These figures are only estimates of what we think you can earn based on the assumptions described below. Your results may differ. There is no assurance that you will sell as many memberships or earn as much.
These figures were prepared without an audit. Prospective franchisees or sellers of franchises should be advised that no certified public accountant has audited these figures or expressed his/her opinion with regard to the content or form.
NOTES AND ASSUMPTIONS
1. We rounded revenues and expenses to the nearest $100.
2. In projecting enrollment fee revenues and the cost of proximity cards, we assumed, based on data reported to us by our designated processor, that 48% of your members would be replaced through attrition, and that the average enrollment fee you charge is $49. The attrition rate is based on the average rolling 12-month attrition of membership contracts of 12 months or longer at Anytime Fitness clubs that have been open 12 months or longer and measures net transfers out of the Anytime Fitness® system.
3. In projecting membership revenues, we had to make certain assumptions regarding the types of memberships you will sell in your center and the prices you will charge for each type of membership. The membership numbers above consist of members paying monthly fees under a membership agreement with you, as well as “pay per visit” members, for which you are paid a dollar amount per visit to your center. We have projected membership revenues equal to approximately $371.90 per member per year. Based on reports from our designated processor under each membership agreement to our Anytime Fitness franchisees, the average monthly membership fees paid was $36.58 per member and the median monthly membership fees paid was $35.78 in the 12 months ended on February 1, 2018, for clubs that were open for 12 months or more as of February 28, 2018. These clubs had an average of 697 members who joined as monthly members and a median of 646 members who joined as monthly members. Based on the data reported to us by our designated processor, the average “pay per visit” member fees paid to our Anytime Fitness franchisees was $7.83 per member per month and the median “pay per visit” member fees paid to our Anytime Fitness franchisees was $6.08 per member per month in the 12 months ended on February 1, 2018, for clubs that were open for 12 months or more as of February 28, 2018. These clubs had an average “pay per visit” member count of 168 members and a median “pay per visit” member count of 101 in the 12 months ending on February 28, 2018. However, membership rates will vary significantly between clubs, depending upon what you elect to charge, how your rates are affected by competition, and the number of memberships you sell that receive corporate discounts, and we do not represent that any franchisee can expect to attain any particular level of sales.
4. Under the 2010 Affordable (Health) Care Act, you are required to collect sales taxes on tanning services, and remit those taxes to the Internal Revenue Service. We assumed that you will collect the tax and pay it to the taxing authorities, which has no effect on your bottom line, and that tanning sales will not be impacted by this tax.
5. It is up to you to determine whether you offer vending machines in your center, the products you place in those machines and the vending prices. The amounts we have projected for vending revenue reflect the per membership revenues we receive from vending. We also do not tell you the sources from which you can purchase vending products. We assumed you would purchase your vending products from a warehouse seller such as Sam’s Club, and that you pick up these items. If you go to other sources, or have these products delivered, your expenses will likely be higher.
6. Most of our clubs hire personal trainers to provide personal training services to their members. Our franchisees typically collect a percentage of what the members pay for these services. We have projected training revenues equal to $111.18 per member per year. These numbers are based on the average monthly personal training revenue reports above $1,500 of clubs who were open for at least 12 months and reported 1 or more months of personal training revenues using the Club Management Software or other personal training management software. We assumed that if a club reported less than $1,500 in revenue from personal training services for any month, that the club was either in the beginning stages of offering personal training services or did not have a fully operational personal training program. In total, 822 clubs reported one or more months of personal training revenues for this data set and 594 of those clubs reported an average of $1,500 a month in personal training revenues for the entire reporting period. We believe that this projection is consistent with the average for all our franchisees, but many franchisees do not report their training revenues to us. Compensation models for trainers vary widely. In the 500 and 865 member models, we projected that personal training expenses, including compensation to your personal trainers, equal 60% of your personal training revenues. We did not include Training Suite Fees as an expense because we do not currently require you to use the Training Suite. Once personal training revenues reach a certain level, some of our clubs have added a Member Experience Manager to oversee the personal training program. Therefore, in the 1,150 member model, we assumed you have this additional expense and therefore projected personal training expenses at 70% of personal training revenue. If you perform all or a portion of the training services yourself, this would increase your income from operating your center.
7. There are other revenue sources we have not included. For example, we have recommended that our clubs charge members $1 a month for membership in Anytime Health. While we included in expenses the fees you pay us for each member (which we cap at $225 a month), since the majority of our clubs have elected not to separately charge their members for these memberships, we did not include them in revenues. Likewise, we recommend that our franchisees charge members a club enhancement fee of $29-$39 per year that we recommend be used to purchase new equipment and upgrade their club. While a significant number of our clubs are charging these fees, we have not included these fees in revenues because we also did not include in your expenses the cost of purchasing new equipment or upgrading your facilities.
8. Your rent can vary significantly depending on the size and location of your center. However, in our experience, the number of members you have does not necessarily correlate to the size of your center. Our projections therefore assumed that the center had 5,000 square feet, and that the gross rent paid was $17.94 per square foot per year. These assumptions are based on information reported to us by franchisees in 2017. If you have a larger center, or you pay more for rent, your rent expense could increase significantly.
