Episode 273

What it Takes to Make Your Gym into a Franchise with Mark Fisher

In this episode, Mark Fisher joins me to talk about what it takes to make your gym into a franchise.

[00:00:00] Hello my friend, in today’s episode I’m speaking with Mark Fisher, and we’re answering a question that all of you submitted, which is, how do I turn my gym into a franchise? So if you are thinking now, or might be thinking at some point in the future, how do you turn your gym into a franchisable product, this so keep on listening.

Welcome to the Business for Unicorns podcast, where we help gym owners unleash the full potential of their business. I’m your host, Michael Kehler. Join me each week for actionable advice, expert insights, and the inside scoop on what it really takes to level up your gym. Get ready to unlock your potential.

And become a real unicorn in the fitness industry. Let’s begin.

Hello, fitness, business nerds. What’s up. Welcome to another episode of the business unicorns [00:01:00] podcast. And today I’m here with Mr. Fisher. Hello, sir. Hello. How are you? I’m doing great. And I think you have an exciting webinar coming up that I want to kick this off by telling our friends about. So you’re doing a webinar that really anyone listening can register for.

And it’s a, the title of the webinar is how much should gym owners make. Is that right? Yes. Yes. Yes. It’s an exciting and exclusive. It’s exclusive webinar. It’s very exclusive. We will only let people in that are registered for the webinar. But yeah, kidding aside, it is a free training. It’s happening on October 13th and October 14th at 12 p.

m. both days. If you’re interested in attending, you should, you can click the link. In the show notes and we’ll be covering the financial benchmarks that I look at when I’m looking to quickly analyze a business. So yes, this is things such as how much should you be making if you run a gym. It’s also things such as how much should you be spending on your staff as a percentage of revenue or how to spot and address the, what I call the four deadly horsemen of overexpansion.

I see often the [00:02:00] foremost common mistakes that prevent gyms from being profitable. I’ll also say briefly where we are going to have some Bonuses purely for the live attendees, so anybody that wants to register will be happy to send you video. I know you might have conflict, but you can attend live. We will bribe you.

And in addition to obviously being able to participate in the Q and A. We will also be able to give you a spreadsheet only for live attendees. That is essentially a version of my gym analyzer that will allow you to plug in your numbers and then it’ll tell you how you’re doing and as compared to the benchmarks that we discussed on the webinar.

Fantastic. Yeah. Listeners for any of you who wanted to wrap your arms more fully around your finances or even just. Start to do that for the first time and understand what the benchmark should be for all the different ratios of the money in your business. This is a great place to start. Mark really is going to be breaking it down to the nitty gritty.

And like I said, if you attend live, you get a spreadsheet that helps you do the math, which is just so valuable. So click the link in the show notes and go register now and tell all your gym owner friends [00:03:00] about it. Bring them along. Don’t miss it. Let’s pivot. Let’s talk about this topic today. The topic actually came from a unicorn society member, Nora.

Thanks Nora for the great question. And Nora asked us to talk a little bit about how do you turn your gym into a franchise? And let’s start this with the obvious caveat is that we’ve never done this, but we have a gym and Mark is now a new. Franchisee of a brand. So we have a little bit of a view and I’ve, we’ve seen, I’ve seen a few other people, not in fitness go through this process.

We have some, I think, ideas to share. I’ll start, I’ll speak for myself when I say this is not a probably an area where I feel like a true expert where I’ve helped dozens of people turn their gyms into franchises in part, because I don’t think that happens terribly often. This is a thing that actually does not happen on the daily.

But we’re going to do our best to give some thoughts. So you want to kick us off with Fisher, where does your brain immediately go when you think about someone trying to turn their gym into a franchise? Yeah, this isn’t [00:04:00] exactly an exit strategy per se, but it strikes me that we had a conversation a few weeks ago that you might’ve heard about what are exit strategies for gym owners.

And this would be admittedly an unusual way to exit because this now really would be turning The Jim now admittedly a franchise or franchise or into a sellable asset. And in order to do this, we really have to have a couple of things dialed in at a very high level. That’s probably number one. We need a system that is actually simple enough that I can scale.

Number two. We need very clear SOPs, very clear standards for what’s supposed to happen. So everything about the brand from marketing to sales to fulfillment is all dialed in and it’s very simple, right? Because the whole thing about a franchise is you’re trying to create a done for you turnkey business and it can’t be designed such that only genius rock stars can run it.

