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Business Plan for Tri-Cities Fitness: A modern facility featuring a holistic approach to well being

Strategic Experience BADM 5800


Prepared For: Dr. Craig Turner Prepared By: Carlos Amaya-Cea, Brent Dowling, Kristin Fletcher, Shawn Hunt, Josh Leko, and Ryan Moyers

Business Plan for Tri-Cities Fitness

TABLE OF CONTENTS
STATEMENT OF PURPOSE ...................................................................................................................................... 2 INTRODUCTION ..................................................................................................................................................... 3 SURVEY RESULTS ................................................................................................................................................... 6 A DIFFERENT APPROACH ....................................................................................................................................... 9 NUTRITIONAL GUIDANCE .................................................................................................................................................9 SPORTS MASSAGE ........................................................................................................................................................10 VARIOUS THERAPIES .....................................................................................................................................................10 TRI-CITIES FITNESS ............................................................................................................................................... 12 LOCATION ...................................................................................................................................................................12 START-UP COSTS .........................................................................................................................................................12 AMENITIES ..................................................................................................................................................................14 EQUIPMENT ................................................................................................................................................................16 HOURS OF OPERATION ..................................................................................................................................................18 COMPETITION ...................................................................................................................................................... 19 THE CENTER FOR PHYSICAL ACTIVITY ................................................................................................................................19 TRI-CITIES LIFESTYLE CENTER ..........................................................................................................................................22 THE WELLNESS CENTER .................................................................................................................................................24 MARKET AND DEMOGRAPHIC ANALYSIS ............................................................................................................. 27 LEGAL CONSIDERATION .................................................................................................................................................27 MARKET TRENDS .........................................................................................................................................................28 DEMOGRAPHIC & ECONOMIC SEGMENT ...........................................................................................................................36 CONCLUSION ....................................................................................................................................................... 40 REFERENCES......................................................................................................................................................... 41

APPENDICIES
Appendix A: Survey Questions .................................................................................................................................... 43 Appendix B: Facility Layout ......................................................................................................................................... 45 Appendix C: Start Up Costs ......................................................................................................................................... 46 Appendix D: Profit/ Loss Projections ........................................................................................................................... 49

Business Plan for Tri-Cities Fitness

STATEMENT OF PURPOSE

To create a company that will serve Johnson City residents, and eventually the greater Tri-Cities area, with a fitness facility coupled with additional offerings. The benefits or offerings we are planning to include are; nutritional guidance, sports massage, and various therapies. The company will seek to provide the local community with both fiscal and health benefits by implementing company paid or assisted employee memberships at a rate that is affordable for most businesses in the area.

Business Plan for Tri-Cities Fitness

INTRODUCTION Johnson City, Tennessee has been selected for this project for several reasons. One of the most influential is the relative youth of the population being estimated at a median age of 36.9. Also, due to the presence of East Tennessee State University (ETSU), the population is considered to have a higher level of education with an estimated 29.4% of college graduates (Onboard Informatics, 2011). There are many advantages to starting this project in a small city that presents growth potential. We can also consider the possibility of expansion into the other major cities in the Tri-Cities area, Bristol and Kingsport. This possibility of growth takes our project to a potential market with an estimated population of 500,000. This is possible due to the great proximity and interconnectivity of the economies and the people of this region. The idea for this project was born out of the great need for people of all ages to exercise and the recent surge in alternative exercise and rehabilitation techniques. As it was reported by the Former Secretary of Health and Human Services, Dr. Donna E. Shalala, We have found that 60% - well over half of Americans- are not regularly active. Worse yet, 25% of Americans are not active at all. We need to turn (this trend) around quickly, for the health of our citizens and our country. Businesses need to learn from what has worked in the past and promote worksite fitness, an easy option for workers (US Department of Health and Human Services, 1996). The Surgeon General has also stated that 70% of all illnesses are lifestyle related causes; in fact, one-half of all medical costs are attributed to preventable illnesses (US Department of Health and Human Services, 1996). Clearly, this should be highly regarded for corporations and individuals to help themselves and their employees to establish a healthier lifestyle.

Business Plan for Tri-Cities Fitness

It is out of this necessity for companies and individuals that our company is born. We intend to bring a better way of life to individuals and also to benefit local companies and subsequently the regional economy. We strongly believe that we can bring an alternative, not only to individuals and companies, but to the great health problem afflicting the nation. We believe that just bringing an alternative location for physical activity does not provide a complete solution for our customers. That is why we have intertwined into our activities a holistic approach to physical activity and lifestyle. The idea of a health and fitness club is not new in this area. The area is known for various outdoor activities, due to the proximity of the mountains and several national parks. There are several opportunities for participation in fitness clubs. Among some of the most popular choices one could consider are Tri-Cities Lifestyle Fitness Center and The Wellness Center. Also, the Wayne G. Basler Center for Physical Activity (BCPA) located on ETSU campus is a popular option for students of East Tennessee State University (ETSU). ETSU students represent a large population in the area. We understand the public has other choices when it comes to fitness. It is due to this knowledge that we are developing an option that will offer more than the average gym. We believe that costumers will be interested in a fitness facility that not only provides them with fitness solutions, but employs some of the most recent advances in the wellness industry. For our corporate patrons, we must provide them with a real and quantitative way to see improvements in the performance of their employees and also of their overall company. Our main competitors have adopted different benefit packages that make it easier for

Business Plan for Tri-Cities Fitness

corporations to afford part or all of the charge for their employee. We want to focus on creating packages that appeal to any size company. The easier it is for small businesses to offer a fitness benefit to their employees, the more likely they are to adopt such a plan. Offering company packages will increase our customer base significantly. We strongly believe that by providing businesses with a quantitative way of measuring employee performance, they will be more willing to open their pockets in order to achieve a healthier workforce. One of the best ways for a company to analyze the effects of providing a fitness benefit would be to conduct quarterly health screenings for employees who are taking advantage of the membership. These screenings can cover some of the basic fitness performance measures, but can also integrate specific results encouraged by the company. Eventually we would like to offer a part-time health care professional to conduct these screenings onsite for the companies for a fee. This would help alleviate any of the confusion and stress in organizing for quarterly screenings by the business.

Business Plan for Tri-Cities Fitness

SURVEY RESULTS We chose to conduct a survey in order to have clearer understanding of what our target audience would require and desire in a fitness facility. The survey was sent out to 833 seniors and 222 graduate students in the College of Business and Technology at East Tennessee State University. It was composed of eleven questions to help define the desires of locals regarding a gym membership. Of the 1,055 students emailed, 147 completed the survey resulting in a 14% completion rate. A results analysis shows that 43% of respondents have a gym membership. There was a mistake in the wording of this question because all ETSU students have a gym membership included in their tuition costs. Therefore we are assuming that the 43% that responded with yes to having a membership actually were implying they use their ETSU membership and/or they have a paid membership at a second fitness facility. This question allowed no

respondents to skip the next seven questions. Only 76 participants answered questions 2-7. Most respondents (44%) stated they attend a gym between 3 and 4 times a week. However, 32% only attend between 0 and 1 time. 13% of our sample uses the gym 5 or more times a week. Based on the participants that use a gym, 55% of them prefer working out after work/ dinner time. The second most popular timeframe was late night (25%). Another important note about our sample is that although they all have access to the ETSUs BCPA, many have memberships at other gyms in our area. The following question was aimed at those that choose to pay for a membership elsewhere. When asked how much they pay for their membership per month, 48% responded with $25 or less. 16% of the population

Business Plan for Tri-Cities Fitness

pays between $26 and $35 and 19% pays between $36 and $45. Lastly, 17% have memberships costing $46 or more. The fifth question asked respondents about childcare costs. An overwhelming 89% do not require childcare. While we acknowledge these results, we do feel that this will not be a true estimation for our target audience. Research shows that the most popular child bearing age range is 20-35 in the United States. This demographic falls within our stated target market. It is likely the results are skewed because the respondents are college students who, for the most part do not have children. For questions six and seven the survey was aimed at discovering their satisfaction with their current gym and if they would consider switching. Over 70% of the respondents replied that they are satisfied or very satisfied with their fitness facility. However 29% are either somewhat satisfied or not satisfied. The results were nearly split on if they would consider switching gyms with 46% a yes and 54% responding with no. The survey questioned all 147 respondents with what their most important gym feature is. Most respondents (35%) selected amenities and 27% stated price as their most important feature. Location also seems important with 20% of respondents choosing it. For this question, the survey had an other option in which respondents could type a short sentence detailing their choice. 22 respondents choose this option and 10 of them listed hours as the most important feature. Other notable responses were types of weights and equipment offered, a non-judgment area, how crowded the gym is, the atmosphere of the gym, an indoor pool, and group fitness classes along with educated and friendly instructors.

