economics of the training facility

[Lincoln Hawk]

Here in Seattle we have several nice training facilities. Occasionally I think about moving around and when I check on rates / hours, etc. I notice that most gyms seem to charge some monthly rate (usually between $80 - $150 / mo) and possibly provide a discount for paying several months in advance.

I used to work out at a health club, and the business model seemed pretty obvious - sign up as many people as possible, through ongoing promotions and marketing. Provide a heavy incentive to pay a bunch of money upfront (e.g. 1, 3, 5 years, etc), and a strong disincentive to leaving and coming back (typically an 'initiation fee' that costs as much as several months' membership). Normally, clubs are oversubscribed Jan - Mar (all those New Years resolutions) and Apr - Jun (people trying to get their beach bodies back), but the rest of the year the traffic flow is pretty stable as people drop off. Since people have so much invested, either by paying upfront or through 'initiation fees' they continue to pay their memberships despite the fact that they don't use them.

With the growing popularity of MMA, I'd expect gym owners to be doing well, though it doesn't really appear to be the case (maybe I'm missing something). Also, there are only a couple of boxing gyms around and they're always struggling.

Anyone gym owners out there want to comment? Why is it hard to make money with MMA and boxing gyms?

[mschatz]

Originally Posted by Lincoln Hawk

Here in Seattle we have several nice training facilities. Occasionally I think about moving around and when I check on rates / hours, etc. I notice that most gyms seem to charge some monthly rate (usually between $80 - $150 / mo) and possibly provide a discount for paying several months in advance.

I used to work out at a health club, and the business model seemed pretty obvious - sign up as many people as possible, through ongoing promotions and marketing. Provide a heavy incentive to pay a bunch of money upfront (e.g. 1, 3, 5 years, etc), and a strong disincentive to leaving and coming back (typically an 'initiation fee' that costs as much as several months' membership). Normally, clubs are oversubscribed Jan - Mar (all those New Years resolutions) and Apr - Jun (people trying to get their beach bodies back), but the rest of the year the traffic flow is pretty stable as people drop off. Since people have so much invested, either by paying upfront or through 'initiation fees' they continue to pay their memberships despite the fact that they don't use them.

With the growing popularity of MMA, I'd expect gym owners to be doing well, though it doesn't really appear to be the case (maybe I'm missing something). Also, there are only a couple of boxing gyms around and they're always struggling.

Anyone gym owners out there want to comment? Why is it hard to make money with MMA and boxing gyms?

Speaking strictly for the boxing gyms, they have never made much money. The gyms that are prospering nowadayds arent "real" spit-bucket boxing gyms, they are more geared towards the fitness crowd, with the cardio boxing and kick boxing classes. Hey, gym owners gotta pay rent... im surprised that MMA gyms arent doing well as you say though. Most places Ive trained at or checked out have been really expensive. They are usually located in the 'burbs, with lots of upper class white kids ready to do "teh ultimate fighting." Boxing has always been more of a sport of the slums. The best boxing gyms in any city are in the poorer neighborhoods, and a lot fo the guys who train there arent paying much in the way of monthly dues.

[Tucker Smith]

Originally Posted by mschatz

Boxing has always been more of a sport of the slums. The best boxing gyms in any city are in the poorer neighborhoods, and a lot fo the guys who train there arent paying much in the way of monthly dues.

Word. The first boxing gym I ever went to was in an old warehouse and it looked like all the heavybags had been donated. They were all held together by duct tape. all the gloves were fuckin worn out as well. but there was a ring, and the training regimen was basically alot of conditoning and mental toughness. (and kicking each others ass of course.) all the guys he knew were serious about it(i think there was about 10 of us at the time) never really had to pay dues, or else we would jsut kick him down however much cash we had on us at the time.

[duker41]

The cost of running a gym is fairly high. You have rent, utilities, equipment, and possibly some sort of insurance against injuries. Beyond that, you have instructors to pay. Now assume you charge $100/month per student. That's $1200 a year per student. We'll assume a commercial mortgage on the property (if the school rents a smaller area, that trades off with later profits) that can easily run $1000 a month with escrow, so $12000 a year. That's 10 students needed. Now say you have 3 instructors. They make $30000 a piece, that's 75 more students needed. Utilities, insurance, equipment, maybe supporting a traveling squad are all each going to add a few more students per month worth of cost. So you need 100 students to break even, and more than that to get funds to protect against potential tough times. Beyond that, you may have to keep prices down if there is competition in the area MMA, like boxing, still appeals to a very small niche in society. We think it's super successful because we live inside of that group. It's not easy to find that many people, especially since the number of people watching is more than the numbers getting up the next morning to train. Gyms don't make much money because the market is small and the costs are high.

[mechanikjoe]

Originally Posted by duker41

The cost of running a gym is fairly high. You have rent, utilities, equipment, and possibly some sort of insurance against injuries. Beyond that, you have instructors to pay. Now assume you charge $100/month per student. That's $1200 a year per student. We'll assume a commercial mortgage on the property (if the school rents a smaller area, that trades off with later profits) that can easily run $1000 a month with escrow, so $12000 a year. That's 10 students needed. Now say you have 3 instructors. They make $30000 a piece, that's 75 more students needed. Utilities, insurance, equipment, maybe supporting a traveling squad are all each going to add a few more students per month worth of cost. So you need 100 students to break even, and more than that to get funds to protect against potential tough times. Beyond that, you may have to keep prices down if there is competition in the area MMA, like boxing, still appeals to a very small niche in society. We think it's super successful because we live inside of that group. It's not easy to find that many people, especially since the number of people watching is more than the numbers getting up the next morning to train. Gyms don't make much money because the market is small and the costs are high.

Yeah, but I would think that instructors probably wouldn't be paid THAT much, at least especially not if a gym is starting off. I think if they are being paid that much, then the gym is most likely already a successful business and capable of supporting a staff like that. Just my .02