tricities fitness business plan final

7/31/2019 TriCities Fitness Business Plan FINAL

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Business Plan for Tri-Cities Fitness:

A modern facility featuring a holistic

approach to well beingStrategic Experience BADM 5800

Prepared For: Dr. Craig Turner

Prepared By: Carlos Amaya-Cea, Brent Dowling, Kristin Fletcher,

Shawn Hunt, Josh Leko, and Ryan Moyers


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1Business Plan for Tri-Cities Fitness

TABLE OF CONTENTS

STATEMENT OF PURPOSE ...................................................................................................................................... 2

INTRODUCTION ..................................................................................................................................................... 3

SURVEY RESULTS ................................................................................................................................................... 6

A DIFFERENT APPROACH ....................................................................................................................................... 9

NUTRITIONAL GUIDANCE ................................................................................................................................................. 9

SPORTS MASSAGE ........................................................................................................................................................ 10

VARIOUS THERAPIES ..................................................................................................................................................... 10

TRI-CITIES FITNESS ............................................................................................................................................... 12

LOCATION................................................................................................................................................................... 12

START-UP COSTS ......................................................................................................................................................... 12

AMENITIES.................................................................................................................................................................. 14EQUIPMENT ................................................................................................................................................................ 16

HOURS OF OPERATION.................................................................................................................................................. 18

COMPETITION ...................................................................................................................................................... 19

THE CENTER FOR PHYSICAL ACTIVITY................................................................................................................................ 19

TRI-CITIES LIFESTYLE CENTER.......................................................................................................................................... 22

THE WELLNESS CENTER................................................................................................................................................. 24

MARKET AND DEMOGRAPHIC ANALYSIS ............................................................................................................. 27

LEGAL CONSIDERATION ................................................................................................................................................. 27

MARKET TRENDS ......................................................................................................................................................... 28DEMOGRAPHIC &ECONOMIC SEGMENT ........................................................................................................................... 36

CONCLUSION ....................................................................................................................................................... 40

REFERENCES ......................................................................................................................................................... 41

APPENDICIES

Appendix A: Survey Questions .................................................................................................................................... 43

Appendix B: Facility Layout ......................................................................................................................................... 45

Appendix C: Start Up Costs ......................................................................................................................................... 46

Appendix D: Profit/ Loss Projections ........................................................................................................................... 49


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STATEMENT OF PURPOSE

To create a company that will serve Johnson City residents, and eventually the greater

Tri-Cities area, with a fitness facility coupled with additional offerings. The benefits or offerings

we are planning to include are; nutritional guidance, sports massage, and various therapies.

The company will seek to provide the local community with both fiscal and health benefits by

implementing company paid or assisted employee memberships at a rate that is affordable for

most businesses in the area.


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INTRODUCTIONJohnson City, Tennessee has been selected for this project for several reasons. One of

the most influential is the relative youth of the population being estimated at a median age of

36.9. Also, due to the presence of East Tennessee State University (ETSU), the population is

considered to have a higher level of education with an estimated 29.4% of college graduates

(Onboard Informatics, 2011). There are many advantages to starting this project in a small city

that presents growth potential. We can also consider the possibility of expansion into the other

major cities in the Tri-Cities area, Bristol and Kingsport. This possibility of growth takes our

project to a potential market with an estimated population of 500,000. This is possible due to

the great proximity and interconnectivity of the economies and the people of this region.

The idea for this project was born out of the great need for people of all ages to exercise

and the recent surge in alternative exercise and rehabilitation techniques. As it was reported by

the Former Secretary of Health and Human Services, Dr. Donna E. Shalala, We have found that

60% - well over half of Americans- are not regularly active. Worse yet, 25% of Americans are

not active at all. We need to turn (this trend) around quickly, for the health of our citizens and

our country. Businesses need to learn from what has worked in the past and promote worksite

fitness, an easy option for workers (US Department of Health and Human Services, 1996). The

Surgeon General has also stated that 70% of all illnesses are lifestyle related causes; in fact,

one-half of all medical costs are attributed to preventable illnesses (US Department of Health

and Human Services, 1996). Clearly, this should be highly regarded for corporations and

individuals to help themselves and their employees to establish a healthier lifestyle.