Business Plan for Tri-Cities Fitness

Questions nine and ten were constructed to give insight into how tech savvy our target audience will be. On a side note, question nine should have allowed respondents to select multiple responses. Instead, it forced them to choose only one; therefore we are assuming their choice is the one they use most. This question asked which social media platforms they participated in and 78% use Facebook the most. 12% of respondents do not use social media. Question 10 asked respondents if they use an app to record their workouts and/or their weight and 85% responded with no. The last question of the survey was aimed at discovering how many of the College of Business and Technology students would be remaining in the Tri-Cities after their graduation. This helps gauge how large the target audience for our proposed fitness facility could be. The responses were nearly split with 52% stating they will remain in the area. The graphical results of the survey are located in Appendix A.

Business Plan for Tri-Cities Fitness

A DIFFERENT APPROACH We want to take a different approach for additional benefits we will offer within the facility. Recently there has been a trend to package services to better serve clientele.

Regarding the well-being industry, many people are seeking alternatives to the traditional gym set up. Therefore, we have differentiated ourselves as a company that would offer a fitness facility along with added benefits such as nutrition, massage, and various therapies. This combination will allow our clients to receive in-house attention that they would otherwise be left alone to acquire. We feel that this approach will not only appeal a clientele that possibly is not being served but it will also attract clients from other facilities who may not even realize all that their gym experience is lacking. Nutritional Guidance The USDA states that most Americans are overweight or obese. Simply put, this means we take in more calories than we use. In the year 2000, the direct medical cost of obesity and indirect economic loss to obesity was $61 billion and $117 billion respectively (Wellman & Friedberg, 2002). Obesity has been a contributing factor to an estimated 100,000-400,000

deaths in America each year (Blackburn & Walker, 2005). It is the cause of many preventable illnesses including type II diabetes, hypertension, and cardiovascular disease. For a large percentage of Americans, a proper diet and exercise routine could eradicate their illness(s). Armed with this knowledge, we have decided to employ a nutritionist on our staff. Our hope is to offer clients a personalized nutrition plan that complements their physical activity level in order to provide them with a sustainable healthy lifestyle. We feel this is an

appropriate option for clients of all sizes. The first session with the nutritionist is one hour long

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and will produce a tailored diet plan. The cost will be $80 and any subsequent appointments would last for 30 minutes and cost $45. We plan to employ the nutritionist on an appointment only basis earning $25/hr. Sports Massage Our two largest competitors offer massage therapy for clients. We felt it was an important addition to our company in order to remain competitive. Further, the research on sports massage indicates that it can help prevent and treat injuries (Massage: Get in touch with its many benefits, 2011). From a risk management perspective, offering massages to our clients will help lower physical activity related injuries that occur in all fitness facilities. We plan to offer one hour massages for $60 and half hour massages for $35. We plan to employ the masseuse on an appointment only basis earning $20/hr. Various Therapies Functional therapy is to restore yourself back to how you were designed to move, says biomechanics expert Katy Santiago, M.S., director of the Restorative Exercise Institute in Ventura, Calif. Some call it the bridge between personal training and physical therapy (Funtional Fitness 101, 2011). This option would be provided through our personal trainers that have been educated in functional fitness. Many Americans deal with chronic pain on a daily basis and because of it do not attempt exercise. With functional therapy, our personal trainers will use various techniques to help not only rehabilitate the client but allow them to exercise effectively by tailoring the workout to their ailments. We do not want to be considered a pain management facility but would like to offer clients or potential clients the benefits achieved from this type of fitness regimen.

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The following two therapies, electrical muscle stimulation and ultrasound therapy are mostly conducted by physical therapists. We have decided not to hire an in-house therapist at this time. Though it is something we are passionate about and will be perusing after the company has reached break-even and begins to profit. Our plan is to seek out partnership with a local physical therapist office in hopes that we can refer our clients to them until we are able to provide this service full-time. Electrical Muscle Stimulation (EMS) causes muscle contractions using electric impulses. The use of EMS machines has increased in popularity over the past few years. This is mostly due to its usage as a strength training tool for healthy subjects and athletes; a rehabilitation and preventive tool for partially- or totally immobilized (clients) and (as) a post-exercise recovery tool for athletes (Maffiuletti & Marco A Minetto, 2011). We feel that by adding EMS therapy as an option, we will gain a competitive advantage in the market. Ultrasound therapy is the use of ultrasound to help with soft tissue injuries. Though the exact science behind why therapeutic ultrasounds work is still being debated, we feel it is an option we could not overlook. Current research shows that it may speed the recovery of and can reduce pain sustained from soft tissue injuries (Ultrasound Therapy, 2011). We feel this is a benefit that our clients would appreciate.

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Tri-Cities Fitness This section of the analysis will look into the location of our facility, start-up costs we will encounter, and the equipment and amenities we will provide in our gym. We will also detail the hours of operation in this section. Location The location selected for Tri-Cities Fitness is in an affluent part of the city at the intersection of North Roan Street, Sunset Drive and Browns Mill Road, with 56,000 SF available. Tri-Cities Fitness will be located in the old Lloyd building, located at 112 Browns Mill Road, Johnson City, Tennessee. This commercial property presents a great opportunity, as it is a popular shopping and dining location. Currently in the shopping mall there is an existing 46,000 SF Kroger. The location also presents important highlights as it is in close proximity to the Mall at Johnson City, the Target shopping center and it is a short distance from I-26. This location would be attractive to people in surrounding communities such as Gray, Elizabethton, Piney Flats, Bluff City, and Blountville. The property is also surrounded by several median income neighborhoods which represents much of our target market, allowing our potential members to have an attractive location close to home. Start-Up Costs As for all businesses, start-up cost it is one of the most important calculations to adequately create a financial projection of where the business will be in the near future and what type of financing it will require in order to accommodate the high initial costs and the accelerated wrought that can be expected at the beginning of operations. One of the ways the company has decided to tackle the start-up costs is by leasing instead of purchasing land to build on.

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The Lease agreement has been negotiated though Mitch Cox realtors, and has been established at a monthly charge of $18,500 for the 56,000 SF. This facility will allow for adequate space for equipment and comfortable accommodations for all our members. The start-up of this business will require financing from different sources. The first of these sources will be by equal participation of $10,000 by all six founding members. The second round of financing will be lender financing totaling $1,450,000. Demanding a total investment of $1,510,000 to start and operate the facility. This investment will be crucial to begin work on site preparation and modifications, purchase equipment, and to completely cover expenses in the first year of operations. Tri-Cities Fitness will be incorporated initially as a corporation this will shield the owners and all other investors from issues of personal liability. The investors will be treated as shareholders and therefore will not be liable for more than their personal investment. The lender financing, in addition to the capital contributions from the owners and shareholders will allow our Fitness facility to successfully open and operate through the year. This investment will allow our company to provide potential clients with a state of the art fitness facility and equipment that brings a unique, upscale, and innovative environment that is currently missing in our area. We have calculated a start-up cost of $995,000 by allocating estimated value to all the expenses that will be necessary to open the facility. We have also considered our monthly operating costs and have allocated $168,000. As financing to cover these costs will be

necessary, we have included three months worth in our loan balance request. Also, $505,000

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has been allocated to prevent any problems with low operating cash flows. The financial goal of this operation is to be a self-sufficient operation in year two. The Tri-Cities fitness concept, as detailed in our Start-up Costs, and Profit and Loss Projection spreadsheets (see Appendix C & D) present an excellent profitability level combined with a very conservative growth rate. These results create a positive cash flow of $51,291.00 by year two. Amenities When creating a fitness facility, there are many essential amenities which customers desire. First, we must have a basketball court in our complex. A full size basketball courts dimensions are 94 feet long by 50 feet wide. We will also need ceilings of 14 15 feet so there is vertical space for the entire backboard(s). The basketball court is going to be located at the back of the gym since it fits perfectly with the dimensions which we have to work with. A basketball court is essential since all three of our main competitors have at least one. We will be able to schedule basketball tournaments at our gym which should appeal to a certain portion of customers. A basketball court is also good for individuals who want to run sprints. The nice thing about having a basketball court is one can easily set up a net which will allow for volleyball and/or badminton. The basketball court will cost roughly $100,000 (parts &

assembly). However, this court is crucial to our gyms success. Second, we intend on having two racquetball courts in our gym. Racquetball court dimensions (per court) are 40 feet long by 20 feet wide by 20 feet high. Certain individuals enjoy racquetball so having these courts should help us appeal to those customers. Also, when not being used for racquetball, our gym members can use the courts for non-damaging athletics such as yoga, crunches, and jumping jacks. The racquetball courts will also be in the back of the