You have to give it to people of average business acumen and they should be able to just run the play, paint by numbers and get. Similar or at least good results. [00:05:00] And then third, you also need a business model that has enough meat on the bone that even allowing for some margin that not every operator at, not every location is gonna hit it out of the park.

Even allowing for the fact that it’s a franchise or you’re gonna be taking 6, 7, 8, 9, 10% off the top, there’s still enough margin in the business that it is attractive. And make sense for a franchisee and that they’re making enough money and that the business is very well insulated from risk, even in a momentary downturn.

So in the world of fitness businesses, we’re, we talk about this a lot and this is also as interesting.

And I would note one thing that’s interesting to observe is those are actually two different questions, right? So leaving aside total owner compensation, you want to be able to probably running your business, I don’t know, with no more than 60 percent max expenses. Now the other 40 percent that that can different things can do it.

You take [00:06:00] some of it out, you leave some in, you invest, you whatever, but your base operating in a perfect world, if certainly more than 65%, but ideally they should be 60 percent or even lower if you can, because that is necessary for whoever is running your play to have enough meat on the bone for them to still get good margins even after paying you out royalty fees.

So I have some other thoughts practically about Um, what this requires, but I’ll pull up their accuracy if you have any reflections or additions. Yeah. Let me just see if I can summarize for our listeners to make sure that we’re getting the same takeaway. So the three things you really highlighted here, so you need to have an overall system or model that scales being how you serve your clients is something that you can repeat at scale by handing off a playbook to someone who have someone of average business acumen who can take your playbook and run with it.

The second thing you mentioned is having good like internal SOPs, good systems that are replicable, easy to understand, and scalable. And the third thing you mentioned and started to elaborate on is just [00:07:00] enough, enough margin that there’s enough money to pay the franchisor. There’s enough money for the franchisee.

And you can, if you can keep generally your expenses under 60%, then you’re in the right ballpark. More less would be better. Did I hear all that right? Anything you would edit? Yeah, so maybe let’s just circle back to the front when we talk about having a fitness system or fitness model that scales. Can you just talk a little bit about the kinds of things that you see scale, the kinds of things you really don’t scale when it comes to delivering a great fitness service?

Yeah, I think the simplest. example, or maybe the simplest place where it needs to be simple is what is it that you’re offering, right? The thing that just emphatically does not work is offering three or four different things. I offer classes and small group, but also one on one and also a high ticket and also a transformation program.

You really have one thing probably you want to be offering. I guess you could try to, it’s funny, I’m just thinking in my head, I can’t really think of anything else. I [00:08:00] can’t think of any franchise of any size certainly that offers more than one thing. The vast majority of them out there are of course class based franchise concepts.

I have chosen to invest and go all in on a small group personal training franchise concept, but there’s a lot of gym owners tend to add these different revenue streams. They think, Oh, I have this other space, so let me, I’m going to do this other space and I can offer classes because some like there’s people that won’t do small group, but they want classes in this one.

I’m going to really grow my business that way. And it is just intuitive. That will be valuable. And it is almost always a mistake. And I say, this is somebody that has had success running a large behemoth unwieldy business by the definition that it’s, that definition does not scale. So I think that’s part of the consideration is if you’re interested in building a franchisable, you’ll have to really pick one lane and go.

All in on it. Cause you got to be dead simple. Yeah, 100%. And I’ll just tack on to that. This speaks to the [00:09:00] finance part, but also the number of ways people can buy that thing should also be simple. If you offer a million, one membership options or packs or combinations of the two, right, it’s just so complex for every extra way that someone can buy a.

thing requires all this other administration to keep track of that thing and how people can freeze. Remember, it just gets so complicated. So I think I just plus one on the other, the, what your fitness model itself, the training style has to be pretty much one thing and then the way you sell it has to pretty much be like one, two.

Three max kind of options for clients to buy, and they have to be really dead simple to explain and sell and manage. So that’s, I think that captures a lot of, I think, the fitness part of this experience. I think the other thing to consider here is. Is picking a model for which you can find talent, which for which you can find trainers to execute [00:10:00] on, right?

So if you pick something more obscure in terms of the training methodology, you’re gonna have a hard time having Franchisees really be able to find trainers who can execute well on that model So it’s got to be something that you can find good trainers to do anything you would add to that No, I think that’s true.

