How Much Does It Cost to Open a Gym
June 27, 2024
Are you thinking about starting your own gym? The path to business ownership is ambitious (and expensive) but can also be fulfilling. If you want to know what it costs to open a gym, you've come to the right place. In this blog, we'll share information on the profitability of gym ownership, key areas to focus on during the planning process, and a detailed breakdown of upfront and ongoing expenses.
How profitable is owning a gym?
The fitness industry is growing steadily. On average, gyms can expect profits of around 10% to 14%. Although this isn't an exact figure, current trends suggest opening a gym could be a good investment. Recent health and wellness trends show that people are increasingly prioritizing their health and physical fitness, leading to a higher demand for gym options.
In addition to current market and industry conditions, several other factors can influence a gym's profitability, such as your marketing efforts, location and visibility, operating expenses, services and equipment offered, and the customer experience.
Other factors affect this figure, including the type of gym you plan to open. For instance, boutique and specialty gyms may generate higher profits (around 35% to 40%) because of their unique offerings and smaller facilities. On the other hand, franchise gyms can generate roughly 10% in profits, while small independent gyms fall in the middle at around 20% due to their lower operating expenses and smaller clientele.
What to consider before opening a gym
As you map out your journey to gym ownership and begin creating your business plan, evaluating what factors can impact your initial investment, future operating expenses, and, ultimately, your bottom line is important. Here are a few key areas to focus on:
Location
Gym size
Type of gym
Pricing
Local competition
Location
The location of your gym can make or break your business. Gyms located in urban areas are more likely to thrive and outperform those in rural areas because of higher foot traffic and convenient access, which can also increase walk-ins and prospective customers. Moreover, the gym's accessibility and parking availability can influence how well you attract and retain customers.
Lastly, your gym's location should align with your target market. For example, people in high-income neighborhoods are more likely to visit higher-end and specialty gyms, while those in lower-income areas may benefit more from budget-friendly gyms.
Gym size
Your gym's capacity depends on its square footage. While a larger gym can fit more members, it also requires a substantial investment in equipment and space, increasing operational expenses, such as rent, utilities, and maintenance. However, they can offer more services like group classes and personal training to draw in customers and generate additional revenue. Balancing these costs with membership fees and other services is important to ensure the gym is profitable.
Type of gym
The type of gym you choose also has a bearing on your profits. Opening a specialty or traditional gym requires you to start from scratch and put in more effort and money to establish your brand and market to prospective customers. Boutique gyms are usually smaller, require less investment, and have lower operating costs.
In contrast, franchise gyms have a proven game plan, on-demand resources, and brand recognition, making it easier to appeal to members. Nonetheless, they require more investment, higher financial requirements, and generate lower profit margins.
Pricing
The pricing of your gym's services and memberships affects its performance. Setting prices too high may discourage potential members, while pricing them too low can make you lose money. Offering a range of membership plans, including monthly, yearly, and pay-as-you-go options and diversifying services such as personal training, small group training, and various amenities, can reel in a broader range of members. In the end, the price of your services should match what your target audience can afford.
Local competition
Understanding the strengths and weaknesses of nearby gyms can help your gym stand out. Offering something unique or superior, like exclusive classes or a better customer experience, can attract members from competitors. Highlighting these unique selling points (USPs) in your marketing efforts can drive traffic to your gym and ultimately increase its profitability.
How much does it cost to open a gym?
The initial investment for opening a gym depends on the type of gym you want to establish. Smaller and boutique gyms generally have lower startup costs, while traditional gyms require a larger investment and offer a wide range of services for a broader clientele.
Franchise gyms, which benefit from brand recognition and operational support, come with higher costs due to franchise fees, financial requirements, and adherence to brand guidelines. Estimated startup costs for each type are:
Small gyms: $50,000 to $150,000
Boutique and specialty gyms: $75,000 to $250,000
Traditional gyms: $250,000 to $500,000
Franchise gyms: $150,000 to $3,600,000
Costs breakdown
One-time gym costs
Rent/lease deposit: The amount you spend on your gym location depends on where you're located and the size of the facility. The average size of a gym ranges from 3,000 to 10,000 square feet. In the U.S., the cost per square foot for a commercial space may range from $18 to $40, so you can expect to pay at least $54,000 a year for a lease on a 3,000-square foot space. The deposit depends on your landlord’s requirements, but prepare to pay at least a month’s rent.
