Episode#40

How do you assess the TRUE-value price of a gym or fitness franchise? After 200+ transactions of gym and fitness franchises, Dustin Slypen is a business broker who has found a niche where he adds tremendous value to understand this.

In Episode#40 - In an effort to understand where the real value sits in these businesses, Glenn asked Dustin to zero in on the key components to valuing them in a purchase or sale process.

The conversation included insights on fit-out cost 'blow outs', equipment supplier 'kick-backs', deals falling over at the last minute, and why, as well as advising sellers not to 'talk-up' their impact in the business too much.

The key parts to value that we uncovered we're broken into broadly;

• Price expectation v reality,
• Franchise requirements, such as equipment modernisation and re-fits,
• Membership and income apportionment,
• The lease, and ensuring it's impact is clearly understood,The value based on a multiple of operating profit between business types, such as functional fitness, 24/7 gyms, Boutique, and Full service big box gyms.

0:00 Intro

0:52 The number of transactions and deals that Dustin has worked on in the industry (hundreds)

1:21 Price expectation versus the reality of what the business is worth. 

2:51 Where do you see the valuation / cost 'blow-outs' beyond reality, and the costs of building a gym or fitness franchise 

4:32 How the honest conversations go with sellers of businesses that need  to have a reality check on valuation.

5:29 The underestimation of costs of modernisation required by a franchise brand and their brand standards. 

7:36 How often do franchises need them to update equipment and how this can be unfair.

9:25 Kick backs from suppliers of equipment back to franchisors.

9:54 Membership income and apportionment of it between ongoing (weekly) or up-front payments (annual) and its impact on valuation.

12:13 The focus of operators often to want to focus on the number of members as opposed to the yield per member.

13:26 The lease likely the most vital part of the equation in any sale.

15:13 Where the problems often begin, when owners come close to the end of their lease.

16:10 Deals falling over on settlement days due to the actions of landlords and the varying motivation of landlords.

18:24 Rent contributions by landlords and the risks with them.

19:54 Valuing the business based on a multiple that varies between 24/7 gyms, big box, functional training and boutique fitness businesses, and the staffing differences.

22:13 Advising vendors not to talk up how successful the business is based on what they have done.

22:49 Wrap up

Podcast Produced by: magnetic business media

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