I think that As we’re talking through this strikes me is one of the challenges when you look at the fitness business land and Lord knows I have both been guilty of this and have also the cause of other people doing this. One of the things very perverse about the franchise model is you are, you can’t look at the people that are like the absolute best knock you off your socks operators and think that’s going to work for almost anybody else that is not.

Absolutely knock you off your And I’ve recently filmed a YouTube video [00:11:00] on this that I imagine something you’ll find a little bit provocative, which basically is my argument against success leaves clues as a good way of understanding how to run your business. Now the reality is of course it’s being flippant because it’s a YouTube, so I don’t have the time to give the full context.

I think even the video I mentioned. It’s not to say that success doesn’t leave clues and you can’t learn things from people that are more successful than you. But the reality is in my experience, and I’ve been in the game a long time now, I’ve known a lot of gym owners, I’ve had a lot of clients. The freak shows that have massive success are often, they don’t have businesses that can scale well because they’re just so good.

They’re so dynamic. They like the people that are willing to be around them. They get a very high level person. They’re like in their ways and they’re very different shades of this, but in their ways, they’re. the clients, the team, whatever, we’ll rally around the person and that doesn’t scale because this is not a personality centric business.

It’s really just about the systems. If anything, you’re taking the personal branding out of it. And a lot [00:12:00] of particular independent gyms build off of a personal brand. And that can really make sense for an independent gym. And you might even be able to do that in maybe A small set of corporate chains, but I would know there’s not really that I can think of and maybe one more comment is I’ve talked about this.

There’s not really a franchise that builds off a personal brand, at least in fitness. Now you, this is leaving aside like Mr. Beast and Shaq or people that have maybe leveraged like real actual celebrity. I think that’s like a different thing that we’re talking about here, but yes, you need a system that is realistic to find.

Um, trainers for which, and that’s going to put some constraints on how complex you’re going to get with the training, right? And that’s probably opposite kind of goes hand in hand, but it needs to be a simple system and I got to give credit to alloy to my mind, right? It’s obviously no secret that I’m a big fan of what they’re doing, hence I bought in, but for my taste, I think they’ve done my favorite job of making as serious of a fitness product as they can, but in a way that does scale.

[00:13:00] So I think frankly. If they were to try to get even more clever or sexy with the product, it stops working. At a certain point, the perceived benefits of the complexity that a really fitness centric owner thinks are there are, first of all, I would challenge that. So they’re usually not there for the client anyway.

And number two, it just doesn’t really work for the business, right? Because you rely on, you have to find these unicorns that are, Great at so many different things. So anyway, I’ll pull up there maybe a little bit of a rant, but I share that only because of my own experiences having this like wonderful business that is so great, but it isn’t really one that.

People want to model right? I’ll say maybe a final bit of like personal sad as I always think it’s and I always feel like The things that people should follow Mark Fisher fitness for they should be impressed by Never seem to get the right amount of credit and the things that people try to emulate or like the wrong Things to be trying to be emulating and that’s human nature and maybe that’s its own like podcast at some point [00:14:00] But it is something that makes me check one side and I do my best to really support people and not falling into some of The errors that they could Yeah, for sure.

Yeah. We totally could do another podcast on that. Cause I think we could probably all, both of us could list many things. We see people copy from MFF and I’m like, wait, why’d you copy that? And there’s so many other things that they were doing better. That doesn’t fit you and your market or your people at all.

And the reverse is true. There’s so many other things that. We’ve fully given away that you should be copying. Go do that. Yeah. You’re right. Another podcast. Let me go back to our list here. So we talked a little bit about having the fitness product scale. The next thing you mentioned was really SOP. So we talk a lot about SOP standard operating procedures on this podcast, the importance of having all of your expectations written down explicitly.

So you can both onboard and train and keep up the quality of your service over time. When you’re thinking about Turning your gym into a franchise. Can you maybe just list like the top few SOPs that really have to be dialed in from day one? Yeah, [00:15:00] certainly you’ll need some sort of systems for generating leads, right.

And they’re likely even a handful of. Systems that reliably can produce leads. So you’ll probably need to be able to offer some, even if the franchise or is not owning it internally. One of the things that is true about a franchise or part of the value proposition you’re offering is at least essentially is being introduced to very competent vendors that can run the franchise or his plays and You’re looking at marketing SOPs.

