123 FIT: Franchisees Debate Viability of Franchise, 30 Minute Fitness Biz
October 2, 2008 by Sean Kelly
Filed under Business
(Franchise Pick) Related reading:
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9,509,657 Reasons to Read Disclosure Documents Before Investing
“Quiznos of Fitness” 1-2-3 Fit in Financial Trouble
“They Lie”: 1-2-3 Fit Franchise Owners Sound Off
The 123 FIT organization and franchise concept has taken some heat from commenters on this blog – in part because it is owned and operated by the much maligned (in franchise circles) executives of Quiznos. But 123 FIT is not an isolated target for criticism; the very viability of the women’s 30-Minute circuit training club as a sustainable business model has been called into question. Industry critics and failed franchisees alike complain of high recruitment costs, low retention rates, oversaturation of the market and profit centers that are too limited and too small.
Commenter Pete (anon) claims to be a successful 123 FIT franchise owner. He contends that the 123 Fit company have been given a bad rap, that the 123 Fit concept is sound and, contrary to what many would have you believe, women’s circuit training is “hot.” We invited him to share his view, which he has graciously done. (I’ve edited slightly to delete the side chatter, added line breaks and formatting for readability)
Pete (anon) writes:
Ok. Here are some specifics… these numbers are mine – rounded off… what I will share is tested and true. So let’s get to the business.
Overhead should run $11K – $12K per month. Here is a breakdown.
- Rent $4K.
- Labor (to cover 77 hours – total coverage) $4K.
- Marketing $1000 – $1500.
- Royalities $600.
- Credit card fees and member service fees $600.
- Utilities/insurance $500.
- Eqpt/Debt Service $600 – $1000
Someone had posted they spent $300,000 in 9 months – so they probably paid cash for equipment. If not, add $600 – $1000 for equipment. Either way, this is a good baseline of monthly spending. My experience is that this is accurate month after month after month.
Revenue. For the revenue. I will use 250 members with an average of $33 dollars per member. The avg per member will vary by club. Rough formula for why I am experiencing that. 125 members at full price of $44 and 125 members at $22. The ones at $22 are add ons or members we signed up on special deals whe we first started.
So here is the math –
- $8250 in monthly dues.
- 12 new members per month.
- 10 pay enrollment fee of $100 plus first months dues. That is $1440.
- $2000 – $3000 in personal training.
- 2-3 of the new members prepay $1100 – $1700.
- So you get to $13K – $15K per month this has been my experience.
I know the math is rough. This is where we are but adding the 10 – 12 new members per month. Even if we lose 6 members per month and add 12 we have a net gain of 6 members per month. In 12 months we go from 250 members to 322 members and you can redo the math from there. More monthly dues and more members to sell Personal Training to. So there is the revenue.
Here is where we have found success.
Price. We strictly adhere to the corporate sales tour. It is incredibly effective in showing the value of what we offer. Price is not the issue when the tour is done. So we get full enrollment and $39 plus $5 towel for all new members. The towel program is not optional. We just include it and quote $44. When the towel program was rolled out I can recall several clubs on the call resisted charging for towel service. Most if not all of the big gyms do – the YMCA near us charges $1 per towel. So unlimited for $5 is a good deal.
Advertising. We focus on “weight loss” rather than exercise in our advertising. We do this at the suggestion of corporate. Last spring they launched the weight loss marketing. Once again many clubs resisted it. We embraced it. The respones we get from weight loss ads VS exercise ads is in the multiples.
Employees. Our employees are such a big part of whether we sell things or not. We hire people that are passionate about helping people. They are paid on production. They know they are valued and they belive in our exercise/weight loss programs. Not only does this help us get new members but it helps us sell personal training. People get results, have a positive experience in our club so they spend money with us.
Capital. Fortunately we had the the capital to get through the normal start up and operating period. It took us longer than 9 months to reach where we are. So when I read that someone only gave it 9 months it is important to understand that it sometimes takes a bit to build a business and to get to a tipping point. So I don’t mean berate those that did not have the capital to get to the tipping point – I just assumed people knew it can take some time.