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facility next to the basketball courts. The two racquetball courts should cost approximately $160,000. Although this is a very high cost, the basketball/racquetball combination should help us remain competitive. Another amenity which is critical to our gyms success is a track. Almost all gyms have a track and it would be very unwise to try and build a gym without one. Therefore, we have opted to build a 1/8 mile track around our main workout room. This track will not be the fanciest track ever built, since some tracks can cost up to $2,000,000. However, we are going to do what we can. Based on the dimensions of our building, we have to build a square track rather than the traditional rectangle. A 1/8 mile track is 660 feet around. This 2 lane track should cost us roughly $75,000. We will also be adding 100 double lockers and six 8 benches to both the mens and womens locker rooms. This should provide storage space for our members as well as a good way to protect belongings. There will be six water fountains placed strategically throughout the facility so our members can refresh themselves during intense workouts. Four sanitization stations will also be placed around our weights and machines so members can stay healthy and clean while working out. For the convenience of our members, we will also have ten 39 TVs and surround sound throughout the main free weight room, machine room, and cardio room. The total cost of the lockers, benches, water fountains, sanitization stations, TVs, and surround sound is $51,000. Other included costs; towels, washer & dryer, security system, check in machine, and computers & printers for our employees. All prices include installation.

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Having a basketball, racquetball, make-shift volleyball, and make-shift badminton court(s) will allow for us to set up some awesome intramural sport competitions. Many members like being involved in activity where they are able to meet new people. Intramural sports allow members to fraternize and engage in friendly competition. Intramural sports are a great way to bring competitive individuals to our gym. *Note to reader: Prices given above are rough estimates. Without actual intensions to open a facility obtaining exact numbers proved difficult. However an interview was conducted with management at a Rush fitness facility in Knoxville for confirmation that our price estimates were close to par.

Equipment The equipment offered in a gym can make or break the success and popularity of it. Our gym will feature brand new, state of the art equipment. Research and personal experience has determined what brand and pieces of equipment will be needed in our gym to satisfy our members. We will be offering more types and total amount of equipment than our

competitors do in Johnson City which will give us an upper hand. The equipment will cost us approximately $417,000. We will be using Life Fitness and their other product line, Hammer Strength, for the larger pieces of equipment and machines in our facility. We will be using Iron Grip dumbbells with a urethane cover because this cover is the strongest and most durable for heavy usage. We plan to have three sets of 5-50lb, two sets of 55-100lb, and one set of 105150lb Iron Grip dumbbells. This is because the majority of people who use dumbbells in our facility will be using between five and 50 pounds. The plates that we have chosen to use are also very well known among the fitness community. Intek plates are used in multitudinous fitness facilities around the nation and provide ample durability with a competitive price. Each

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set of Intek plates contains 16x45lb, 4x35lb, 8x25lb, 12x10lb, 12x5lb, 8x2.5lb plates and we have estimated that we will need ten sets of these plates for our facility. Our main equipment and machines will be furnished by Life Fitness and Hammer Strength. Life Fitness is one of the largest suppliers to gyms in the nation. All of our equipment and machines come directly from their warehouse and have a ten year warranty. A couple of highlighted pieces of equipment that our members will enjoy are the squat racks, smith machines, dual cable adjustable pulleys, and benches. However, the most state of the art piece of equipment that our gym will have is the Life Fitness MJ12. This piece of equipment allows for up to 12 individuals to work out at once with various stations and attachments. The MJ12 has a hefty price tag of $22,000; however, it will likely be the machine with the highest use in our entire gym. The Life Fitness MJ12 is pictured below.

We will be using Life Fitness ellipticals, treadmills, and exercise bikes. We will feature twenty-five of the Life Fitness 95xi ellipticals at a price of $2,200 per, twenty-five 95t treadmills at a price of $2,500 each, and fifteen 95c exercise bikes at a price of $1,500 each. For our

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spinning room we will offer thirty Spinning Spinner Edge bikes at a price of $899 each. The total cost for our ninety-five pieces of cardio equipment will be $166,970. The total cost for our fifty-three pieces of equipment, dumbbells, kettle bells, attachments, fixtures, and other miscellaneous equipment is $417,637. This is a small price to pay to have brand new equipment that will provide our users with the amenities that they desire. We believe that our equipment choices will help bring in new clients and the gym layout, shown in Appendix B, will allow for maximal efficient use of our location. Hours of Operation Tri-Cities Fitness plans to have regular business hours Monday- Saturday from 5am until midnight. On Sunday we will open later at noon and remain open until midnight. The deciding factors for our operating hours came from our survey results in which most respondents worked out either early morning or late evening and into the night.

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COMPETITION The Center for Physical Activity The Wayne G. Basler Center for Physical Activity (BCPA) opened in April of 2002. This 100,000 square foot facility was built by, and currently operates on East Tennessee State University student activity fees and is staffed by student workers. The building is located on the East Tennessee State University campus and is only accessible at no cost to enrolled students, faculty/staff, and retired faculty/staff members. Currently enrolled students can purchase a spouse/domestic partner pass for $17 per month and/or a dependent pass for $5 per month. Current faculty/staff can purchase a spouse/domestic partner pass for $27 per month and/or a dependent pass for $8 per month. Also, guests can attend with a current student or

faculty/staff member for $5 per visit. However, if you do not have some sort of connection to a user of the facility, you are not permitted to enjoy use of the facilities. The Center for Physical Activity has many different types of workout areas which include a 1/8 mile indoor track, martial arts training area, indoor cycling area, basketball/volleyball courts, racquetball/squash courts, outdoor challenge/rope course, indoor and outdoor climbing wall, indoor swimming pool, aerobic studio, yoga studio, 2 outdoor intramural and sport club fields, locker rooms, casual care center for child care service, and a 15,000 square foot weight and cardio room. In addition, several other services are offered such as kayak sessions, swim lessons, walking trails, bike rentals, and outdoor equipment rentals. Kayak sessions occur at 7:30 PM every Monday and Wednesday night in the indoor pool. Swim lessons are offered to children ages 3 12 as well as adults and can occur as either a group lesson or a private lesson. All swim instructors are trained through the BCPA based on American Red Cross swim level

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skills. Lessons are only available to ETSU students, staff, and faculty. For safety reasons, children ages 15 and younger are not allowed in the weight room and cardiovascular equipment area, indoor track/workout area or in fitness classes. Children ages 12 15 can partake in the climbing wall as long as they have a parent/guardian present. Children ages 3 months 8 years are eligible to attend the casual daycare facility. The BCPA has many different sports clubs and intramural sports which members can participate in. Some intramurals sports include flag football, softball, basketball, volleyball, soccer, table tennis, and ultimate Frisbee. All current students and faculty members are able to participate in sports clubs and intramurals at no cost. Intramural leagues are generally broken up into competitive and casual leagues each of which are refereed by fellow students who work for the BCPA. Games are scheduled Sunday Thursday between 4 PM and 11 PM. Personal trainers are offered through the facility. All trainers are required to hold and maintain a nationally recognized certification. The personal training service offers six free sessions for students, faculty, staff, spouse/domestic partner members, and dependent members over the age of 16. Following the completion of six free sessions, clients have the option to pay $60 for each additional package of six training sessions. Due to popularity of this program, if a client cancels a session within 12 hours of the start time, they will be charged for one session. This program is not meant to be a replacement for physical therapy or

rehabilitation. The BCPA also offers several classes which members can partake in free of charge. Some of these classes include; dance classes, martial arts classes, yoga, cycling, and group fitness. These classes are generally set up as a group aerobic event where one instructor

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relays instructions on to all participants. In addition, non-credit courses are offered such as CPR and First Aid, Red Cross Lifeguard Certification, Rape Defense, and Wilderness First Aid.

