CVP Analysis
Introduction
According to “Snap Fitness,” (2011), “economically, the health club industry has proven to be recession-proof, averaging an 8% annual growth rate since the early 1990’s across all health clubs and gyms,” (Fitness Franchise Opportunities). Snap Fitness franchising offers opportunities for entrepreneurs to open a successful business that has already allocated the following benefits and services for consumers and for the franchisee:
Location of fitness needs is open 24/7
Can be easily operated with one employee
Affordability for the owner and consumer
Business training and start-up marketing include
Snap Fitness clubs that have been open for 2 years as of December 31,2012 o (13%) have more than
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Most of the staff is paid an hourly wage, and these costs are dependent on the size of the health club and the number of hours of operation. The managers of the facility are paid a salary plus a percentage of business revenues. In addition to variable labor costs, there are some facility and equipment expenses that are variable. The major expenses in this category are the utilities. Additionally, equipment is depreciated, retired, and purchased on a continual basis. According to data from the health/fitness facility industry, startup fitness equipment costs range between $20 and $25 per square foot. Club owners also invest in equipment upgrades or replacement machines to stay current with equipment trends. According to the International Health, Racquet & Sports Club 2010 Profiles of Success, the median reinvestment allocation in 2010 for fitness equipment was 1.3% of revenues with some operations investing as much as 4.7% of revenues (American College of Sports Medicine, 2011). Repairs and modernization costs are usually services purchased by fitness clubs to provide repairs on existing equipment or installation of new equipment from trained technicians. Additionally, fitness owners have insurance to pay for some of these variable expenses according to the amount and types of equipment. Some taxes, like property taxes, are fixed. Others are variable costs, tied to income and some expenses. Sales taxes are paid on income from members and
The rise of the U.S. health club industry can be traced back to the 1980s and 1990s when the majority of health clubs emerged. By 2004, this $14 billion industry claimed 41 million members. Although the health club industry operated in a perfectly competitive market, several prominent key players gained large market share, including Bally Total Fitness and 24 hour Fitness. This perfect competition encouraged entry of smaller emerging firms into the industry. In 2004, the health club industry consisted of 26,000 clubs in the U.S. Of this growing market,
A fitness center or health clubs greatest variable cost is maintenance and equipment repair. Keeping
Business taxes can have a huge impact on the profitability of businesses and the amount of business investment. Taxation is a very important factor in the financial investment decision-making process because a lower tax burden allows the company to lower prices or generate higher revenue, which can then be paid out in wages, salaries and/or dividends. Business taxes include, Federal Income Tax; a tax levied by a national government on annual income, Payroll Tax; a tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee, Unemployment Tax; a federal tax that is allocated to unemployment agencies to fund unemployment assistance for laid-off workers, and Sales Tax; a tax imposed by the government at the point of sale on retail goods and services. Sales tax is based on a percentage of the selling prices of the goods and services. Consumers pay sales taxes, but effectively, business pay them since the tax increases consumer’s costs and causes them to buy less.
Operationally speaking, the two franchises operate in a very similar manner with some notable differences. Planet Fitness and Snap Fitness are both self-service facilities open 24 hours a day, 7 days a week. The support offered by each respective franchisor is essentially the same as it relates to training, marketing and advertising (see Table 2).
The cities receive their revenue from companies, state and federal accounts. But, a lot is paid by the residents of the state, for example; property taxes, permits, parks and recreation, homeowners taxes, taxes from businesses, court fees and fines, utility companies and other outside franchises. City revenue can also take fees for some services like, amusement taxes, and hotel occupancy.
First of all, Property Taxes, Revenues and Interests are worth-based taxes paid on various types of property (e.g. residential and commercial real estate, motor vehicles, farm machinery, etc.). The body charged with tax collection is responsible for taxing authority appraises the
For a fitness center or health club, the biggest and most ongoing variable cost to think of is maintenance and repair of the equipment. To maintain quality, of the fitness equipment must be kept in prime condition at all times. Although monthly and routine checks of the equipment may be part of an employee’s responsibilities, replacing or repairing damaged equipment could be a cost that varies greatly from month to month. One way to try to reduce or manage this variable cost is to ensure equipment is inspected regularly and problems are being addressed while they are still small.
The health club industry has continued to see an increase in the amount of health clubs/fitness centers. Since 1992, the United States has seen the number of health clubs increased by almost 40 percent, from 12,635 to 17,531 facilities. It has also seen an increase in membership by almost 60 percent, from 20.8 million to 32.8 million. What this all means for Fun 4 Life Fitness Center, LLC is that the market is ever growing which translates to more competition. Most fitness centers offer a variety of services to address the needs and convenience of the customers. Some of these services includes personal trainers, facilities with state-of-the-art equipment, and programs that cater to mostly every demographic.
Fitness is in. The percentage of people belonging to health clubs and gyms has doubled over the past 20 years. More growth is expected, fueled by an aging Baby Boomer generation in search of eternal youth and the reality that regular exercise can prevent or control diseases that are driving health care costs relentlessly upward. The 24/7 fitness opportunity is the newest model of fitness centers today.
Because of its popularity in the local and international scene, LA Franchise makes for an attractive franchise opportunity for those entrepreneurs who are interested in getting involved in a health and fitness business. Before engaging in this type of business it is important to first have a brief overview of what the franchise is all about, therefore requirements include having basic business and management experience and knowledge in the health club and wellness center type of business is also an advantage though not a pre-requisite. Having
Ms. Anne Mitchell is a fitness manager at the Westlake Recreation Department. The recreation department works to provide various forms of exercise for people of all ages. A member can swim, run, and lift weights, and there are various programs for children such as basketball leagues and soccer leagues. Ms. Mitchell works to organize and administer events, such as scheduling trainers to work with groups of people, create exercise plans, and she works to create a budget to include activities for all members. She has been in the fitness industry for over 15 years. Most fitness managers, including Ms. Mitchell, get their degrees in personal training as a starting point. However, they take classes in business management to learn both aspects of
If customers are able to work out in their home, without technical difficulty with the software or equipment there will not be many calls to technical support for the service. Monitoring complaints about the service can be a good measure of the new division performance.
Taxes are the dollars that we pay to government to supply the services that are not or can not be provided through the free enterprise system. Taxes have been around since the beginning of organized societies. They come in various forms. Most common are income taxes both federal and local government. These taxes are assessed on the amount of income a person earns. Other taxes come in the form of user taxes; these taxes are imposed on the people that are using the goods being taxed, such as gas tax, alcohol tax, sales tax, and luxury taxes. Property taxes make up the major revenues for local and city governments. Furthering the burden of taxation are taxes that are attached to such bills as utility
Sales and tax rates are stable in some states, but tend to be unpredictable in others. Counties, cities, school districts, and townships are continually expanded, becoming established and given effect in the United States. In some locations, sales and use tax rates are even more susceptible to change because of political influence, this can cause rates to even change as recurrently as a monthly
Issues containing weight control, fitness, and nutrition are a prime subject in today 's culture. Completive companies are existent and they have many different levels of health clubs and fitness centers; this contains everything thing from price, equipment, staff , activities and classes offered. In the present time, topics being subjected through the industry are; disease control and research, diet and fitness trends of 2005, performance running, life balance, eating and sleeping right, working out according to personality and foods to lower cholesterol. Many people from The States are on a constant search for what is new, healthy and trendy. Health and fitness clubs were put in our society to make people feel and look good, and now not only are they there for that but they are making a large profit as