You need some clear sales SOPs, right? What are the followups the sales conversations? What is the brand standards for that? You’ll need SOPs certainly for the fitness product itself, which we’ve discussed. And then of course you’ll also in a perfect world probably have some sort of SOPs for customer service.

Now here’s the thing that’s challenging about franchises. To some extent, it’s a version of the same challenge that you have as an independent gym operator is. The lighter touch the franchisor has in regards to what sort of SOPs they offer, the more [00:16:00] usable they are and the more challenging it is for some franchisees who have to fill a lot of blanks.

They’re just like not being explicit. On the other hand, the more the franchise work goes down the rabbit hole and gives you every possible SOP you can think of, the more that franchise manual becomes unwieldy and very difficult to use. So this is hard because there’s not a perfect solution for this.

It’s part of, frankly, why I… Yeah. It’s part of why I want to ultimately choosing going the route of a fitness franchise listeners may or may not know. I was vetting a number of different brands in different industries. It wasn’t clear to me that necessarily I was going to be going down the fitness route.

Those are, that would be probably something in services where I could leverage existing skill sets. So those are, I think are some of the buckets of things you will need as a franchise or should you look to franchise your business. They’ve got to be written down, they got to be clear, they got to be.

usable by not requiring a complete super genius to run them. Yeah, 100%. I think the only ones I would add to that [00:17:00] list are ones about your staff. Yeah. Often I think the French, the franchise or probably offer some suggestions here, how you recruit, how you hire, how you onboard, how you develop that team over time, HR policies.

Those are things all need clear SOPs from day one to make sure you can create a really stellar team. I know you already talked about the third bucket here. So we have scalable fitness product. Scalable, simple, written down SOPs that people can follow, and then really the right margins. I know you started to give a little bit of math on there, but what else would you add to really flesh that out?

Yeah, I think within the margin, the reality is when you’re looking at a franchise, particularly for what we do, it’s pretty simple because basically you have rent, you have payroll. And then the other stuff, right? Maybe you give marking its own bucket, but that’s how you think about this, right? So again, counterintuitively to the way a lot of people instinctually run their gyms, and ki and I were having a, a conversational chuckle about this in our one-on-one before this call.

You have to resist is I call them the Ford [00:18:00] deadly horsemen of over expansion, right? You actually, what you wanna do is you want to figure out how many people can I get and how small of a footprint. with how few staff, and this is the thing for independent gym owners that I see people misstep again and again that makes their business not scalable is in their attempts to create as amazing service as possible and do their best when their team is feeling overwhelmed to add staff and add capacity and do all these bells and whistles.

They’re nice to have, but ultimately hurt the margin. They actually prevent the business, their own business from scaling the way that it could and certainly hurting their own business’s margin. But those are the kinds of things that don’t work in a franchise model. Now again, it’s hard to speak in generalities because obviously if you’re, if you have a business that’s going to be doing.

Let’s say a few hundred K revenue versus one that can do a million or even more. There’s going to be different calculations there as far as how much staff you can handle, how much spacing you can have. But when you’re thinking about good margins, similarly [00:19:00] to running an independent gym, you’re looking for how small of a footprint can I get?

How many people can I get in there? How much operational capacity can I get for whatever service it is that you’re offering? And that’s going to dictate probably some decisions you make about programming, equipment, et cetera. And then how lean of a staff can I get away with so that as few people as possible need to work on this business.

And again, larger business, if you’re looking at like a class based franchise or like an orange theory, it’s not going to be a super, super teeny staff, but as a rule, it’s a little bit of an inversion where many gym owners will brag about things like I’ve so many employees and I’ve got such a big space.

It’s actually the opposite day, right? You want to brag about how few employees you have and how small your footprint is. Yeah. Well, I just also want to normalize that for all business, especially service businesses, figuring out how to scale your people as a business grows is hard. And the number one reaction most of us have as business owners is to throw people at the problem when we’re having growing pains and more people is everyone does it.

[00:20:00] And even giant companies, we see every day on the headlines, this company laid off. 10 percent of its workers, they, they overshot it. Like they threw too many people at the problem of, of their growth pains, and then they’re paying the price through major layoffs, which obviously no one wants to do, but at our scale just is really not a cute look as a small business of hiring too much than having to lay off, which is why I think.