BCPA HOURS
Facility Mon-Thurs: 6am-midnight & Friday: 6am-9pm Saturday: 10am-6pm & Sunday: 2pm-9pm Pool Mon-Fri: 6:15am-8:15am, 11am-1pm, 4pm-7:30pm Saturday: 10am-2pm & Sunday: 4pm-6pm Family Swim Casual Care Open Climb Friday: 5pm-7:30pm & Saturday: 10am-12pm Mon-Fri: 9am-12pm, 3pm-7pm & Saturday 10am-12pm Mon-Thurs: 4pm-10pm & Friday: 4pm-7pm & Sunday: 4pm-7pm

**The BCPA is closed on all major holidays and remains open during the summer

Overall, the BCPA has many benefits and few downfalls. Some of the benefits are that it is centrally located within Johnson City, it offers many different classes, members can experience the personal training system prior to locking themselves into a long contract, and childcare is provided at no additional cost. However, there are also some downfalls. First, you must be a current student or faculty member in order to use the BCPA free of charge. As stated prior, family members of the student or faculty member can use the facility at a cost. Second, the hours are somewhat limited conforming to the availability of student workers. Since the BCPA is associated with East Tennessee State University, the hours are based on when the campus is open. Third, sometimes the facility can seem a bit overcrowded since many students like to work out. None the less, the BCPA is a great place to work out. It offers a great product

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to its users. Unfortunately, not all Tri-Cities residents can use the BCPA since many do not have any associations with East Tennessee State University. Lastly, it is quite unfortunate that ETSU graduates cannot utilize the facilities upon graduation from the university. Tri-Cities Lifestyle Center Tri-Cities Lifestyle Center is located on 2517 Knob Creek Rd in Johnson City, TN. The 50,000 square foot facility is located on the north side of Johnson City near interstate 26. The location provides access to members from Johnson City, Gray, Blountville, Kingsport, and Bluff City. Members range from families with teenagers, college graduates, young professionals, and seniors. Some of the prominent features that Tri-Cities lifestyle offers are an abundance of trainers, dozens of free classes, a child care facility, relevant equipment, a local masseuse, a smoothie bar, clean locker rooms with showers and saunas, an indoor track, a racquetball court, and a basketball gym. Each guest is allowed to try out the lifestyle center for 2 weeks without being charged. Other perks for new members include one free session with a trainer, a 50% off coupon for a smoothie, $10 off a one hour massage, and a free t-shirt. Potential members are presented with two commitment options: a 12 month and a 24 month plan. The first includes monthly dues of $49 with a $29 per month add-on for each family member. If you decide to prepay the whole year, you can save 20% which equates to $549. If you select the 24 month plan, the monthly dues are $39 with a $24 per month add-on for each family member. If you decide to prepay the whole two years you can save 20% which equates to $828. If you decide to join within 30 days of the 2 week free trial, there is no enrollment fee. Otherwise, the enrollment fee is $49.

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When a new member joins, the 150 different pieces of equipment give the member plenty of options to improve their health. With many options comes confusion as well. That is why each member can ask for an orientation session with a trainer where the trainer will show you how to use each piece of equipment and tell you what parts of the body they are specialized for. All of the machines are the most current Nautilus machines offered today. If using the exercise machines is not your style, the dozens of free classes provides you with great options on getting to know other members and finding an exercise routine that is fun and enjoyable for you. The classes offered include: Blast of Power, Step Fusion, Power Yoga, Spinning, Silver Sneakers, X Power, Zumba, Core Cuts, Kickboxing, Pure Pilates, Wally Ball, Group Centergy, Group Power, High Energy Athletic Training, Move It Move It, Step: 2 or 1, and Step for All. Each of these classes is offered several times a week throughout different times of the day to meet their customers demanding work schedules. The significant qualities of Tri-Cities Lifestyle Center are the people. There is always an abundance of employees working there to help you with any of your needs. From the smoothie girl to the physical trainers, each employee has a different background and knowledge of the human body. Some of the physical trainers and other employees even have degrees in nutrition. This type of knowledge base within your reach is the best quality of the Lifestyle Center. The downfalls of Tri-Cities Lifestyle Center are obvious though. They lack several features compared to their competition in the area. There is no Olympic size pool, the basketball gym is too small, and the whole facility feels cramped. Another problem the gym

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faces is their attention to detail. They let the seats and other wear items on the exercise machines deteriorate for quite a long time before they are ever replaced. In the gym, the basketballs provided are severely used and almost not worth playing with. The towels provided are also worn and should be replaced. These little details for someone that is spending a large amount of money can give the customer the wrong impression. The Wellness Center The Wellness Center which is operated by Mountain States Health Alliance is located at 200 Med Tech Parkway. They claim to differentiate themselves from the competition by first offering a health and risk assessment. From this they develop individualized cardiovascular and strength training programs for their clients. The facility offers many different fitness options as shown in the following table.

Life Fitness Strength Equipment Cross Trainers Elliptical machines Free-Weights Rowing Machines Airdyne Bikes

Stability Balls Nu Steps Upright Bikes Treadmills Recumbent Bikes

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Members also enjoy benefits such as dry saunas in both the mens and womens locker rooms, a Jacuzzi hot tub, and upscale locker rooms equipped with flat screen TVs located in a lounge area. The facility also offers two 25 yard lap swimming pools (one indoor and one outdoor) as well as a warm water therapy pool. Members can also employ the services of either massage therapy or personal training for an additional fee. The below tables detail the cost for these services:

30 Minute Massage

Non-Member $40

Member $35

Personal Training Member


One Session $45

Personal Training Non-Member


One Session $65 Four Sessions $248 Eight Sessions $430 Twelve Sessions $635 Sixteen Sessions $830

60 Minute Massage

Non-Member $55

Member $50

Four Sessions $170 Eight Sessions $300

90 Minute Massage

Non-Member $70

Member $65

Twelve Sessions $440 Sixteen Sessions $575

To join The Wellness Center there is an initiation fee for the primary member of $185. The second member will pay a fee of $60. There is no added cost for each additional member past the first two members. Membership dues are $49.50 for the primary member and $37.50 for the second member. Third and fourth family members are $21.50 each.

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There are a few downfalls of The Wellness Center. First, they do not have an indoor track. However they are situated inside a 3.1 mile outdoor running path. This path can be altered to allow runners/ walkers to run less than the 3 miles or more. Because they are directly across the street from Lifestyles, they do share this attraction with their competition. Runners/walkers do not have to be members in order to use this path. The other large downfall, for our target audience at least, is the clientele that The Wellness Center appeals to is much older. We were not able to obtain exact statistics regarding their memberships average age but it is estimated to be higher than our young- middle aged adult target range.

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MARKET AND DEMOGRAPHIC ANALYSIS

We will assess relevant information pertaining to the sustainability and stability of the fitness industry. Such information will likely include; industry statistics, growth/decline rates, consumer preferences, and industry trends. We will utilize research conducted by the International Health, Racquet, and Sports club Association (IHRSA). This organization provides statistics related to the fitness industry that provides valuable input into the consideration of our venture. We will research demographic information within Washington County and make assumptions based upon the information. We will apply market statistics to that of the demographic information to give an estimate of our potential market. We will also include legal information related to our venture. Economic information related to our area will also be included in the market and demographic analysis. Legal Consideration Our establishment will fall under the definition of a health club according to Tennessee law 47-18-301 (4) (A). This definition states, health club means any enterprise, however styled, which offers on a regular, full-time basis, and pursuant to a health club agreement, services or facilities for the development or preservation of physical fitness through exercise, weight control or athletics(Health Club Law - Part 3). As an entity, we realize that our responsibility is that of Operator defined under the law as any person, firm, corporation, or business entity which operates as a health club. We must obtain a certificate of registration under code 47-18-302 before operations can begin. This section states It is unlawful to operate a health club unless a valid certificate of registration is obtained for each location where health club services or facilities are provided and payment of the fee for required for such registration

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is made. Our entity will adhere to the additional regulations outlined in 47-18-30(3-20). These sections define contract terms for health clubs in Tennessee and also pertain to registration and license information. (Health Club Law - Part 3). Market Trends We will explore trends of health club membership, activities, and age demographics of members. For our venture, we estimate that our main customer base will be Generation Y (21 to 30) and X (31 to 45) individuals. We will use information provided by The International Health, Racquet, and Sports club Association (IHRSA). IRHSA provides a wealth of valuable information that can be used in the assessment of our proposed venture. This organizations purpose is as follows: The International Health, Racquet & Sports club Association is the trade association representing health and fitness facilities, gyms, spas, racquet and sports clubs, and suppliers worldwide. IHRSA and its members are dedicated to making the world healthier through regular exercise and fitness promotion. IHRSA is the recognized leader on health club industry research. IHRSAs annual reports provide a comprehensive, country-specific overview of the key fitness industry markets worldwide as well as a detailed view of the overall global market. IHRSA also tracks U.S. industry trends on club performance, consumer behavior, and employee compensation practices (Top Health Club Trends for 2012, 2012). We will analyze various reports from this organization in order to make assumptions for our venture. Also, we will attempt to formulate a plan for member acquisition, utilizing the information given. The IHRSA recently released a report of the expected health club trends for 2012. This top 10 list includes: 1. More people working out in clubs.

