F45 Franchise Cost & Profit Worth Failure Risk in 2024?
This article is based on its 2022 FDD.
The F45 franchise is a training studio that provides exercise training that involves alternating periods of short, intense anaerobic exercise.
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Adam Gilchrist has been a Director and CEO since the formation of the company. He is also a Director and the Co-CEO of each of F45 Training Pty Ltd, F45 Training Canada Limited, F45 Training Asia Private Ltd., and Functional 45 Training Limited. Adam is based in Sydney, Australia.
The F45 Training system was launched in Australia in 2012 and currently has over 2,300 franchises sold in 63 countries. In the United States F45 began offering franchises in 2015 and now has 597 franchise units and 1 company owned units.
F45 is a public company backed by notable investors such as Mark Wahlberg and David Beckham. The shares began trading on the New York Stock Exchange on July 15, 2021 under the symbol “FXLV.” F45 received net proceeds from the offering of approximately $279.0 million.
Mark Wahlberg sold 52,653 shares of the F45 stock in a transaction dated April 25, 2022. The shares were sold at an average price of $9.83, for a total value of $517,578. Following the completion of the sale, the Mark Walhberg now owns 1,618,849 shares in the company, valued at $15.9 million. Mark Wahlberg has sold a large portion of his initial holdings in F45 fitness throughout April 2022.
F45 franchises are a community based, functional training system that prides itself on innovation, motivation and results.
How Is the F45 Franchise Positioned in the Fitness Industry?
The F45 is uniquely positioned to grow within the Fitness Industry because of the management team behind it. F45 boasts notable investors that are committed to growing the brand internationally and Mark Whalberg is actively helping grow the brand name in the United States. The F45 franchise has also reported that margins can be up to 30%, while the industry average in the fitness sector is 9.6%. They are competing in a $37 billion market with an expected 4.7% growth rate.
While the fitness industry as a whole is facing uncertainty because of COVID-19 and the shift to online home workouts such as Peloton. However, as consumer demand for normal life reemerges and the safety of vaccines, we believe that this competitive fitness model will excel as people want to compete in a live setting against other people. The most comparable company to F45 is Orange Theory. Orange Theory takes on average over 12 years to make your money back compared to F45 franchises which can be under 3 years.
“…we became profitable about a year on a cash flow basis so about a year into the project.” – F45 Franchisee
How Much Is a F45 Franchise?
The initial F45 Franchise Fee is $50,000. You have to pay this upfront fee when opening a F45 franchise.
To be considered for a franchisee of an F45 franchise you need to have at least $120,000 in liquid assets.
$259,000 to $275,600 must be paid to F45 Fitness or its affiliates when you open up a F45 franchise.
F45 Franchise Cost
The estimated total investment necessary to begin operation of a F45 Franchise ranges from $313,200 – $485,100
The following costs are part of the upfront costs included in the initial investment for a F45 franchise
Many of these are one-time fees that are needed to launch the franchise.
Review the chart below to see how much it costs to buy a F45 franchise in 2021.