So with all that said I now want to offer a sincere apology to Barb and any Sean and any others I offended. Just as you are passionate about your experiences, I am too. And members and potential members do read these blogs. When a potential member came in recently and told me that 123 Fit was being trashed on some sites and that caused them to decide not to join I became engaged in this and other sites. I just want to get the word out that many 123 Fits are experiencing what I am. That the future for 123 Fit may very well be better than the experience Barb had with them.
I can understand the bitterness and hurt from folks that were first in with 123 Fit or many other concepts. Certainly there is a learning curve for any business. Even with experienced and long standing businesses mistakes are made – New Coke? But I am sorry people get hurt in the process.
But several of us are making it. I am just here to protect my business – not hurt or berate others. So you have my sincere apology.
….please know that success or failure with 123 Fit does not make you OR 123 Fit bad people. You mentioned I may be Brooksy Smith. Well I am not. I have no love lost for him just an arms length relationship. Trust but verify. But I have come to learn that he is not evil. He did not start 123 Fit so that he could oversee failure. I believe he is doing his best. And based on recent changes and the profitability of many clubs – they may have actually figured it out…
WHAT DO YOU THINK? SHARE A COMMENT BELOW.
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My name is Rita Wilson and I own Weight Loss Centers (non-exercise). I have been in the business for 6 years, followed the formula of the franchisor and succeeded.It is a different company, and I cannot speak for 123, but everything you give is excuses on here.
It sounds like you are too busy keeping up with everyone else’s gym, how could you have given it 100%? Sometimes, to cut through the clutter in marketing you have to be persistent. You may get turned away, but that is no reason to give up! Giving up is for losers. Didnt you want to be a winner with your franchise? You can’t just try the zors suggestion once and say it does not work. My centers do over 5 million a year in gross sales and I have a 25% net. But I have been hung up on, told to remove email lists and to never call back, but my staff is persistent.
This is truly a case of not following the system. No wonder you were a failure with your franchise. You did not play by the rules.
It is obivious your system was tried and proven. If you are successful I am very happy for you. Since yours is not a fitness business I don’t think your advice is applicable. Persistance is good. There is a point where when you do something over and over and it isn’t working you have to do something else. I am not making excuses. It is the reality of what was happening. If something is not working in is pure insanity to do it over and over and over. There is a point where you have to try something else. The proof is in all the zees who have went out of business. Even before the recession. Everyone said the same thing. The first generation is just about wiped out. Only a few are left.
I wish you continued success and may you prosper because you must be doing something right. I have been out of business for over a year. I know what went on. I still have relationships with some of my club members who miss the gym.
Following the system is an excuse that zors use to throw the blame off the zee. If you are in a flawed system it will not work. Tell that to all the zees in 123 Fit who have closed their doors. One lady closed her doors after a few weeks. Could it be that the numbers we had before we opened were not true. Could it be the zor gouged the zees so much that they could not reach success. Like one area director told a zee that never opened, “You can go out anytime.” Real good of him after they paid the franchise fee, bought a second one for a deal of $1000. They never opened and are having to sell their home. Their build out came back $50,000 more than the original bid. You are not listening are you? By the way our’s came back $50,000 more than what corporate said it would be. Is there a pattern here.
Stick to what your doing because it is working for you. Just because you say you are successful doesn’t mean you are. All I know is I wish you well and hope you never get hurt in any way.
Sorry about the typos. Following the system is an excuse to throw the blame on the zee. Every failing system says the same thing. They didn’t follow the system. It is so obvious. They are making excuses for their failure to care about their zees.
How long were you open?
Ok my gosh, lets back up for a minute – Barb has real concerns lets not attack her business ethics, I would be psst to if I had an investement that went sour because of corporate lack of professionalism and business sense. Quiznos may know fast food, but what of health club?
After all – it was not just Barbs club that went under it was all 123 Fits, so Rita are you saying that all owners of 123 Fit were ignorant!!!. I beg to differ I was there – and from what I saw – lack of business sense.
I was shocked to hear Ray was involved – I worked for Family Fitness for 15 years, and Ray has always ran an excellent franchise. He may have given 123 Fit the concept. but Corporate chose to do what they wanted.
I’ll give an example – Family Fitness survived because of it’s concept, 2 weeks free, and 1 month free – lots of personal service and lots of referrals.
