Gold’s Gym Franchise Worth the Profit? (2024) – Vetted Biz
Gold’s Gym franchise is an American chain of international fitness centers, it started originally by Joe Gold in Venice Beach, California. Each gym offers a variety of cardio and strength training equipment as well as group exercise programs. Gold’s Gym’s headquarters have relocated to Dallas.
Gold’s Gym is privately own. It was acquired from its previous owner, private equity firm Brockway Moran & Partners, by Robert Rowling’s TRT Holdings in 2004 for approximately $158 million.
How is Gold's Gym Franchise Positioned in the Fitness Industry?
The U.S. has the biggest Fitness market in the world, both in terms of revenue and in the number of members enrolled in a fitness facility. The Fitness Center industry has over 111,000 businesses with market size of $34 billion, and it supports over 800,000 jobs.
The fitness center industry has grown with the rise in disposable income and demand for a more health-conscious lifestyle among millennials. The fitness center industry is mainly divided into two groups, either a specialized fitness boutique or a full-scale gym with multiple amenities and services. Fitness centers have experienced sustained growth since the post-economic crisis in 2009.
Gold’s Gym competes in the Fitness market against big brand companies such as Orange Theory and Planet Fitness.
How Much is a Gold's Gym Franchise?
The initial Gold’s Gym Franchise Fee is $40,000. You have to pay this upfront fee when opening a Gold’s Gym franchise.
Gold's Gym Franchise Cost
The estimated total investment necessary to begin the operation of a Gold’s Gym Franchise ranges from $1,483,000 to $3,602,000. The following costs are part of the upfront costs included in the initial investment for a Gold’s Gym. Many of these are one-time fees that you need to launch the franchise. Review the chart below to see how much it costs to buy a Gold’s Gym franchise in 2022.
| Type of expediture | Amount | To Whom Payment Is To Be Made |
|---|---|---|
| Initial franchise fee | $40,000 | Us |
| Travel and living expenses during training | $4,000 to $7,000 | Outside suppliers and us |
| 3 months’ rent | $30,000 to $255,000 | Landlord |
| Security deposit for lease | $12,000 to $150,000 | Landlord |
| Leasehold improvements and construction costs | $1,000,000 to $2,000,000 | Outside contractors and suppliers |
| Selectorized equipment and free weights | $100,000 to $400,000 | Outside suppliers |
| Cardiovascular equipment | $150,000 to $300,000 | Outside suppliers |
| Signage | $40,000 to $85,000 | Outside suppliers |
| Initial inventory, other equipment and supplies | $12,000 to $45,000 | Outside suppliers |
| Computer system and Gym Management System | $20,000 to $35,000 | Outside suppliers |
| Advertising and marketing | $25,000 to $120,000 | Outside suppliers |
| Miscellaneous opening costs | $10,000 to $65,000 | Outside suppliers and us |
| Additional funds – 3 months | $40,000 to $100,000 | Us and outside suppliers |
| TOTAL ESTIMATED INITIAL INVESTMENT (excluding real estate purchase costs) | $1,483,000 to $3,602,000 |
Gold's Gym Franchise Requirements
Gold’s Gym requires that potential franchisees have a minimum of $1 million in net worth and $400,000 in liquid assets.
Franchise Requires Ongoing Fees
Royalty: Greater of 5% of the Facility’s Gross Revenue each month or $2,000 per month
Marketing Fee: Greater of 2% of the Facility’s Gross Revenue each month or $1,350 per month
Cooperative contributions: Amount that the Cooperative determines, up to 3% of Gross Revenue
How much do Gold's Gym franchise owners make?
2021 Median Franchise Sales: $1,268,000
Statement of Average Gross Revenue for Each Measurement Period
| Number of facilities | Gross Revenue | Facilities that met or exceed the average | ||||
|---|---|---|---|---|---|---|
| Median | Average | Range | % | Number | ||
| Affiliate-Owned Facilities | 60 | 1638 | 1760 | 668 to 6036 | 45 | 27 |
| Franchised Facilities | 160 | 1268 | 1427 | 251 to 4661 | 41 | 65 |
| All | 220 | 1411 | 1517 | 251 to 6036 | 44 | 97 |
| Initial investment (midpoint) | %Profit margin of average franchise sales | Estimated profits | Time to recoup investment |
|---|---|---|---|
| $2,542,500 | 10% | $126,800 | 21.5 years |
| 15% | $190,200 | 15 years | |
| 20% | $253,600 | 11.5 |
Based on the median sales provided by Gold’s Gym’s franchise locations, at an average of a 15% profit margin it will take around 15 years to recoup your investment. This is standard for opportunities in this industry but is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other Fitness stores; the extent of market penetration and brand awareness that Gold’s Gym stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Gold's Gym Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Gold’s Gym 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 where more transaction data is available.
Under $5 Million Net Sales
- Estimated Selling Price = Net Sales * 0.67
When you go to sell a Gold’s Gym franchise based on the median multiple of .67 and net sales in 2021 of $1,268,000, it would sell for $849,560. This is significantly lower than the midpoint investment of $2,542,500.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Gold's Gym (Franchisor) Income Statement Key Insights:
| 2022-04 YTD | |
|---|---|
| Revenue | |
| Annual Fees | $3,386,656 |
| Initial franchise and renewal fees | 206,690 |
| Territory development fees | – |
| Deferred franchise revenue | (164,631) |
| Other | 125,000 |
| Revenue | 3,553,715 |
| Operating Expenses | |
| General and administrative | 970,373 |
| Depreciation and amortization | 306,438 |
| Operating expenses | 1,276,811 |
| Operating Income (Loss) | 2,276,904 |
| Foreign currency exchange – gain/ (loss) | – |
| Interest income | – |
| Income before taxes | 2,276,904 |
| Provision for Income Taxes | 145,980 |
| Net Income | $2,130,924 |
Gold’s Gym is a very profitable business for the franchisor with retained earnings of $2.13 million in the first quarter of 2022 – if expanded to all four quarters, this would amount to nearly $8.52 million. This is a good indication of high growth as a company overall.
How many Gold's Gym units have opened and closed?
System-wide Outlet Summary
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 191 | 178 | -13 |
| 2020 | 178 | 180 | 2 | |
| 2021 | 180 | 166 | -14 | |
| Company-Owned | 2019 | 144 | 121 | -23 |
| 2020 | 121 | 61 | -60 | |
| 2021 | 61 | 60 | -1 | |
| Total Outlets | 2019 | 335 | 299 | -36 |
| 2020 | 299 | 241 | -58 | |
| 2021 | 241 | 226 | -15 |
Over the last three years, the company has been in decline. Both franchising units and company-operated stores have decreased. Over the last three years, franchises have closed at a rate of 8 units a year. This is an indicator that these stores may not be performing well. 0r their franchise term is up and they are not renewing it.
Conclusion
Gold’s Gym offers people the opportunity to be a part of the fitness industry but it has a longer payback period than most opportunities in other industries.
We believe that this franchise is an option for those that are passionate about fitness and are willing to put in the hours to make the business run smoothly. We also suggest that you speak to 3 – 5 Gold’s Gym owners before opening one yourself.
While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Fitness Industry.