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2. Specific programming and certifications for Baby Boomers. 3. Youth programming. 4. Social exercise. 5. Small group personal training. 6. Technology. 7. Convenient fitness options. 8. Corporate wellness benefits. 9. Body weight exercise. 10. Physician prescribed exercise. (Top Health Club Trends for 2012, 2012) This list provides some expected results as well as some areas that have not fully matured in the industry. We will look into these trends in further detail and discuss relevant characteristics of each phenomenon. Addressing trend #1 (more people working out in clubs) we see that indeed, health club memberships have increased in recent years. The index provided by IHRSA contains 14 clubs and a total of 501 facilities (IHRSA Index Indicates Health Club Growth in Third Quarter 2011, 2012). According to this index, memberships to health clubs are rising. The findings state, Revenue at U.S. commercial health clubs reached $21.4 billion and memberships totaled 51.4 million in 2011, the International Health, Racquet and Sports club Association (IHRSA) reported in a survey released Monday. The revenue represented a 5 percent increase while membership numbers grew 2.4 percent from 2010 (U.S. Club Revenue, Memberships Rose in 2011, 2012). The trend of more people joining health clubs appears to be expected to continue according to IHRSA. The report also states that, For-profit club membership penetration (members who are

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6 and older) reached an all-time high of 18.1 percent (U.S. Club Revenue, Memberships Rose in 2011, 2012). These figures would contribute to the assumption that the health club industry is remaining stable. Melissa Rodriguez, IHRSA's senior manager of research states, In this economy, even steady to slightly improved performance bodes well for the future of the health club industry (IHRSA Index Indicates Health Club Growth in Third Quarter 2011, 2012). In addition to increased club memberships, trends show that visit frequency to health clubs has also increased. IHRSAs executive vice president, Jay Ablondi states, The health club industry continues to attract new members and is engaging them with innovative programs that are driving up frequency of club visits. According to IHRSA, members increased their usage of facilities from 97.5 days in 2010 to 102.5 days in 2011(U.S. Club Revenue, Memberships Rose in 2011, 2012). Financially speaking, IHRSA index organizations provide the following information, Membership dues revenue came in at a mean of $28.1 million and a median of $5.2 million. Non-dues revenue came in at a mean of $11.4 million and a median of $2.4 million. Membership accounts for the participating clubs grew by 6.1 percent for the quarter. EBITDAR improved by 10.4 percent, up from a company average of $13.3 million to $14.6 million (IHRSA Index Indicates Health Club Growth in Third Quarter 2011, 2012). Although the results from this index provide a positive outlook for health clubs, it should be stated that the given information is a small sample and does not represent the entire health club population. However, it does provide significant information that could be assumed to be related to the population. Trend #2 (specific programming and certifications for Baby Boomers) provides an interesting factor to consider. This segment is the fastest growing demographic for new health club members (Top Health Club Trends for 2012, 2012). Many Baby Boomers are concerned

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with their health and well-being but have a difficulty finding ways to execute proper exercise activities. These individuals are often wary of large machines and crowded areas with younger exercisers. They would rather have exercise groups and less strenuous activities that can improve wellness. Baby Boomers are less likely to exercise for fun reasons, but rather for health reasons. This generation is less concerned with technology enhanced and trendy methods of exercise. Although Baby Boomers are the least likely demographic to join health clubs, 12% of their population possesses memberships according to a study. In addition, Baby Boomers were more likely to list cost as their top reason for not joining a health club than any other demographic (Cost Is Top Barrier to Health Club Membership, Per Study, 2011). This information is helpful in formulation of potential programs and activities for the Baby Boomer generation. Pricing incentives for seniors as well as secluded meeting areas for relevant activities could entice an influx of older customers. Instructor led group activities such as water aerobics and balance exercises are popular with this age demographic. If our organization could offer such services with a payment plan that appealed to specific needs, we could experience above average membership rates of Baby Boomers. Payment plans based solely upon program use may be beneficial for this demographic. Trend #3 (youth programming) provides a similar consideration basis as trend #2. The key in both trends is age appropriate programming and availability. Health clubs have experienced growth from the youth segment in recent years. According to IHRSAs trend report, health club memberships for individuals under the age of 18 grew from 3.8 million in 2007 to 6.1 million in 2010. Sport specific training as well as the government backed Lets Move initiative for youth obesity are probable causes for the influx in youth involvement (Top Health

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Club Trends for 2012, 2012). Our organization may look into obesity cooperative programs for children and implement ways to get them involved. Also, cooperating with sport coaches by giving them a location for lessons and the opportunity to promote lessons (via business cards, etc.) could be beneficial to our organization. We could charge monthly or per use fee for such services. The youth market provides a potential competitive advantage if the correct assessment of this demographic can be applied. This group is most likely to prefer technology intensive, modernized methods of exercise. Trends #4 and #5 pertain to increased group involvement in exercise activities. Trend #4 (social exercise) is not new to the fitness industry but has increased in the nature and number of exercises now popular with members. Members of such groups often feel they are a cohort with other members serving to encourage and share in fun activities. Popular programs within this trend includes: yoga, kick-boxing, dance classes, and cycling (Top Health Club Trends for 2012, 2012). A fairly newer phenomenon is that in trend #5 (small group personal training). Identified by the acronym SGPT, this trend involves a personal trainer leading a few members in exercise activities. According to IHRSA, 4 million Americans used personal trainers in 1999. That number has grown to approximately 6.5 million currently (Top Health Club Trends for 2012, 2012). Perks for such format include the efficiency for the club and trainer since more customers can be served at once. Customers also pay a lower rate than would be paid for oneto-one service. Furthermore, this format includes the group cohesion effect that strengthens the customers relationship with the organization and other customers. Our organization plans to provide various programs that can utilize the profitability of group exercise.

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Trend #6 (technology) presents an interesting variable for consideration. With young individuals joining more health clubs, technology is a large part of their daily routines. Technology is embraced by the majority of individuals up to the Generation X age. Baby Boomers are less likely to use or want to use technologically advanced means of exercise. Technology is beginning to be more prevalent with equipment and programs offered at health clubs. Apps for phones and other handheld devices assist the user with keeping track of exercise, dietary, and personal progress activities. Generation Y and younger will be the most likely to embrace and use technology for personal fitness assistance. Incorporating technology so that it is available to our customers will be an important factor to consider. Instructions on the use and perks of technological enhancers should be readily available for customers. However, we must be careful not to lose a certain degree of personal touch that is often sacrificed as automation and technology increases. Providing age appropriate technology for age appropriate activities would likely be most beneficial for our organization. Trend #7 (convenient fitness options) represents the consumer preference of having fitness options available when they are personally desired and at a convenient location. According to IHRSA, there were approximately two hundred 24-hour health clubs available five years ago and this number has grown to over 2,000 today (Top Health Club Trends for 2012, 2012). Convenience is listed by all demographics as a major factor in choosing a health club. We wish to provide members with convenient access times and location. Trend # 8 (corporate wellness benefits) provides another cooperative opportunity for our organization. Companies are investing more into employee health and wellness. Studies

