How do you assess the TRUE-value price of a gym or fitness franchise? After 200+ transactions of gym and fitness franchises, Dustin Slypen is a business broker who has found a niche where he adds tremendous value to understand this.

In an effort to understand where the real value sits in these businesses, Glenn asked Dustin to zero in on the key components to valuing them in a purchase or sale process.

The conversation included insights on fit-out cost 'blow outs', equipment supplier 'kick-backs', deals falling over at the last minute, and why, as well as advising sellers not to 'talk-up' their impact in the business too much.

The key parts to value that we uncovered we're broken into broadly;

• Price expectation v reality,
• Franchise requirements, such as equipment modernisation and re-fits,
• Membership and income apportionment,
• The lease, and ensuring it's impact is clearly understood,
• The value based on a multiple of operating profit between business types, such as functional fitness, 24/7 gyms, Boutique, and Full service big box gyms.

0:00 Intro

0:52 The number of transactions and deals that Dustin has worked on in the industry (hundreds)

1:21 Price expectation versus the reality of what the business is worth.

2:51 Where do you see the valuation / cost 'blow-outs' beyond reality, and the costs of building a gym or fitness franchise

4:32 How the honest conversations go with sellers of businesses that need  to have a reality check on valuation.

5:29 The underestimation of costs of modernisation required by a franchise brand and their brand standards.

7:36 How often do franchises need them to update equipment and how this can be unfair.

9:25 Kick backs from suppliers of equipment back to franchisors.

9:54 Membership income and apportionment of it between ongoing (weekly) or up-front payments (annual) and its impact on valuation.

12:13 The focus of operators often to want to focus on the number of members as opposed to the yield per member.

13:26 The lease likely the most vital part of the equation in any sale.

15:13 Where the problems often begin, when owners come close to the end of their lease.

16:10 Deals falling over on settlement days due to the actions of landlords and the varying motivation of landlords.

18:24 Rent contributions by landlords and the risks with them.

19:54 Valuing the business based on a multiple that varies between 24/7 gyms, big box, functional training and boutique fitness businesses, and the staffing differences.

22:13 Advising vendors not to talk up how successful the business is based on what they have done.

22:49 Wrap up

Podcast Produced by:  www.magneticbusinessmedia.com.au

Franchise Stories and Knowledge Base (our other website):  www.franchisebuyer.com.au

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