Renovations and design: Your gym's renovation and design needs may vary depending on the space's condition and your preferences. It's advisable to budget between $5,000 and $100,000 for remodeling and decor.
Equipment: Roughly $10,000 to $50,000 may be spent on gym equipment, including dumbbells, cardio machines, bench presses, and barbells. Smaller gyms will likely spend less than traditional and franchise gyms. Costs may also vary depending on if you decide to purchase or lease equipment.
Licenses and permits: You can expect to pay anywhere from $50 to $500 for your business license and any other permits necessary to operate your gym.
Franchise fee (if applicable): Franchise fees can range from $19,900 to $60,000 depending on the company.
Marketing and advertising: Marketing and advertising are essential for attracting your target market to your gym. In the beginning, it's best to invest in branding and signage, setting up your website, establishing your social media presence, advertising, and amplifying your online presence through search engine optimization (SEO). The initial setup costs for these efforts can range from a few hundred dollars to over $2,000.
Professional fees (legal, accounting): When you start your business, you will have to handle a lot of paperwork and contracts, such as your lease, certifications, business licenses, and membership contracts. This may result in higher legal and accounting fees at the beginning. On average, upfront legal fees can range from $1,500 to $5,000.
Operational software and technology: The upfront costs (if any) for installing security systems, internet, gym management software, and POS systems will vary.
Ongoing gym costs
Rent: You can expect to pay at least $54,000 a year for a lease on a 3,000-square-foot space.
Utilities: Your gym's utility expenses will vary based on its size and operating hours. Gyms that are open 24/7 are expected to consume more power and water than those with fixed operating hours. On average, you can expect to spend between $1,000 and $3,000 on utilities each month.
Staff salaries: These costs will vary depending on how many people are on your staff. Smaller gyms will require fewer employees, while larger gyms may have a staff of trainers, front desk admins, and managers.
Equipment: Ongoing equipment costs can vary based on leasing costs (if any) and maintenance needs.
Insurance: Your gym insurance may include a single or a combination of policies. General liability and a business owner's policy are common coverages for gym owners. Prices vary based on the size of your facility and deductible. Due to the nature of your business, there's a higher level of risk, leading to a higher premium. Insurance costs can range from $200 to $10,000 a year.
Licenses and permits (renewals): $50 to $200 may be spent annually for license and permit renewals.
Technology and software: Managing a gym requires the use of gym management software to ensure smooth operations. This software helps with membership management, scheduling, billing, member check-ins, and member communication. It also provides integrated marketing tools and business performance analytics. Typically, a good platform costs between $100 to $300 a month. Apart from selecting reliable gym management software, you should also budget for surveillance cameras, alarm systems, and access control to ensure the safety of your facility and prevent unauthorized entry. Additionally, you will need POS equipment and a reliable internet network to process member payments. In total, you can expect to spend a minimum of $400 a month on software, a POS system, security, and the internet.
Marketing and advertising: The ongoing marketing and advertising costs will depend on the tactics you choose to use. For instance, you might decide to run ads on Facebook, use Instagram to grow your business, or hire someone to manage your social media accounts and engagement. The monthly expenses could be as low as a few hundred dollars.
Inventory restocking: Regular inventory restocking helps maintain a clean and welcoming gym environment. Depending on your gym's size and usage rate, monthly costs for restocking cleaning supplies could range from $100 to $500, while towels, a key amenity for members, may cost between $200 and $1,000 monthly. Miscellaneous items like office supplies, paper products, and first aid supplies might add an extra $100 to $500 per month.
Professional fees: Professional fees will vary throughout the year based on your specific needs. For instance, during tax season, you may need to budget for an accountant, and when it's time to renew your lease or handle legal paperwork, you may need a lawyer. We recommend setting aside $4000 to cover these expenses.
Franchise royalties (if applicable): Depending on the franchise, royalty fees may be 6% to 8% of your monthly gross sales.
Whether you're considering a small gym or a franchise, it's important to be informed about the financial and operational aspects. Conducting thorough research, developing a clear business plan, and fully committing to the process can significantly increase your chances of building a successful gym.