F45 Franchise Cost (Detailed). Estimated Initial Investment
| Type of Expenditure | Amount | To Whom Payment Is to Be Made |
|---|---|---|
| Initial Franchise Fee | $50,000 | Us |
| Document Preparation Fee | $2,000 | Us |
| Opening Package | $125,000 | Us |
| Opening Package Taxes and Duties | $5,000 to $12,000 | Us or the relevant taxing or other authority |
| Architectural Floor Plan Design | $14,500 | Us, Our Affiliates and/or Suppliers |
| Leasehold Improvements | $1,000 to $100,000 | Suppliers |
| Utility Deposits | $1,000 to $2,000 | Suppliers |
| Exterior and Interior Signage | $5,000 to $10,000 | Suppliers |
| Furniture, Fixtures, Other Equipment | $4,000 to $10,000 | Suppliers |
| Office Equipment and Supplies | $1,000 to $3,000 | Suppliers |
| Computer System | $1,000 to $2,000 | Us, Our Affiliates and/or Suppliers |
| Business Licenses and Permits | $1,000 to $3,000 | Government Agencies |
| Training Expenses | $1,000 to $2,000 | Employees and Suppliers |
| Professional Services | $1,000 to $5,000 | Accountants, Architect, Lawyers, etc. |
| Insurance | $1,000 to $4,000 | Insurance Broker |
| Grand Opening | $25,000 | Us or suppliers |
| Nutritional Supplements | $3,000 | Us |
| AED | $1,500 to $2,100 | Us, Our Affiliates and/or Suppliers |
| F45 Body Fat Scanner | $8,500 plus shipping and handling charges and taxes | Us, Our Affiliates and/or Suppliers |
| Music Licenses | $1,700 to $2,000 | Performance Rights Organizacions |
| Additional Funds (initial 6-month period) | $60,000 to $100,000 | Employees and various suppliers |
| TOTAL | $313,000 to $485,100 |
Owning a F45 Franchise Requires Ongoing Fees
Royalty: 7% of Gross Sales or $2,500 per month (whichever is higher)
Brand Fund: 2% of Gross Sales or $200 per month (whichever is higher)
Marketing Fee: $2,500 per month
The Fitness Industry Average has a royalty fee of 6.4% and a marketing fee of 2%, so F45 has slightly higher royalties but makes up for it with large revenues per franchise unit.
How Much Do F45 Franchise Owners Make?
F45 does not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. However, if you are purchasing an existing F45, the company may provide you with the actual records of that F45 franchise.
However, Charlie Payne, Chief Financial Officer, provided some insight into the financials behind an F45 in a press release before their IPO that gave us some insight into how well franchisees can do financially after opening an F45 studio.
Our nearly 100% franchised model offers compelling economics to both us and our franchisees. Our franchisees benefit from our highly attractive new unit economic model that features a relatively low initial investment, low four-wall operating expenses, and strong returns on investment. A typical F45 franchise requires an initial investment of approximately $315,000, significantly lower than other franchise models. In Year 3 of operation, franchisees produce an average AUV of approximately $359,000; average four-wall EBITDA margins in excess of 30%; and average cash-on-cash returns in excess of 35%. On average, it takes a studio approximately six months and 75 members to reach breakeven.»
“So you’re always selling every day, making phone calls, answering phone calls, text, e-mails, business-to-business outreach. I mean it’s a nonstop process. So if you’re going into this, as an owner, and you’re not going to be that person who’s kind of spearheading that campaign, you need to find someone that you trust and that’s reliable and consistent…” – F45 Franchisee
Is the F45 Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for F45 franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems like Anytime Fitness where more transaction data is available.
Under $1 Million Net Sales
- Estimated Selling Price = Net Sales – 0.54
$1 Million – $5 Million Net Sales
- Estimated Selling Price = Net Sales – 0.67
Over $5 Million Net Sales
- Estimated Selling Price = Net Sales – 1.21
When you go to sell an F45 franchise based on the median multiple of .54 and net sales averaging $359,000 it would sell for $193,860. This is significantly lower than the average investment of $315,000.
If you owned multiple F45 franchises, you do have the ability to make an even larger profit. Gym owners with over $5 million in sales have a median multiple of 1.21. So, if you had 15 F45 franchises this would be $5,385,000 million in sales. And the sale amount would be $6,515,850.
“… to be profitable, to turn a decent profit per unit, you would need at least a couple of hundred members.” – F45 Franchisee
F45 Training Incorporated. STATEMENTS OF OPERATIONS
| Year Ended December 31, 2020 | Year Ended December 31, 2019 | |
|---|---|---|
| Revenue | ||
| Franchise | $ 28,452,997 | $ 22,105,930 |
| Equipment and Merchandise | $ 14,076,619 | $ 28,081,224 |
| Total revenues | $ 42,539,616 | $ 50,187,154 |
| Operating expenses | ||
| Cost of franchise revenue | $ 6,998,167 | $ 9,971,008 |
| Cost of equipment and merchandise (Related party: $2,596,620 and $2,002,272, for 2020 and 2019 respectively) | $ 9,831,886 | $ 14,200,071 |
| Selling, general and administrative expenses | $ 22,558,510 | $ 21,530,850 |
| Total operating expenses | $ 39,388,563 | $ 45,701,929 |
| Income from operations | $ 3,141,053 | $ 4,485,225 |
| Interest expense, net | $ (193) | $ (333) |
| Other income (expense), net | $ 38,879 | $ (638,784) |
| Income before income taxes | $ 3,179,739 | $ 3,846,108 |
| Provision for income taxes | $ (1,101,975) | $ (1,879,355) |
| Net income | $ 2,077,764 | $ 1,966,753 |
F45 Income Statement Key Insights
In 2020 the F45 franchisor had a profitable year with a net income of $2.08 million and revenues of $42.5 million. Revenues from 2020 to 2019 dropped by 18% and this was largely due to the revenues from equipment and merchandise in 2020. Overall, net income was slightly higher in 2020 compared to 2019.