You’re right. Fisher is really counterintuitive as you’re growing, your job is to keep the team as small as possible, which means sometimes as you grow, you have to let go of some of the tasks and things you thought were important to simplify things over time, instead of thinking that you have to maintain the same exact way of doing things as you scale, it’s not the case, the only way you get that kind of those margins to scale with you or even increase as you grow is by ultimately doing less.

As you get bigger and that’s really counterintuitive. We’ve made the mistake many times and, and I see it every day and unicorn sighting numbers, and it’s [00:21:00] not an easy one to overcome. Like I said, big businesses who have tons of really smart, high paid people sitting around boardrooms, make the mistake all the time.

Let me, let’s recap and wrap it up here. Cause I know we’re at our time, which is basically for those of you thinking about maybe turning your business into a franchise someday, we didn’t even get into the legal stuff and how big you got to be, we can maybe circle back and add some more thoughts there.

But at the very least, I think Mark’s list of three things is the list to start thinking about, which is, do you have a fitness experience and product that scales and as simple as possible? Do you have SOPs that document all of your expectations as clearly as possible? And do you have a financial model?

That leaves enough meat on the bone to be franchisable, to leave enough money in there for all parties involved, which means you got to keep the space small and the staff low in a nutshell. Yeah. Any final thoughts here, Fisher? Yeah. I think the only two things we didn’t touch on here. Yeah. Leaving aside, obviously the legal piece is just like very expensive.

And for a lot of people, that’s going to be the barrier. It’s just going to be so [00:22:00] prohibitive to afford the cost of going through all those legal. Uh, rabbit holes, legal hurdles, legal, something that’s illegal hoops, perhaps you jump through them. Yeah. Because the franchise is, it’s pretty highly regulated and that makes sense because there’s been a lot of crappy miles over the years, really taking advantage of people, so that the government has a lot of strong opinions, a lot of things you need to do.

The only thing we didn’t touch about. Two that I would highlight is something an independent gym owner is going to need to think through that they will tend to not have a lot of experience doing is part of making this all work for the franchisee because understand if you run a franchise for It’s challenging because you need to create something that the throughput for the client is going to be positive, but you also need to be servicing the franchisees need, even though they’re not your employee, they’re not your client or your partner.

It’s a weird thing. Yeah. And that’s a relationship that in many franchise universes. Can be fraught, right? Cause you’re dealing with people who have real entrepreneurial spirit, but I’ve also [00:23:00] agreed to do things the franchise’s way. And there’s often a rub there that has to be managed and that’s probably its own podcast we can talk about at some point.

Yeah. And especially as you have more and more experience navigating yours, Fisher without spilling too many beans, we can probably have more and more chats about that over time. Yeah. And I think we’ll see early innings here, but I feel, I hope one of the values I’m going to bring this entire system is just.

I’m an adult. I’ve done this. Also, I’m pretty clear on what I’m getting into. I think I’ve got like pretty reasonable expectations and so far, so great. So far, so great. So I pride myself on, I look forward to being the, hopefully the least pain in the butt franchise in the system. I want to take that title.

But the two things I had mentioned there, which we won’t have time to talk about in great detail is you have to understand how to keep your build out as affordable as possible, right? Because based on what your EBITDA is based on what your profit is over like a two, three, five year period, if. The build out is so massive.

that you can’t make a return on that. That becomes an issue that doesn’t make [00:24:00] sense. An investment anymore number one and then number two related to the build out is what is your proven strategy for a ground game so that you have a lot of butts in the seats when you open again, an independent gym operator.

They don’t have. By definition, they don’t have all these reps for building out new locations and then filling the seats of new locations in different markets. And those are two other things that one would need to keep in mind that are requirement for having a franchisable scalable gem model that you would take on franchises for.

Awesome. Awesome. Big shout out to Nora. Thank you, Nora. Again, for asking this question. Dear listeners, I hope that you got some great thoughts out of how you might get started thinking about making your gym franchisable someday, and we’ll do more on this topic over time. Uh, but go ahead and click the link in the show notes and go sign up for Mark’s super fun webinar to learn all the financial benchmarks you should have on your business.

As of today, whether you’re franchising or not, these are useful benchmarks to know whether you’re heading in the right financial direction. Thanks for the great conversation, [00:25:00] Fisher and listeners. I’ll see you on the next one. Have a kick ass day. Bye.