1460+$4000)

=$1740

Variable cost per member:$1740/300 members

=$5.8 per member.

Sales in members for target profit:

(Fixed costs+desired profits)/contribution

=($4000+$1460+$3640)/($24-$5.8)

=500 members.

Examples of variable costs of fitness center:

1)Gym trainer fee if it is paid pretty person.

2)Laundry services of any provided.

3) Electricity charges.

4) Supplies like water,protiens etc provided.

5)Generator etc fuel charges.

Here in the anytime fitness the franchise costs from $75000 to $750000 and leading equipment costs from $1100 to $2550 and no royalty needs to be paid.

They are saying that there chance of training 500000 members .

But along with it we must include fixed rented salaries etc and also we can't go by franchise rate per person as people may not be willing to pay such high rates every where and along with that the local demand also have impact on profits and hence a person must analyse it carefully and then go for it.