Want to open a gym on your own? Then you come to the right place.
For the majority of gym owners, getting into the fitness industry is a labor of love. Working out is their passion and they have a huge emotional investment in their business. That’s great, but unless that emotion is tempered by solid financial reality, their gym dream can quickly become a nightmare.
In this article, we reveal all of the cost of opening a gym that new gym owners will encounter. Costs will vary in different countries, with the prices listed here being based on the United States. For other countries, you can refer to the expense structure and ratio.
We also consider some of the most critical start-up questions that gym newbies will face.
Let’s discover the financial facts to bring your gym ownership dream to reality.
Table of Contents
- Independent Ownership or Franchise?
- Insurance – It’s not Optional
- Licenses & Permits
- Location, Location, Location
- Equipment: Lease or Buy?
- Equipment Maintenance
- Interior Design & Renovation
- Utility Facilities
- Staff Wages
- Website Costs
- Management Software
- Other Costs
- Gym Budget Template
- The Final Tally
Independent Ownership or Franchise?
The first and most critical decision that a new gym owner will have to make is whether to strike out as an independent operator or purchase a franchise. Gym franchises seem to be popping up everywhere but every town has a few independent operators with a reputation for personal service and attention to detail.
Take your time to do your research, whether choosing to franchise or opening a gym on your own. Franchise agreements can have hidden costs to start a gym, and independent ownership can be challenging to plan for if you don’t have a mentor or business coach.
Here is an overview of the pros and cons of buying a gym：
- Association with an established, creditable industry name
- Ready-made business and marketing plans and advertising material
- Equipment and interior design part of the package
- Franchisor chooses the location and sets up the gym
- Franchisor responsible for staff training
- Lack of independence
- Business creativity stifled
- High franchise fee
- Percentage of income must go to the franchisee (5%-20%)
- Negative actions of other franchisees or the company will reflect on your business.
Gym Franchise Costs
Gym franchise fees consist of the initial investment and the royalty fee. It is also important to consider the initial agreement length, which tells you how long you will be tied into the franchise.
A survey of the Top 10 gym franchises in the United States provides the following averages:
- Initial Investment – $80,000-$120,000
- Royalty Fee – 6%
- Initial Agreement Length – 10 years
Gym Franchise Examples
Planet Fitness is one of the most expensive name brands with an initial investment of $969,600 – $4,242,500 as of 2018, which includes the typical industry expectation of 7% royalties and a whopping ten-year agreement.
A mid-range cost to open a gym franchise would be Pure Barre. The initial cost for this franchise is $178,350 – $370,000, which comes with 7% royalties and a five-year agreement.
An example of a lower cost gym franchise is GymGuyz. They only ask for $56,072 – $122,482 as their initial investment and 6% royalties. However, they do require a lengthy ten-year agreement.
Insurance – It’s not Optional
With hundreds of people exerting themselves inside your premises every day, it is vital that you protect the business from liability if things go wrong. There are five main types of insurance that a new gym requires:
- General Liability – this provides protection if your staff or equipment are deemed responsible for accident or injury to a person while they are on the premises.
- Professional Liability – this provides coverage if a staff member is found to have committed ‘errors or omissions’ which have led to accident or injury. An example would be the staff member not picking up weights and the member tripping over them and sustaining an injury.
- Business Income & Extra Expense Coverage – this provides a payment to allow you to repair and temporarily relocate if your business is affected by fire, flood or earthquake.
- Worker’s Compensation – this provides coverage if an employee makes a claim against you for a work-related injury.
- Equipment Breakdown Coverage – this provides protection for expenses incurred due to equipment breakdown. If the equipment is out of warranty or the repair is not covered by the warranty, the costs for repair will be repaid.
You should allocate $6,000-$12,000 in annual premiums for your insurances, with the lower amount providing more limited coverage, while the higher amount will reimburse you for such things as loss of potential membership fees.
Licenses & Permits
It is vital that you adhere to all legal requirements associated with opening a gym. These will be slightly different depending on what part of the world your gym is located. You can expect to be required to complete, and pay for, the following:
- A business license
- A trade name registration
- An employer registration
- Health and safety certification
Aside from licensing your business name, you’ll also have to ensure you follow both federal and state licensing regulations. Licensing typically means you’ll need some kind of legal counsel. Having an attorney on retainer to help with this process can be an immense help.
You should budget $3000 to cover the cost of legal fees, licenses and permits.
Location, Location, Location
The location and size of your facility will depend on several factors, including:
- Whether you are franchising or going independent
- Your demographics market research
- The competition
- Whether you are buying or leasing the building
- Whether you will have a separate cardio area, a men’s and women’s gym, a food area and a reception lounge.
Although prices vary markedly, you should budget for $150-$300 per square meter per year. An average gym size is 278 square meters.
As an estimate, a 278 square meter facility that cost $200 per square meter, would require an annual rent of $55,600.
To buy a 278 square meter warehouse style building will cost an average of $350 per square meter, for a total cost of $97,300. The cost of the land will add an extra $20,00.