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show that physically active employees report fewer sick days, cheaper insurance, and increased productivity. IHRSA is attempting to make fitness offerings easier for businesses. Their trend report states, At the federal level, IHRSA secured the reintroduction of the Workforce Health Improvement Program (WHIP) Act, which would reclassify employer-provided fitness memberships as non-taxable income. The WHIP Act is especially important to smaller businesses that lack the space to build an in-house fitness center, which is already considered a non-taxable benefit by the IRS (Top Health Club Trends for 2012, 2012). It may be beneficial for our organization to provide incentives for local businesses so that our services can be offered to their employees. Pricing discounts and member quantities will need to be considered for such contracts. Trend #9 (body weight exercise) pertains to changes in equipment and preferences from users. Body-weight leveraging equipment has become a necessity at many fitness facilities in recent years. Trend #10 (physician prescribed exercise) addresses a growing population, obesity rates, and healthcare costs. IHRSA estimates that exercise as a prescription by physicians will increase and take the place of many medications (Top Health Club Trends for 2012, 2012). This new trend is expected to cause health insurance providers to create programs that promote healthy lifestyles. This trend could contribute to the assumption that health club memberships will see steady growth rates. Although the top 10 IHRSA trends are meant to indicate a possible evolution of the fitness industry, the point should be made that this study is merely a forecast of estimated consumer preferences. IHRSA also states that although the trends are expected to alter health

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club operations, tried and true methods are still very stable and popular with health club customers. IHRSA states, The top 10 health club activities per IHRSAs member census of 3,024 North American clubs are: #1 free weights (hand weights, dumbbells and barbells) #2 treadmills #3 resistance machines #4 elliptical trainers #5 stretching #6 abdominal machines #7 stationary cycling #8 low impact aerobics #9 yoga #10 stair-climbing machines (Top Health Club Trends for 2012, 2012).

Traditional methods prove to be the backbone of the health club industry. It is also important to note that although trends can revolutionize fitness methods, they may also be a mere fad that consumers fail to accept. Caution should be used when assessing trends and their implications upon the fitness industry. After assessment of relevant statistics and information concerning health clubs, the assumption could be made that the industry is experiencing and expected to experience continued growth. Trends provide the information that contributes to the overall sustainability and stability of the health club industry.

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Demographic & Economic Segment The census of 2000 showed a population of 107,198 for Washington County. The census of 2010 showed a population of 122,979 (State and County Quickfacts - Washington County). If we wish to estimate the population for Washington County for 2012 we can apply the average yearly growth rate from 2000-2010.Wasington county experienced a 14.72% population increase from 2000-2010, or 1.472% per year. The adjusted population estimate for 2012 is 126,627. The following chart illustrates the 2009 population age distribution in Washington County:

As of 2010, Washington County was composed of 91.6% White persons, 3.9% Black persons, and 3% persons of Latino or Hispanic origins (State and County Quickfacts - Washington County). Washington Countys per capita income was $30,695 in 2009, an increase of 6.5% from 2007. If we apply a 3.25% per year growth rate to Washington County income, we can estimate the per capita income for 2012, = $33,786. The median effective buying income per household in 2009 was $42,571. Washington County saw building permits for both commercial and residential ventures fall dramatically from 2008-2009. Commercial permits dropped by 46% while residential permits dropped 44.7%. This fact is undoubtedly cause by the economic recession as well as the housing crisis. Retail sales for Washington County experienced a 5.3%

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drop from 2008-2009 (Johnson City/Jonesborough/Washington County Economic Development & Demographic Profile). We are most concerned with the population and income of persons most likely to patronize our facility. This is estimated to be individuals 18-45 years of age. If we apply market information to the demographic information given, we can find the estimated number of potential customers for our venture and make related assumptions. The approximate American population that uses health clubs is 16%. We assume this percentage accurately estimates the usage rate for Washington County. When we apply this percentage to the population of Washington County, we find that the estimated number of health club users is (.16 x 126,627) = 20,260. This tells us there are approximately 20,000 potential customers within our county of operation alone. We realize that our potential customer base extends to other surrounding counties. However, due to a convenient location being a necessity for most health club members, estimating the percentage of distant customers is difficult. However, we feel that an approximation of an additional 8,000 potential health club customers would be a conservative estimate considering the surrounding populations. This brings our estimated potential customer base to approximately 28,000. According to our survey, it can be assumed that over 50% of students belonging to a health club said they would consider switching. If we apply this percentage to the customer base population, we find that approximately 14,000 club members would consider switching to another club if the conditions were favorable. We also can calculate the approximate number of potential customers based upon their demographic and likelihood of possessing a membership. According to IHRSA, specific ages belonging to clubs are approximately:

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Youth Gen Y Gen X Gen 46-64 Baby Boomers (Top Health Club Trends for 2012, 2012)

12% 19% 17% 14.5% 12%

We can apply the demographic percentages from 2009 to calculate the approximate number of potential health club members per demographic. For the youth demographic, we will not use the under 5 age percentage but will rather only use the 5-19 age percentages. We will also make the assumption that for ages 46-64, the likelihood of club membership should be calculated by finding the average of the previous and following age brackets (17 + 12 2 = 14.5%). We will take the percentages, multiply them by the adjusted population and then multiply by the expected percentage of club members. This information provides the approximate number of potential customers based upon age.

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Youth Gen Y (20 to 29) Gen X (30 to 45) Gen (46 to 64) Baby Boomers 65+

17.8% x 126,627 x 12% 14.7% x 126,627 x 19% 20.55% x 126,627 x 17% 24.22% x 126,627 x 14.5% 15.6% x 126,627 x 12%

= 2705 = 3537 = 4424 = 4448 = 2371

The demographic information and research provided by IHRSA allows us to assess the stability and nature of the market we are concerned with. Given the information above, we can roughly estimate the likelihood of customer acquisition and also the supporting population. The trends that were assessed help us determine the sustainability of the industry and factors that could be used for competitive advantages. The indications appear to be positive for the health club industry. Reports of growing memberships and increased participation among specific demographics bode well for future operations. Changes in society and health awareness have also contributed to the rise in health club participation. Although most sectors of the economy have seen decreased business, the fitness industry appears to be remaining stable.

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CONCLUSION
This analysis was conducted in order to explore the potential for a new fitness club venture in Johnson City, TN. We have considered a wide range of aspects such as; competitor offerings, specific location, current market prices for products and services, consumer preferences, and current market conditions. We incorporated a collegiate survey into our analysis that provided valuable information pertaining to a large portion of our target market. We have also considered competitor product and service offerings in order to meet or exceed industry standards. A thorough cost analysis of necessary products, construction, and services needed to establish our venture has been conducted. Market analysis of the fitness industry reveals that growth has been experienced by fitness clubs, in spite of a poor economy. According to research, this trend is expected to continue in coming years. Also, the population surrounding our area of business provides a firm quantity for sustainable operations. After consideration of our combined findings, we feel this venture can achieve stable profitability. Our cost analyses show that, according to our calculations, we could see substantial profits after fixed costs are reduced. There are variables within our analysis that could alter the decision to accept or reject the project. Our main concern is that of customer acquisition. We feel if our estimates of customer acquisition can be met or exceeded, the venture has a strong probability for success. Although all factors cannot be solidified, we feel this venture has legitimate profitability potential.

