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Snap Fitness Franchise Opportunity Ryan Parish, Shelia Wilson, Christopher Maynard, Marcia Matthews, Fallon Bradford University of Phoenix- ACC/561 October 4, 2012 Myrtle Clark
2010 Break Even (300 members) Fixed Costs Total Variable Costs Contribution Margin Total $ 7.000 1. Finally the team will come into an agreement regarding whether entering into a franchise would be a good idea. Estimated Variable Costs Each Snap Fitness franchise location incurs fixed costs of $4.Snap Fitness 2 Snap Fitness claims that the number of people who go to the gym has doubled over the past 20 years and that this number will rise as the “baby-boomer” generation is in search of eternal youth and disease control.800 $ $ $ 6.800.800 6 The total variable cost for Snap-Fitness is $1. which means each member has a contribution margin of $6. Team B is looking into the opportunity to start its own Snap Fitness Franchise. Snap-Fitness Break Even Analysis For the month Ended June 30.000 per month in expenses in addition to $2.000 in leased equipment. . The team will examine Snap Fitness specifically with real-world cost and net income goals. each paying a monthly fee of $26. Team B will use a local newspaper’s estimation that only 300 members would be required to break even. To determine the variable costs.
Snap Fitness needs to determine the amount of sales in members and in dollars needed to achieve a target net income of $10. At least one employee must be at the gym for a few hours a day. the contribution margin will work to the advantage of Snap Fitness by subtracting the contribution margin of $6 per customer from the break even monthly fee leaves the net profit to be $20 for each customer. Therefore. In this case.000 after costs.800. The following five variable costs have been accounted for at Snap Fitness.000 / (net profit) $20 x $26 = $20. the calculations for monthly sales for members and in dollars are explained as follows: • Monthly sales for members = (fixed costs) $6. If this cost is added with the desired target net income.000 + (target net income) $10.800 dollars to turn a profit. With 300 members. If Snap Fitness wants to sign up more than 300 memberships.000. variable costs must stay under 1. Snap Fitness should aim for 800 members who will bring in $20. a cost-volume-profit analysis should be done to maximize profits as the business expands.000 for this month. • Monthly sales in dollars = (fixed costs) $6.800 in revenue and yields $10. The fixed cost for Snap Fitness has been determined at $6. To start out.Snap Fitness 3 $10.000 / (net profit) $20 = 800 members.000 + (target net income) $10. Five Variable Costs Variable costs are costs that vary in total directly and proportionately with changes in the activity level.000 Net Income With the membership contribution of $26 monthly. this employee can . The first variable cost to consider is number of employees.
the more costs will be accrued.800. yoga mats. This will cost 200 dollars/month. etc.000 (employee) + $200 (towels. The more members who are showering and using the bathroom at the gym. instructors will have to be paid to run the classes. For example.Snap Fitness 4 clean the equipment and maintain the facility as well as instruct members on how to use the equipment. The initial equipment lease is included as a fixed cost by the franchise. Initially.50 per new member as a one-time fee. Monthly cost of one part-time employee will be 1. Towels are also needed to wipe down equipment after use to keep the equipment sanitary. towels. etc. This exceeds the break even threshold of $1. or before work. total variable costs will total $1. more lockers are needed. more employees may be required to help run the facility. classes may be offered as a marketing tool to attract more members. but as more members are signed up. The last variable cost is the cost of the access badge and free T-shirt given to each new member.250. etc. soap. The third variable cost is the amount of lockers. In that case. more equipment will be required. The second variable cost to consider is the amount of treadmills. As membership expands. This would be $2. the cost of the badge and T-shirt is a one-time fee and . Many people work out during their lunch break. However.) + $1. There is also a variable cost in washing the towels. These members require a locker in the gym to hold their belongings. paper towels. The fourth is the cost of toilet paper. after work. soap. weights.050 (T-shirts and badges for 300 members).000 dollars. However. This will not be a recurring monthly charge but will cost $3. lockers for 300 members will be provided. Assuming that Snap Fitness signs up 300 members in the opening month. with more members. stationary bikes. antibacterial hand gel.
which has proven to be a lucrative business. Also the facility could start out with the owner working until more members are signed up. Franchise or Not The idea of owning a franchise entrepreneurship like Snap Fitness Club provides the new perspective business owner with a quality low-cost fitness franchise. especially a fitness center. It involves various procedures to ensure that the operational costs do not outweigh revenue totals. Recognizing the cost-volume-analysis is crucial in determining memberships and establishing the break-even point. As partners with the Snap Fitness organization. As mentioned earlier. The franchise owners should collaborate on . and a proven business model. Snap Fitness wants to help move owners toward success. the company offers the support to get a business started such as financing assistance. the initial investment and the cost of maintaining the fitness center is relatively low and the fixed and variable cost of operating the business indicate the Snap Fitness franchise would be a very sound investment. To maintain profits. therefore the company does its best to offer support while also offering years of combined experience with other gym owners. the fitness center must continue to attract customers with a 24/7 convenient fitness center with low marketing costs and maintenance repairs. Snap Fitness also offers assistance in selecting the best demographic location to make certain the franchise will be in a potentially thriving area of the city. marketing campaigns. The risk involved in owning a business. There are a number of things to consider when starting a franchise.Snap Fitness 5 the second month should turn a profit of $600. training resources.
In today's customer centric environment. The numbers required to break even seem doable and the amount of time required per gym is relatively low compared with many other franchise opportunities.Snap Fitness 6 operational standards to ensure the Snap Fitness franchise remains a growing business with satisfied customers and increasing profit margins. On the basis of break-even and variable costs. a franchise opportunity with Snap Fitness appears to be a sound decision. In the service industry such as a fitness center. . it is of extreme importance to ensure the highest quality service to customers. companies are working hard to improve upon existing processes and ensure the best product and service quality to customers.
J.. Hoboken. E. D. (2009). & Kieso.Snap Fitness 7 References Kimmel. Weygandt. . Accounting: Tools for business decision making (3rd ed.). P. J. D. NJ: John Wiley & Sons.