How Much Profit Does A Gym Make? (Planet Fitness vs 9Round)

Many gym franchises are bringing in significant sales revenues every month. 

Some of the individual franchise locations that we have looked at are bringing in over $1,000,000 in top line sales revenue per year. 

But of that sales revenue, how much profit does a gym make? 

Gym owners make different amounts of profit based on their cost structure. If a gym makes a gross profit margin of 70% with moderate payroll and rent expenses, it is realistic for the gym to make a net profit of 20% per year.

There is a wide variability in exactly how much profit each gym or fitness franchise makes based on the business model, the equipment, the location, taxes, and several other factors. But, most individual gym and fitness franchise locations have healthy profit margins as outlined in their business model. 

In this tutorial, we will discuss these factors and how they affect the profitability of a gym and fitness franchise.  

Let’s first get clear on what profit in a gym actually means.

How Much Profit Does a Gym Make?

Profit can be defined in multiple forms, especially when discussing franchises. Let’s clarify some of the terms discussed in this article:

Sales Revenue as it relates to a gym’s profits 

Sales revenue is the amount of income that a gym is bringing in before any expenses. 

Gyms and fitness franchise locations generate revenue primarily through membership sales and fees, personal training, and in-store sales such as food items and merchandise. This measure is total top line revenue with no cost adjustments.

Gross Profit as it relates to a gym’s net profits

Next up is gross profit. Gross profit is simply defined as sales minus the cost of goods sold, or variable costs. 

While every accounting system is a little different, typically the variable costs included in a gym’s gross profit calculation might include some payroll expenses, credit card processing fees, and some payroll taxes.  Many gyms also hold inventory and sell products such as gloves, belts, proteins and drinks, so the cost of goods sold (COGS) figure is also used to calculate gross profit.

In terms of gyms and fitness franchises, the majority of costs are fixed costs, so the gross profit measure is often not as important as net profit and EBITDA. 

The important thing to remember about this highly important figure is this: gross profit is a core calculation and must be high enough to adequately cover all the fixed expenses in order to make adequate profit for the gym. 

Defining the Gym’s Net Profit

After gross profit is net profit. 

Net profit is found by calculating gross profit minus fixed costs. 

This is an important metric as it measures the true book value of a business or franchise. Oftentimes you will see the industry value a gym based on a multiple of this figure. For example, if the business makes $240,000 in net income per year, the valuation is $240,000 x 3.2 = $768,000.

EBITDA in a gym and fitness franchise

The measure we will discuss here is EBITDA, which is the figure most often used in fitness franchising. EBITDA is Earnings Before Interest, Tax, Depreciation, and Amortization and it measures the true cash flow for a fitness franchise. This is a common measurement of value in the fitness franchise industry.

This is because net income includes non-cash expenses (depreciation and amortization), is affected by taxes, and backs out interest expense (which is already included in fixed debt payments). 

So, EBITDA is the best measure of true cash flow and that is why most franchise owners use EBITDA as the measure of profitability.

Compare the Profit Structure for Gym A vs Gym B 

Balancing all of the factors that affect a franchise’s net profit can be challenging. With that said, this next section will show some common scenarios and how they affect a gym and fitness franchise’s profit margins.

Gym or Fitness Franchise Scenario A

The first scenario we will review is a gym or franchise that has

high revenues and a lot of members

This is similar to the business model that traditional gyms use, such as Planet Fitness and Anytime Fitness. But, despite the high revenues, high costs can kill profit margins as shown here. Here is what a sample income statement for this scenario would look like:

Beginning at the top, this location is bringing in $100,000 in sales revenue per month (or $1.2 million per year) which is in the upper 10% of most franchises in the US per 2021 FDD filings.

From there, the variable costs are based on sales and can not be changed much. This creates a gross profit margin of almost 62%, which is very healthy. If we were to stop reading here, the franchise appears to be in very good financial standing.

The last major section is the fixed costs. The major offenders here are the payroll expenses and the monthly rent expense and that drives the net profit margin to 21.6%. While this is still positive, it can be improved. 

Gym or Fitness Franchise Scenario B

The second scenario is a fitness franchise that has

A low number of members, high revenues per member, and low fixed costs 

This is similar to the business model for a boutique fitness franchise, such as Jazzercise and 9Round. Possible numbers might look something like this:

As you can see in this scenario, the profit margins, especially the net profit margin, are much healthier. This franchise has done a good job of increasing average revenue per member and keeping fixed expenses low and this has resulted in a much more profitable business.

As a note, none of these scenarios are direct representations of the projected financial performance of any franchise and are not representative of previous results — just hypothetical examples for educational purposes. If you are interested in any of these franchise models, you are encouraged to request information from the respective franchisor.

Conclusion

Gyms and fitness franchises can be profitable business ventures. 

They are more than able to generate high sales with healthy margins. Exactly how healthy those margins are depends on how well you manage and run your gym and your franchise.