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References
(n.d.). Retrieved from http://tn.gov/consumer/documents/HealthClubLaw-Part3.pdf Best Buy. (2012). LG 3.6 Cu Ft 9-Cycle Washer and Dryer Combo White. Retrieved from http://www.bestbuy.com/site/Washers-Dryers/Washer-DryerCombos/pcmcat245000050019.c?id=pcmcat245000050019 Best Buy. (2012). Insignia 39 Class LCD 1080p 60Hz HDTV. Retrieved from http://www.bestbuy.com/site/Insignia%26%23153%3B+-+39%22+Class+-+LCD+-+1080p++60Hz+-+HDTV/3689052.p?id=1218428153915&skuId=3689052 Campus Receration Department. (2011, November 29). Retrieved from East Tennessee State University: http://www.etsu.edu/students/campusrec/ Cost Is Top Barrier to Health Club Membership, Per Study. (2011, November 28). Club Industry. Retrieved from http://go.galegroup.com/ps/retrieve.do?sgHitCountType=None&sort=DASORT&inPS=true&prodId=ITOF&userGroupName=tel_a_etsul&tabID=T003&searchId=R5&result ListType=RESULT_LIST&contentSegment=&searchType=BasicSearchForm&currentPosition=1&c ontentSet=GALE%7CA27365 Dynamic Sports Construction Inc. (2010). DynaCourt. Retrieved from http://www.dynamicsportsconstruction.com/dynacourt.htm Fastest, D, Park, Derek F. (2009, April). How Much Would it Cost to Build a Running Track for a School. [Msg 2-4]. Message posted to http://answers.yahoo.com/question/index?qid=20081201180718AAGgPQk Forder, Kenny. (2008, October 20). Crazy Expensive Home Editions.[Msg 1]. Message posted to http://homesoftherich.net/tag/racquetball-court/page/4 Funtional Fitness 101. (2011, Novemember 23). Retrieved from http://life.gaiam.com/article/functionalfitness-101-workout-therapy-hybrid-what-you-need Kully Supply Inc. (2010). Drinking Fountain Doctor. Retrieved from http://www.drinkingfountaindoctor.com/complete-units/by-style/water-coolers/barrier-free Leko, K. The Rush Fitness Center Knoxville, TN. (2012, April 24). Personal Interview Locker Supply. (2012, April 23). Athletic Lockers. Retrieved from http://www.lockersupply.com/ Massage: Get in touch with its many benefits. (2011, December 1). Retrieved from Mayo Clinic: http://www.mayoclinic.com/health/massage/SA00082 Staples.(2012). Purell TFX Touch Free Foaming Hand Sanitizer Dispenser. Retrieved from http://www.staples.com/Purell-TFX-Touch-Free-Foaming-Hand-SanitizerDispenser/product_675291

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The Wellness Center. (2011, December 2). Retrieved from Mountain States Health Alliance: http://www.msha.com/body05.cfm?id=252 Ultrasound Therapy. (2011, November 23). Retrieved from Sports Injury Clinic: http://www.sportsinjuryclinic.net/cybertherapist/general/ultrasound.html IHRSA Index Indicates Health Club Growth in Third Quarter 2011. (2012, January 4). Club Industry. Retrieved from http://go.galegroup.com/ps/retrieve.do?sgHitCountType=None&sort=DASORT&inPS=true&prodId=ITOF&userGroupName=tel_a_etsul&tabID=T003&searchId=R3&result ListType=RESULT_LIST&contentSegment=&searchType=BasicSearchForm&currentPosition=1&c ontentSet=GALE%7CA27632 Top Health Club Trends for 2012. (2012, January 11). Retrieved March 2012, from ihrsa.org: http://www.ihrsa.org/media-center/2012/1/11/top-health-club-trends-for-2012.html U.S. Club Revenue, Memberships Rose in 2011. (2012, April 3). Club Industry. Retrieved from http://go.galegroup.com/ps/retrieve.do?sgHitCountType=None&sort=DASORT&inPS=true&prodId=ITOF&userGroupName=tel_a_etsul&tabID=T003&searchId=R4&result ListType=RESULT_LIST&contentSegment=&searchType=BasicSearchForm&currentPosition=1&c ontentSet=GALE%7CA28515 Blackburn, G. L., & Walker, W. A. (2005). "Science-based solutions to obesity: What are the roles of academia, government, industry, and health care?". The American journal of clinical nutrition , 207-210. Health Club Law - Part 3. (n.d.). Retrieved March 2012, from tn.gov: http://tn.gov/consumer/documents/HealthClubLaw-Part3.pdf Johnson City/Jonesborough/Washington County Economic Development & Demographic Profile. (n.d.). Retrieved March 2012, from www.jcedb.org: http://www.jcedb.org/demographics/ed_profile.pdf Maffiuletti, N. A., & Marco A Minetto, D. F. (2011). Electrical stimulation for neuromuscular testing and training: state-of-the art and unresolved issues. European Journal of Applied Physiology, 111. State and County Quickfacts - Washington County. (n.d.). Retrieved March 2012, from http://quickfacts.census.gov/qfd/states/47/47179.html US Department of Health and Human Services. (1996). Physical activity and health: a report of the Surgeon General. New York: National Center for Chronic Disease Prevention and Health. Wellman, N., & Friedberg, B. (2002). Causes and consequences of adult obesity: health, social and economic impacts in the United States. Asia Pacific journal of clinical nutrition, 11.

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Appendix A: SURVEY RESULTS


The eleven questions are shown in the order they were asked from left to right.

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Appendix B: Facility Layout

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Appendix C: Start Up Cost

Business Start Up Cost Structure


FUNDING Investors Funding Owner 1 Owner 2 Owner 3 Owner 4 Owner 5 Owner 6 Other Loans Bank Loan 1 (10 Years 4.8%) Bank Loan 2 (10 Years 4.8%) Angel Investor Angel Investor 1 Angel Investor 2 $ Total FUNDING COSTS Fixed Costs Deposit on Lease Building Improvement /Remodeling Deposit on Electrical Connections Deposit on Water Connection Deposit on Gas Connection Telephone Connection Fee Cable Connection Fee Internet Connection Fee Locked IP Address Fee Business Entity Business License/Permits Legal/Professional Fees Prepaid Insurance Signage Security Systems (Camera) Advertising for Opening Website Mobile App Development $ ESTIMATED $ $ $ $ $ $ $ 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 60,000.00 $ ACTUAL Under/(Over) $ $ $ $ $ $ $ $ (10,000.00) (10,000.00) (10,000.00) (10,000.00) (10,000.00) (10,000.00) (60,000.00)

$ 750,000.00 $ 700,000.00 $ 1,450,000.00 $

$ (750,000.00) $ (700,000.00) $ (1,450,000.00) $ $ $ -

$ 1,510,000.00 $ ESTIMATED $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 18,500.00 50,000.00 2,500.00 400.00 1,500.00 400.00 400.00 100.00 100.00 200.00 200.00 1,000.00 2,500.00 20,000.00 20,000.00 25,000.00 200.00 2,500.00

$ (1,510,000.00) Under/(Over) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 18,500.00 50,000.00 2,500.00 400.00 1,500.00 400.00 400.00 100.00 100.00 200.00 200.00 1,000.00 2,500.00 20,000.00 20,000.00 25,000.00 200.00 2,500.00

ACTUAL

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COSTS (Cont.) Fixed Costs (Cont.) Business Cards Computer Hardware & Software Point of Sale System, and Entrance Card System Operating Cash Reserve for Contingencies Initial Cleaning Chemical Inventory Initial Linen Inventory Laundry Equipment & Installation Laundry Supplies Machines & Equipment - Free Weights - Machines - Cardio - Miscellaneous Courts (Basketball & Racquetball) - Basketball Court - Racquetball Courts (2) Running Track Television Sound System Tools & Supplies Office Furniture/Fixtures Childcare Furniture/Fixtures Childcare Supplies Lockers - 8' Locker (20) - Double Tier Locker (200) First Aid Equipment Travel Others Total Fixed Costs

ESTIMATED $ $ $ $ $ $ $ $ $ $ $ 147,067.00 $ 37,200.00 $ 213,570.00 $ 19,800.00 $ $ 100,000.00 $ 160,000.00 $ $ $ $ $ $ $ $ $ $ 180.00 175.00 $ $ $ $ 75,000.00 6,750.00 5,000.00 2,000.00 8,000.00 4,000.00 2,000.00 38,600.00 260,000.00 300.00 10,000.00 5,000.00 500.00 2,000.00 400.00 500.00 6,000.00 400.00 417,637.00

ACTUAL

Under/(Over) $ $ $ $ $ $ $ $ $ $ 300.00 10,000.00 5,000.00 500.00 2,000.00 400.00 500.00 6,000.00 400.00 417,637.00

260,000.00

1,500.00 1,000.00 2,000.00 994,087.00 $

$ $ $ $ $ $ $ $ $ $ $ $ $ $

75,000.00 6,750.00 5,000.00 2,000.00 8,000.00 4,000.00 2,000.00 38,600.00 1,500.00 1,000.00 2,000.00 994,087.00

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Average Monthly Costs


Building Lease Payment Advertising (Print, Broadcast & Internet Business Insurance Employee Salaries and Commissions Laundry Supplies Loan & Credit card interest & Principal Legal/Accounting fee Merchant Fees Manager Salary Payroll Tax Laundry Supplies COSTS (Cont.) $ 18,500.00 $ 1,000.00 $ 2,000.00 $ 108,000.00 $ 300.00 $ 15,240.00 $ 500.00 $ 200.00 $ 4,167.00 $ 6,480.00 $ 300.00 ESTIMATED ACTUAL $ $ $ $ $ $ $ $ $ $ $ 300.00 200.00 100.00 10.00 3,500.00 300.00 600.00 $ $ $ $ $ $ 100.00 2,000.00 2,000.00 2,000.00 168,247.00 $ 3 504,741.00 $ $ $ $ $ $ $ 100.00 2,000.00 2,000.00 2,000.00 168,247.00 504,741.00 200.00 100.00 150.00 5,010.00 $ 18,500.00 $ 1,000.00 $ 2,000.00 $ 108,000.00 $ 300.00 $ 15,240.00 $ 500.00 $ 200.00 $ 4,167.00 $ 6,480.00 $ 300.00 Under/(Over) $ $ $ $ 200.00 100.00 150.00 5,010.00

Average Monthly Costs (Cont.)


