As stated on the Snap Fitness web site, it “ understands that the current loaning environment is a challenge – particularly if you ‘re seeking to finance a start-up concern. That ‘s why the franchisor of more than 1,200 24/7 fittingness centres worldwide decided to take it upon itself to assist ease the emphasis associated with procuring funding by developing a proprietary seller finance plan available through its primary equipment providers and preferable loaners ( Strait, 2012 ) .
Once funding is unafraid, it is important that a consistent and equal sum of gross is generated to guarantee the life of the single franchise. As of November 18, 2012, discovered through on-line research, an person, one-year rank at Snap Fitness varies from $ 29.95 to $ 39 per month. For intents of this paper, an person, one-year, one-month Snap Fitness rank fee is an false monetary value of $ 26, which does non include a annual contract. From this point frontward, mentioned numerical figures, in relation to costs and measures will be those as stated in the “ Broadening Your Position ” ( BYP197 ) exercising instructions ( Kimmel, Weygandt, Kieso, 2009 ) .
Using the figures provided in the BYP197 exercising, cardinal informations, such as the entire monthly fixed cost of $ 6,000 is a given. Unknown figures, at this point, are the estimated sum of variable costs and monthly gross revenues in members and dollars to accomplish a mark net income of $ 10,000 per month. Using a Cost-Volume-Profit ( CVP ) analysis will convey about those solutions.
Cost-Volume-Profit Analysis ( CVP )
CVP analysis, as it is sometimes known, is a manner of analyzing the relationship between your fixed and variable costs, your volume ( in footings of units or in footings of dollars ) , and your net incomes ( Business Owner ‘s Toolkit, 2012 ) . As a franchise proprietor, to keep optimum usage of installations while concentrating on maximising net incomes, one should utilize a CVP analysis. In a CVP analysis, variable and fixed costs are itemized, which allows an proprietor a mathematical agency to find the profitableness of an single rank as it applies to overall net incomes.
Break-Even Analysis
Rosemary Peavler, in About.com, provinces:
“ Once you know the fixed and variable costs for the merchandise your concern green goodss, or a good estimate of them, you can utilize that information to cipher your company ‘s breakeven point. A company ‘s breakeven point is the point at which its gross revenues precisely cover its disbursals. The company sells adequate units of its merchandise to cover its disbursals without doing a net income or taking a loss. If it sells more, so it makes a net income. On the other manus, if it sells less, it takes a loss ( Peavler, 2012 ) .
Soon, Snap Fitness maintains 300 members at a cost of $ 26 per, which equates to $ 7,800. Fixed costs sum to $ 6,000 ( $ 4,000 in operating costs, plus $ 2,000 in equipment rental costs ) . To interrupt even, the part border must be $ 6,000, intending the part border must be the entire fixed costs, which is the break-even point. The variable cost is computed as $ 1,800 ( $ 7,800 – $ 6,000 ) . The above, in the signifier of an income statement would resemble, as follows:
Snap Fitness
Income Statement
Grosss:
Gross saless ( 300 ranks )
$ 7,800
Operating disbursals:
Costss – Variable
$ 1,800
Costss ( fixed ) – Monthly Operating
$ 4,000
Costss ( fixed ) – Monthly Lease
$ 2,000
Entire Operating Expenses
$ 7,800
Net Income
$ 0
Target Net Income
It is safe to assume that most “ for net income ” concerns do non stay in concern to interrupt even. Snap Fitness is non any different. To travel from breaking-even, monthly, to gaining a mark net income of $ 10,000 per month, Snap Fitness must increase their rank from 300 to a mark rank figure of eight 100s.
Another term for mark income analysis is target net income analysis. The equations and expressions that are to cipher a break-even point can besides be used to cipher the figure of units to be sold to gain a mark net income. The process of ciphering gross revenues volume needed to accomplish a mark net income is known as mark net income analysis ( Cost Volume and Profit Relationships, 2012 ) .
In order for Snap Fitness to find a figure of ranks that will let a monthly net income of $ 10,000 ( targeted gross revenues ) , the undermentioned stairss must be conducted:
Required gross revenues in units must be computed. To cipher needed gross revenues in units, fixed costs and aim net income must be added, so the amount divided by the part border per unit, as follows: targeted gross revenues in units = ( $ 6,000 + $ 10,000 ) / $ 20 = 800 ( ranks ) .
A part border ration must be determined. Based on CVP analysis, the part border ratio is, as follows: $ 6,000 / $ 7,800 = 76.92 % .
