negotiate right out of the gate.”
The Sunshine Fitness Management duo says that rent and
tenant improvement are almost always give and take. When one
goes up, the other goes down, but malls serve as one type of real
estate where this is a little less true and where there are good deals
to be had.
“Regional malls that are trying to keep space filled are a lot of
times very aggressive in deals that they are going to do, and we’ve
found some success in those type of facilities,” said Dore. “Those have
been great because they obviously have a ton of parking, and it seems
like they always give the most tenant improvement and free rent.”
Never Stop Negotiating
One of the biggest missed opportunities, according to
Sunshine Fitness Management, is that franchisees sometimes stop
negotiating once they sign their name. Every lease renewal is an
opportunity to renegotiate rents, tenant improvement and any
other issues that may arise during the initial lease term.
A couple of years before the end of a club’s first term, Dore
typically finds a few potential locations in a given market and starts
a discourse with the respective landlords.
“We can use that to leverage our renewal and as an oppor-
tunity to negotiate some additional refurbishments or tenant
improvement money or even a new lease with our current land-
lord,” said McGuiness. “Sometimes it even opens up the possibility
to move the location. There’s some lead time involved with that so
you need to have the pieces in place to leverage against each other
in order to make that work, but we’ve been in a position where it’s
worked out on several occasions and usually got more out of our
current landlord than we ever would have expected.”
Dore notes that for some of the older clubs, relocating when
lease renewals come up can provide a much needed update for the
Planet Fitness model.
“It’s that fear of a landlord losing a good tenant that has resulted
in some really good deals at existing facilities and also the opportu-
nity to expand, which is where we’ve really seen the biggest bang for
our buck when we do these renovations and expansions,” said Dore.
“Anybody that opened clubs early on will tell you the model was just
different – 13,000 to 15,000 square feet was the norm, and that just
doesn’t allow you to maximize the potential of what you’re able to do
now with the Black Card Zone. We’re seeing some drastic increases
when we make those renovations and expansions.”
By relocating and refreshing a space, Sunshine Fitness
Management has seen EFTs go from $80,000 to $140,000 within
the same shopping center in one instance and from $75,000 to
$130,000 in another.
Regardless of the challenges of leasing space and negotiating
the contracts that come with it, for a lot of franchisees, it is still the
best option.
“We look at ourselves as a marketing company that sells
fitness, and commercial real estate isn’t necessarily where we want
to be,” said Dore. “We know the health club business, we know
how to operate it, and just personally feel that we have a system
that is working.” G
Christina Cannon is the PFIFA communications manager
and associate editor of Geared Up. You can contact Cannon at
678-797-5160 or [email protected].
27