Supplies Website Hosting Mobile App Maintenance Utilities - Telephone - Cable - Internt Access - IP Adress Fee - Electrical - Water, Sewer & Trash Collection - Gas First Aid Equipment Supply Travel Misc. Expenses Other Total Averge Monthly costs x Number of Months Total Monthly Costs

Total COSTS SURPLUS/(DEFICIT)

$ 1,498,828.00 $ $ 11,172.00 $

$ 1,498,828.00 $ 11,172.00

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Appendix D: Project/ Loss Projections

XXX GYM
4 - Year Profit and Loss Projections INCOME Operating Income Membership ($ 40) Trainer Revenue Sports Massage Revenue Nutritional Guidance Revenue Total Operating Income (OI) Non-Operating Income Space Rental Income Extra Activities Income Extraordinary Income Other Total Non-Operating Income Total INCOME EXPENSES Operating Expenses Building Lease Payment Depreciation Advertising (Print, Broadcast & Int.) Business Insurance Employee Salaries and Commissions Loan & Credit card interest & Principal Legal/Accounting fee Merchant Fees EXPENSES (Cont.) Operating Expenses (Cont.) Manager Salary Payroll Tax Supplies Telephone Cable Electrical Gas Internet Access IPP Adress fee Water, Sewer & Trash Collection Website Hosting Mobile App Maintenance Travel Misc. Expenses Other Total Operating Expenses Non-Recurring Expenses Equipment, Furniture & Software Gifts Given Special Promotion Other Total Non-Recurring Expenses Total EXPENSES 2012, Q4 % OI Est. membership 500 $ 60,000.00 49% $ 33,750.00 28% $ 12,000.00 10% $ 16,500.00 13% $ 122,250.00 100% 2013 % OI Est. membership 2000 $ 960,000.00 49% $ 540,000.00 28% $ 192,000.00 10% $ 264,000.00 13% $ 1,956,000.00 100% 2014 % OI Est. membership 2250 $ 1,080,000.00 49% $ 607,500.00 28% $ 216,000.00 10% $ 297,000.00 13% $ 2,200,500.00 100% 2015 % OI Est. membership 2500 $ 1,200,000.00 49% $ 675,000.00 28% $ 240,000.00 10% $ 330,000.00 13% $ 2,445,000.00 100% 2016 % OI Est. membership 2750 $ 1,320,000.00 49% $ 742,500.00 28% $ 264,000.00 10% $ 363,000.00 13% $ 2,689,500.00 100%

$ 122,250.00 2012, Q4 $ $ $ $ $ $ $ $ % OI

$ 1,956,000.00 2013 % OI

$ 2,200,500.00 2014 % OI

$ 2,445,000.00 2015 % OI

$ 2,689,500.00 2015 % OI

55,500.00 45% $ 222,000.00 11% 41,363.00 34% $ 165,455.00 8% 6,000.00 5% $ 15,000.00 1% 6,000.00 5% $ 24,000.00 1% 324,000.00 265% $ 1,296,000.00 66% 45,720.00 37% $ 182,880.00 9% 1,500.00 1% $ 6,000.00 0% 600.00 0% $ 2,400.00 0% 2012, Q4 % OI 2013 % OI 12,500.00 10% 19,440.00 16% 1,500.00 1% 900.00 1% 600.00 0% 10,500.00 9% 1,800.00 1% 300.00 0% 30.00 0% 900.00 1% 300.00 0% 450.00 0% 1,200.00 1% 5,000.00 4% 1,000.00 1% 537,103.00 439% $ 50,000.00 3% $ 77,760.00 4% $ 6,000.00 0% $ 3,600.00 0% $ 2,400.00 0% $ 42,000.00 2% $ 7,200.00 0% $ 1,200.00 0% $ 120.00 0% $ 3,600.00 0% $ 1,200.00 0% $ 1,800.00 0% $ 4,000.00 0% $ 15,000.00 1% $ 5,000.00 0% $ 2,136,628.00 109%

$ 222,000.00 10% $ 165,455.00 8% $ 15,000.00 1% $ 24,000.00 1% $ 1,296,000.00 59% $ 182,880.00 8% $ 6,000.00 0% $ 2,400.00 0% 2014 % OI $ 50,000.00 $ 77,760.00 $ 7,000.00 $ 3,600.00 $ 2,400.00 $ 42,000.00 $ 7,200.00 $ 1,200.00 $ 1,200.00 $ 3,600.00 $ 1,500.00 $ 2,000.00 $ 4,000.00 $ 12,000.00 $ 5,000.00 $ 2,136,209.00 2% 4% 0% 0% 0% 2% 0% 0% 0% 0% 0% 0% 0% 1% 0% 97%

$ 222,000.00 9% $ 165,455.00 7% $ 12,000.00 0% $ 24,000.00 1% $ 1,296,000.00 53% $ 182,880.00 7% $ 6,000.00 0% $ 2,400.00 0% 2015 % OI $ 55,000.00 $ 77,760.00 $ 8,000.00 $ 3,600.00 $ 2,600.00 $ 43,000.00 $ 8,000.00 $ 1,500.00 $ 1,200.00 $ 4,000.00 $ 1,800.00 $ 2,250.00 $ 3,000.00 $ 12,000.00 $ 5,000.00 $ 2,141,460.00 2% 3% 0% 0% 0% 2% 0% 0% 0% 0% 0% 0% 0% 0% 0% 88%

$ 222,000.00 8% $ 165,455.00 6% $ 10,000.00 0% $ 24,000.00 1% $ 1,296,000.00 48% $ 182,880.00 7% $ 6,000.00 0% $ 2,400.00 0% 2015 % OI $ 55,000.00 $ 77,760.00 $ 8,500.00 $ 3,600.00 $ 2,600.00 $ 44,000.00 $ 8,000.00 $ 1,500.00 $ 1,500.00 $ 4,000.00 $ 1,800.00 $ 2,500.00 $ 3,000.00 $ 14,000.00 $ 5,000.00 $ 2,143,510.00 2% 3% 0% 0% 0% 2% 0% 0% 0% 0% 0% 0% 0% 1% 0% 80%

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

$ 4,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 13,000.00 $ 550,103.00

3% 2% 2% 2% 11%

$ $ $ $ $

5,000.00 3,000.00 5,000.00 2,000.00 15,000.00

0% 0% 0% 0% 1%

$ $ $ $ $

3,000.00 3,000.00 5,000.00 2,000.00 13,000.00

0% 0% 0% 0% 1%

$ $ $ $ $

3,000.00 2,000.00 2,500.00 1,000.00 8,500.00

0% 0% 0% 0% 0%

$ $ $ $ $

5,000.00 2,500.00 3,000.00 2,000.00 12,500.00

0% 0% 0% 0% 0%

$ 2,151,628.00

$ 2,149,209.00

$ 2,149,960.00

$ 2,156,010.00

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Net Income Before Taxes Income Taxes (35%) NET INCOME Owner Distribution / Dividends Adjustment to Retained Earnings

$ (427,853.00) $ (149,748.55) $ (278,104.45) $ (278,104.45)

$ (195,628.00) $ (68,469.80) $ (127,158.20) $ (127,158.20)

$ 51,291.00 $ (200,266.50)
Tax Credit Previous Years

$ 295,040.00 $ (97,002.50)
Tax Credit Previous Years

$ 533,490.00 $ 89,719.00 $ 443,771.00 $ 443,771.00

$ $

51,291.00 51,291.00

$ 295,040.00 $ 295,040.00