Equipment: Lease or Buy?
Many gym owners decide to lease their equipment in order to reduce the start up cost for a gym. Leasing also allows them to upgrade the equipment regularly, something which will be greatly appreciated by their clientele. This will also reduce maintenance costs and equipment downtime.
On the other hand, you will be able to claim the new gym equipment cost as a tax expense, which will help with your first year’s tax bill.
Over the life of your business, leasing will always work out to be more expensive.
You should budget to equip your facility with premium quality gym equipment. Check out the best manufacturers here.
You can expect to pay between $48,000 – $98,000 per year to lease a gym full of equipment.
You can expect to pay $10,000 – $50,000 to buy the equipment to outfit a 278 square meter commercial gym. The lower cost will provide you with standard quality commercial gym gear, while the higher rate will give you premium level padding, customized positioning and the highest spec pulleys and cabling.
If you do decide to purchase your equipment, you should know that China is home to many top fitness equipment manufacturers with high quality and cost-effective gym equipment.
Nothing is more frustrating for gymgoers than faulty equipment. Frayed cables, ripped seat cushioning and malfunctioning monitors need to be fixed promptly.
You should allocate $1500 per year for gym maintenance costs.
Interior Design & Renovation
You will want to allocate a reasonable budget to allow you to style the gym. If you are buying into a franchise, you won’t have much leeway in this area with the bulk of your interior design features provided. However, you will still have to purchase the following:
- Weighing scales
- Reinforced Gym Flooring
You can expect to pay around $40 per hour for construction costs. Budget for 150 hours to complete the job, for a total of $6000 for labor. Add another $15,000 for materials for a total gym utilities cost of $21,000.
You should allocate a budget of between $20,000 – $120,000 for interior design and renovation, depending on what size lounge area and how extensive you want the bathroom facilities to be.
People will often judge the quality of a gym on the basis of the utilities. You should provide a spacious changing area with at least a half dozen showers and bathroom cubicles for each gender. It will pay off to spend a little more on your gym utilities cost to make your members feel pampered.
Gym utilities costs can include internet and cable, air conditioning and heating, water, trash, and electricity. All of these will vary greatly depending upon your area and the size and the amenities of your building. Your hours of operation also have an impact.
You can estimate your gym utilities cost for your start-up as well as your monthly cost of running a gym by contacting each utility provider in your area and asking for estimates.
You should base your staff numbers on a ratio of one employee to 50 gym members. So, if you are planning to cater to 1,000 members, you will require 20 staff members. This number will include sales staff, receptionists, cleaners, floor staff and personal trainers.
Payroll expenses will depend largely on your location. Not only is minimum wage determined by region, but expectations for contractor wages across various staff positions will vary greatly. For example, in an area like New York, personal trainers average over $25/hour, while the same position in North Carolina is only $18/hour. If they are employees, remember to add insurance and worker’s compensation costs to the mix.
Other staff members may include sanitation workers, a lawyer and repairmen. These employees are typically paid by hourly rates which vary by location.
2019 average annual salaries are:
- Fitness Instructor – $40,000
- Personal Trainer – $58,000
- Gym Manager – $69,000
You should budget about $800,000 for staff wages annually.
You should budget $2,500 for your opening day marketing campaign. You can apply traditional local marketing, such as billboards, radio and collaborations with local businesses. Ongoing marketing costs should be budgeted at 7.5 percent of your turnover.
However, advertising and marketing don’t have to be elaborate to be effective- many gyms nowadays rely solely on Instagram and Facebook for their marketing strategy. Often, they let word of mouth do the rest. Initially, a lot of this budget will be dedicated to giveaways, contests, free memberships, and other activities directed at increasing your membership numbers.
Even though you may get quite a bit of your clientele from walk-ins, most gyms report that their customers research them before walking in and making a decision to join. This buyer behavior means your website is your first point of contact for most clients.
That’s why every progressive gym needs a responsive website that showcases the facility while also providing plenty of quality information to keep visitors engaged. You should hire a freelance fitness writer to keep your website up to date.
Expect to pay $300 for the initial website build and $25 per month to keep it updated.
Gym management software will greatly simplify the day to day running of your business. It will automate bookings, check-in, point of sale, member training diagnostics and payroll, freeing you up to focus on what you love – getting people fitter!
You should budget about $200 per month for gym management software.
Lawyer Fees – $7,500
POS System – $1,500
Signage – $250
Staff Uniform – $1,000
Gym Budget Template
You’ve got quite a bit to consider when it comes to gym operating expenses. Daily operations take careful planning for every business. You might consider relying upon a gym budget template that will keep you on track. A gym budget template can help you stay on top of monthly, quarterly, and yearly cost of running a gym.
Click here to download your template and plan your gym right now!
The Final Tally
We have now covered all of the costs that you will face when starting up a gym business. No matter it’s a small gym or big gym, you can see them summarized in the chart, so that you can estimate the total costs according to your own needs and budget template.
I hope this article has been helpful. If you have any questions, please share them in the comments below.