Door hanger were a very small percentage of our sales, the referrals and the personal touch is what kept us above the rest. I suggest the club franchise owner and corporate at Parker CO. to do the same,one on one marketing they refused, Instead they wanted us to sell this outragous membershps,
before even trying the club. Many people in Parker were psst at 123 Fit and how they handle everything. I left the club because I brought in 60 members and never saw a dime of commissions… I have the contractts to prove it and I did it all through referrals. It was a joke. I saw the writing on the wall, within 3 month he went under. If Ray really had his hands on these clubs, they would still be around – 123 Fit gave the impressions that Ray was behind them, not true – I new better. So Rita, am assuming you are related to Ray – instead of faulting the franchisers of 123 Fit who lost their shirts,
Give them some helpful advise – And lets not forget the reason Family Fitness did so well, it was after all a fmaily run business …. no outsider really had a franchise with Ray. So if you really want to help the 123 Fit owners, why don’t you offer them franchise in your clubs – or maybe they should contact Jack La Lanne, the Pioneer of health clubs. I’ve been watching clubs pop up all around me for the past few years, Lifetime Fitness, Mountainside Fitness… but I can tell you this, none will survive -unlike Family Fitness – their concept is all about money and not personal touch. Today anyone can be a personal trainer, it’s a joke to me, that they even charge for that service. Back in the day with Family Fitness the instructors as they were called,were part of your membership and had to read a huge manual before even becoming an instructor. There is room for great health clubs – just go back to the basics. Barb don’t give up your dream, peruse your own clubs, the concept is easy. Keep the initiation fee feasible, low dues and lots of personal touch– work your referrals, – find your target market yourself it’s not hard. Work those markets like a politician, become a positive influence in your neighborhood working with the area businesses and merchants is your best bet.. That’s how we did it back in the days with Family Fitness, people haven’t change – they still need to feel cared for and service plays a big factor. Trust me, you do this and the money will come – members will come to you – These big clubs are missing the boat on all levels. Don’t give up – don’t sit back and accept what happen with 123 Fit go out and create your own success. Infact their is a hugh need for the ederly in Parker, no one caters to them – this market is untapped, and am sure other thier are other places like this. The baby boomers are ready for their own place, not hugh clubs with balsting music and glitter, but somewhere they can get serious results.
I’ve been looking to get to the health club business, but quess what..I get turned down because am older and over qulified. When the truth is I’m interview with 21 year managers who are afraid I may take away their jobs.
How sad is that…
Good Luck
We closed the doors on Jan. 12th 2008. We were open eight and half months. We tried to make up for the lost of the cost of the build out. I knew if we didn’t make it up we had no chance. We tried everything to make it work. Unfortunately we were not allowed to get in the hospitals, churches and schools. We got kicked out of parking lots. Some businesses told us not to keep showing up because there were signs on the doors said no soliciting. We found later we were not suppose to be putting flyers on cars. Some areas do not allow this. We got phone calls with very upset people about putting flyers on their cars. A new restaurant opened after we did and I gave them free week passes all the time. When I asked the manager he told me he never saw them. All I can think is they threw them in the trash. Holding the sign where traffic worked good. Nothing was better than personal notes to people. Our summer was busy. We thought we had a chance. When school started in Sept. it died. People went on hold which is not a good thing to keep a business running. Since we couldn’t make up for the lost on the build out we ran out of money. The cost of running a club is alot more than we were told. We had contest and I believed I developed a sense of community. Ladies many times worked out before lunch than ate lunch with me. I personally lost 30 pounds to be an example to everyone. The summer was alot of fun. We sincerely tried to make it work when we should of never opened. The club is not the business the numbers are. Even if we never opened we would of had to go bankrupt because of the lease and the royalties. We lost two houses that we had to set us up for retirement. Their gone. We went from living a comfortable life to living in WA. with no heat and barely enough money to buy the food we are use to eating. There is good explanations why this happened. Which I can’t share all the details but the zor did not give us the support and the advice we thought we would get. Good zors are there for their zees. I am happy you are with a good one. It sound like it anyways. I have worked with the public all my life. After a month in business our area director said, “You are own you own.” Why go the franchising route if their not going to help you? Instead we feel like we were lied to and taken advantage of.