F45 franchises have been growing at a pretty exponential pace averaging 136 new units opening each year over the past three years. This large growth can be attributed to the new capital invested in the business and the large public figures like Mark Whalberg and David Beckham getting behind the fitness franchise.
“I would highly advise … to take a close look at where you’re thinking about putting one of these (F45 Unit) and do drive-bys and drive the territories and drive to the nearest F45s to see how close they are because they’re everywhere around town. And which is great… But if you’re looking for 150 to 200 member breakeven on your cash flow each month, it can be a challenge, especially with COVID.” – F45 Franchisee
F45 Fitness Studio Owner Quotes
F45 Fitness Studio Owner. The expert is responsible for operating the franchise location for 5 years ago. The expert is responsible for overseeing all daily operations, purchasing, recruiting clients, client retention, marketing, and more. The owner has been a franchise owner of F45 for 4+ years and can speak to the goal of 7,000 studios in the US, as well as the existing locations’ current states and management.
“I have interacted with many F45’s in many places and a number are struggling because of the demographic areas”.
“F45 really caught my attention with their product, with how they compare with other things on the market. And my beliefs and commitment to fitness and the variety and a lot of their key principles just really fit well with what I believe. That’s how I got into it”.
“It was a long process for us. I mean, for me, it really cut into my savings to be as economical as I could. I managed and did a lot of the build-out, and that stretched it out. In hindsight, it probably would have been better just getting an operation sooner. So, it took, I don’t know, about nine months. And as far as the cost of it at the time I mean, generally, the equipment is about $100,000. The start-up costs I think, were about $350,000“.
“About the competitive landscape… Well, there are some knockoffs. I think there’s Fit Body Boot Camp. There’s a couple with a very similar name right in that range. And they basically try to do the F45 thing at a lower rate. And then others like Barry’s Bootcamp, and we don’t have the type of competition around here… I would say, Orangetheory is a higher-quality product. But it looks impressive. But when a customer comes to F45, they get so much a broad experience, a better weight-lifting experience, so here’s my opinion…”
“I think their concept works fantastically in the right setting, and part of that setting would be urban, upscale, high-income, young professionals. When you put that in small-town U.S.A., you can make it work… I’m guessing that if you put a high-dollar boutique fitness in small-town U.S.A., people aren’t used to paying that. And it’s much harder to find clients”.
“We’ve worked hard at retaining customers and getting referrals. We deliver a really good product. We just do everything we can. But we struggle, too. So I still haven’t made my investment back, I still don’t draw paycheck from the business, that’s where I’m at”.
“Rate revenues and profits? I think we’re about $270,000 on revenue, and our profits, maybe $20,000, $30,000“.
Source: https://www.tegus.com/
Conclusion
With powerful figures like Mark Whalberg and David Beckham supporting this fitness franchise and with the growth of competitive group workouts, it is positioned to grow exponentially in the United States. The Company raised a significant amount of money from their IPO and also minority stake investment from Mark Whalberg.
We strongly recommend you speak to at least 5 F45 franchisees to better understand the financials (see questions to ask).
Think F45 franchise is the right franchise for you, or are you interested in other franchise opportunities in the Fitness Industry? Check out our listings page on the Vetted Biz website for thousands of franchises available for your investment.
