the real estate,” added John Clancy, franchisee with Planet Fitness
Midwest.
This is nearly always easier said than done, however.
Depending on how expensive the land is, franchisees should expect
to pay from $700,000 to $1.5 million for a decent plot of land,
equity for the land and for the vertical build.
“If you have a big enough group and you have that kind of
cash flow, it makes more sense for you to pay yourself from a real
estate perspective because you build equity. As long as you have a
good enough cash-on-cash return, it’s better to own the real estate,”
added Clancy. “However, if you’re a smaller franchisee and you’re
on your third or fourth site and you don’t want to come up with a
million dollars because you could open another two units with that
million, that’s going to throw off a lot more cash flow than owning
the real estate. You could open up a Planet Fitness® and throw off a
million dollars a year. You’re not going to have any real estate that is
ever going to throw off a million dollars a year single-use like that.”
Another word of advice when building a new club, notes
Clancy, is to not sacrifice location in order to save a few bucks on
the real estate.
“The actual property location is very important,” agreed
Kindler.
But not just because you need that to attract and retain
members. The site you select to build a new club on can often
deliver the largest blow to your wallet. What grading of the ground
needs to be done? Are there wetlands or other environmental issues?
What are the local municipality’s rules for storm water runoff?
“In Pennsylvania, this must be addressed, so either the prop-
erty has a retention pond to hold water or a system of underground
piping must be put in,” explained Kindler. “As you might be able
to tell, all the above factors can make what is thought of as a great
location be very expensive.”
“We’ve made some mistakes for sure, but
when you start to work with people and they
prove themselves, you stick with them.”
— John Clancy
Planet Fitness Midwest franchisee
found that this best practice over the years has saved us significantly
and allowed us to keep prices in check.”
Bouchard, who also owns a construction company, operates in
a similar way.
“We take measures to get multiple bids to do a cost analysis
and value engineering with all of our subs,” he said. “We meet with
all of our subs prior to getting all the permits and finalized plans,
and we go through the HVAC, the electrical, all the plumbing,
the tilework. We make sure that everything on those plans is done
properly and there’s not another way to do it that would save us
money.”
Dore suggests another way to keep construction costs in line
is to have a standard format when it comes to how you review a
contract so you are comparing apples to apples, and Clancy notes
the importance of having a good core team that you can trust.
“We’ve made some mistakes for sure, but when you start to
work with people and they prove themselves, you stick with them,”
said Clancy. “We have that core team, and in different regions, we
have a little bit of a different core team. That’s really the key to it.”
Clancy’s main team members consist of contractors, electrical
engineers, civil engineers and architects, and having a team in
place that allows you to confidently tackle building projects and
personalize your club is one of the main advantages to becoming
your own contractor or developer.
“The biggest advantage is you create a sick wow factor,” said
Clancy. “In my opinion, the key to the actual building of the Planet
Fitness is creating this crazy wow factor, and the fact that you can
do that with the design, that is the biggest advantage.”
Dore thinks that giving franchisees the knowledge to become
developers will truly set the PF® brand apart.
“Having the flexibility and ability to actually build new loca-
tions should be a top priority of the franchise and the franchisees,”
said Dore. “We can all capitalize on those opportunities because it
is almost an untapped market right now in a lot of areas. I know
a lot of guys who are actually making great headway, so we look
forward to learning from them and, over time, maybe that is
something we can learn to adopt.” 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].
Once the site work is completed – however expensive that may
be, the actual build can begin, but this too has its hidden costs.
Kindler notes that over the last few years, his company has seen an
increase in construction costs upward of 15 percent.
“The cost of goods is definitely going up. The cost of our
transportation of goods has increased. The labor costs are going up.
Everything is increasing,” said CJ Bouchard, franchisee with PF
Eastern NC.
Nonetheless, there are still a few precautions franchisees can
take to keep their construction costs in check.
Eric Dore, franchisee with Sunshine Fitness Management,
notes that even though the company has used the same general
contractor for 19