9. This amount assumes that you have a center with 5,000 square feet and 1,000 square feet within the center is reserved for functional training containing no large exercise machines (such as treadmills or elliptical machines). We assume you will purchase $140,000 in equipment and enter into a 4year lease purchase agreement for your equipment, paying approximately 15% down, and financing the balance. (Larger centers or centers with less functional training space will typically have more equipment. See Item 7 for additional information about the range of initial investment for equipment and improvements.) Our projection assumes an interest rate of 9% per annum. These assumptions are based on information reported to us by franchisees in 2017. These numbers will likely be different for each franchisee, as you may decide to make more of a down payment (which would lower your payments), you may decide to finance your equipment over a longer period of time (which will also lower your payments), and you may have to pay a higher interest rate (which would increase your payments).
10. Processing and credit card fees will vary depending on how many members prepay their membership fees, how many pay by bank draft, credit card, and the credit card they use. In our experience, costs for these services generally average about 5% of your membership fees and 1.5% on enrollment fees and personal training fees.
11. We assumed you would have 3.3% bad debt on your membership fees. This is consistent with the bad debt experience for our franchisees in 2017 as reported to us by our designated billing processor.
12. This amount includes gas, electric, water, cable, Internet and telephone. It does not include expenses for an answering service because we assume you will forward your calls to you or a manager to answer during unstaffed hours. It assumes utilities average $4.00 per square foot. Our franchisees do not report this data to us, therefore, this projected expense is based on actual expenses reported by our 33 company owned and operated Anytime Fitness centers in 2017.
13. This amount is based on our current requirement that you contribute $300 per month to our General Advertising Fund.
14. We expect you to spend a minimum of at least $10,000 per year for local advertising. Our projection assumes your spending on local advertising increases by 1.5% of your revenue as you have more members.
15. As noted in footnote 7, you will be selling Anytime Health memberships for us, and you keep everything you charge for those memberships above $0.50 for individual members. However, the maximum amount you must pay us each month for these memberships is $225 (and $675 if you own 3 or more centers).
16. In some states, you will also be required to pay sales tax on these fees. We have not included those sales taxes because they are payable in only a handful of states.
17. These fees represent an estimate of the initial and ongoing Healthy Contributions program fees you will incur for your monthly members if you participate in the Healthy Contributions Reimbursement Programs. They are based on the actual reports of the Anytime Fitness centers participating in the Healthy Contributions programs for the last 6 months of 2017. The average total fees per club for that period was $0.60 for each member participating in a Healthy Contributions program.
18. You are required to license the Club Management Software from 1 of 2 designated vendors. Thus, we have also assumed expenses of $179 per month for the Club Management Software. (If you have 4 or more centers, these fees will be reduced to $149 per month for all centers.)
19. Miscellaneous includes janitorial services, legal and accounting fees, cell phone, supplies, licenses, 1 registration to our Annual Conference and minimum travel expenses to attend that conference, and other similar items. Many of these costs can vary significantly depending on the location of your center and the time you spend looking for the best possible cost on these items. Our franchisees are not required to report these expenses to us, however, these expense projections are consistent with the experience of our company owned and operated Anytime Fitness centers.
20. The low projection assumes you act as manager of your center and do not receive a separate salary. As your business grows, you may wish to hire a manager to oversee some or all of the club operations. Some states or municipalities may require you have an employee on premises whenever your center is open and we have a minimum staffed hours policy that requires you, or a staff person, to be in the center for at least 30 hours per week. We are assuming you would pay that manager $2,000 per month, plus commissions and limited benefits, so that with payroll costs, the total cost for a manager will be $35,000 a year. This is consistent with what we understand to be the average compensation our franchisees pay their managers. In the 865 and 1,150 member projections, we assumed that you would pay for staffing equivalent to 1.5 times a single manager. Except as noted in footnote 6, the projections assume you do not hire any other employees to help you and assume you oversee some of your club operations. If you are an absentee-owner, or you operate in a location that requires the center to be staffed at all times, your expenses will increase significantly because you will have to pay salaries and benefits to employees. These assumptions are based on information reported to us by franchisees in 2017.
21. Because each location is different, actual revenues, expenses and income will vary at each location. We do not represent that any franchisee can expect to attain the revenues or income shown in these statements. Also, because these statements are for a second year of operation, results for a new franchisee are likely to differ from the results shown in the projections.
22. We also recommend that you set aside at least $500 per month to defray the cost of remodeling and acquiring new equipment for your Anytime Fitness center as a condition to renewing your franchise. We have not deducted these amounts from the projected income because (i) these are still your monies and therefore it would not affect your profitability to set the amounts aside, and (ii) we recommend that you charge your members a club enhancement fee that will generate these amounts and we did not include the club enhancement fees in the projected revenues.
We gave you information above about the number of all our franchised centers that were open for at least 12 months as of February 28, 2018. We, or our affiliates, also operated 33 centers for the entire 12 month period ending February 28, 2018. Revenue and membership data for those company-owned and managed locations has not been included in the above calculations. Because our franchisees are not required to report their revenues and expenses to us, we used the data from the expenses incurred by our 33 corporate owned and managed centers in calculating the following three expense projections: utility costs, maintenance costs and miscellaneous. Our corporate owned and managed centers operate in substantially the same manner as our franchised centers and we believe these expenses are consistent with those incurred by our franchisees. Because our franchisees are not required to give us this level of detail as to their revenues and expenses, we cannot tell you how many of our franchisees exceeded the projected revenues or projected EBITDA.