Required gross revenues in dollars must be computed. To make this, the amount of fixed costs and aim net income must be divided by the part border ratio achieved in measure 2. supra, as follows: ( $ 6,000 + $ 10,000 ) / 76.92 % = $ 20,800.
Variable Costss
Variable costs are costs that vary in entire straight and proportionally with alterations in the activity degree. If the degree increases 10 % , entire variable costs will increase 10 % . If the degree of activity lessenings by 25 % , variable costs will diminish 25 % . A variable cost may besides be defined as a cost that remains the same per unit at every degree of activity ( Kimmel, Weygandt, Kieso, 2009 ) . Knowing how much is variable cost out of entire cost is cardinal to calculating incomes generated by assorted alterations in productions.
Therefore, entire variable cost is in proportion to entire disbursal ( see Total Variable Cost graph below ) . The sum of variable costs associated with an person, monthly Snap Fitness rank is $ 6. Not factoring future rising prices, the variable cost remains $ 6 and is ever the same no affair the figure of ranks ( see Variable Cost Per Unit graph below ) . Snap Fitness spends $ 1,800 for entire variable cost per month. In the instance of a Snap Fitness franchise, variable costs could be employee wages, fuel costs, office supplies, equipment and installations care and fix costs, and staff preparation.
Franchise
Franchising is one manner in acquiring into a concern with the aid and backup of an established company. There are several fitness-based companies presently in operation.
Curves is the first and largest fittingness franchise. Established in 1995, it has become the 10th largest franchise in the universe that focuses on adult females and weight-loss. Curves reached 1,000 locations in five old ages and in 2005, hit the 9,000 plus locations grade. An initial investing of a Curves franchise is $ 29,900 with a bringing of equipment cost of $ 3,000 – $ 5,000. The proprietor, at his or her disbursal must go to a preparation session in Texas. The franchise royalty is five per centum gross grosss with $ 795 as the maximal monthly payment and $ 195 being the lower limit. The advertisement royalty is three per centum of gross grosss, with $ 395 as the maximal monthly payment and $ 95 as the lower limit ( Curves Franchise – Start a Curves Franchise ) .
Anytime Fitness is a universe leader in the 24/7 fittingness market. This coeducational gym is accessible via a cardinal watch pocket locking system. This concern was established in 1975 and in 2012, it is expected to open its 2,000th nine. The initial franchise fee is $ 8,999 – $ 14,999 and the entire investing runs between $ 30,074 and $ 292,574. The franchise royalty is a level rate of $ 419 a month and non a per centum of gross revenues ( Anytime Fitness Franchise Review ) .
Snap Fitness Centers are accessible 24 hours a twenty-four hours with a cardinal entree card and offer state-of-the-art equipment, including cardio, strength, and selected equipment. In 2003, the concern was incorporated. The initial term of the franchise is 10 old ages with an option for reappraisal for limitless extra 10-year footings. The initial franchise fee is $ 15,000. The equipment bundle cost is from $ 12,000 to $ 68,000, depending on the size of the nine. Royalties are six per centum of entire gross gross revenues. Initial preparation disbursals are $ 500 to $ 2,000. The entire investing runs between $ 79,428 and $ 195,828 ( Snap Fitness Franchise Cost and Fees ) .
Decision
Taking ownership of a franchise lessens many of the start-up demands that come with the district of being a new concern proprietor. The rudimentss are already set in gesture. What remains is for the proprietor to fall-in on the concern and take over. Granted, there may be a significant investing cost, but being prepositioned may countervail some of the inaugural strivings incurred.
To give a new franchise proprietor a head-start, cognizing the dislocation expression to cipher cost volume net incomes and break-even points will set him or her that much in front of the competition. More of import, it will supply a mathematical analysis of what is required in order for the concern to do a net income and, if non rather at that place, a manner in front. If present gross is non equal, an proprietor will cognize how to get at Numberss that will help him or her with predicting future net incomes.
Snap Fitness every bit good as other franchises in other lines of concern, afford an chance to pull off a concern whose theoretical account is already been structured and is prone to be well-supported because of the concatenation outlook to win. Having members of the franchise concatenation successful and healthy, in footings of net incomes and visual aspects, benefits all members in the franchise concatenation. Snap Fitness ‘ “ less is better ” motive, 24-hour day-to-day operations, and really sensible rank costs should go on to procure the niche it has found. Because similar concerns exist with similar concern theoretical accounts, Snap Fitness must guarantee that they keep invention and safety at the head while supplying offerings that their direct competition does non.
Keeping in head the above and understanding fittingness and amour propre plays a immense function in the ceaseless conflict of the bump, a franchise of the fittingness kind appears to be a good hazard to prosecute.