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It is out of this necessity for companies and individuals that our company is born. We

intend to bring a better way of life to individuals and also to benefit local companies and

subsequently the regional economy. We strongly believe that we can bring an alternative, not

only to individuals and companies, but to the great health problem afflicting the nation. We

believe that just bringing an alternative location for physical activity does not provide a

complete solution for our customers. That is why we have intertwined into our activities a

holistic approach to physical activity and lifestyle.

The idea of a health and fitness club is not new in this area. The area is known for

various outdoor activities, due to the proximity of the mountains and several national parks.

There are several opportunities for participation in fitness clubs. Among some of the most

popular choices one could consider are Tri-Cities Lifestyle Fitness Center and The Wellness

Center. Also, the Wayne G. Basler Center for Physical Activity (BCPA) located on ETSU campus is

a popular option for students of East Tennessee State University (ETSU). ETSU students

represent a large population in the area.

We understand the public has other choices when it comes to fitness. It is due to this

knowledge that we are developing an option that will offer more than the average gym. We

believe that costumers will be interested in a fitness facility that not only provides them with

fitness solutions, but employs some of the most recent advances in the wellness industry.

For our corporate patrons, we must provide them with a real and quantitative way to

see improvements in the performance of their employees and also of their overall company.

Our main competitors have adopted different benefit packages that make it easier for


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corporations to afford part or all of the charge for their employee. We want to focus on

creating packages that appeal to any size company. The easier it is for small businesses to offer

a fitness benefit to their employees, the more likely they are to adopt such a plan. Offering

company packages will increase our customer base significantly. We strongly believe that by

providing businesses with a quantitative way of measuring employee performance, they will be

more willing to open their pockets in order to achieve a healthier workforce.

One of the best ways for a company to analyze the effects of providing a fitness benefit

would be to conduct quarterly health screenings for employees who are taking advantage of

the membership. These screenings can cover some of the basic fitness performance measures,

but can also integrate specific results encouraged by the company. Eventually we would like to

offer a part-time health care professional to conduct these screenings onsite for the companies

for a fee. This would help alleviate any of the confusion and stress in organizing for quarterly

screenings by the business.


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SURVEY RESULTSWe chose to conduct a survey in order to have clearer understanding of what our target

audience would require and desire in a fitness facility. The survey was sent out to 833 seniors

and 222 graduate students in the College of Business and Technology at East Tennessee State

University. It was composed of eleven questions to help define the desires of locals regarding a

gym membership. Of the 1,055 students emailed, 147 completed the survey resulting in a 14%

completion rate.

A results analysis shows that 43% of respondents have a gym membership. There was a

mistake in the wording of this question because all ETSU students have a gym membership

included in their tuition costs. Therefore we are assuming that the 43% that responded with

yes to having a membership actually were implying they use their ETSU membership and/or

they have a paid membership at a second fitness facility. This question allowed no

respondents to skip the next seven questions. Only 76 participants answered questions 2-7.

Most respondents (44%) stated they attend a gym between 3 and 4 times a week.

However, 32% only attend between 0 and 1 time. 13% of our sample uses the gym 5 or more

times a week. Based on the participants that use a gym, 55% of them prefer working out after

work/ dinner time. The second most popular timeframe was late night (25%).

Another important note about our sample is that although they all have access to the

ETSUs BCPA, many have memberships at other gyms in our area. The following question was

aimed at those that choose to pay for a membership elsewhere. When asked how much they

pay for their membership per month, 48% responded with $25 or less. 16% of the population


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pays between $26 and $35 and 19% pays between $36 and $45. Lastly, 17% have memberships

costing $46 or more.

The fifth question asked respondents about childcare costs. An overwhelming 89% do

not require childcare. While we acknowledge these results, we do feel that this will not be a

true estimation for our target audience. Research shows that the most popular child bearing

age range is 20-35 in the United States. This demographic falls within our stated target market.

It is likely the results are skewed because the respondents are college students who, for the

most part do not have children.

For questions six and seven the survey was aimed at discovering their satisfaction with

their current gym and if they would consider switching. Over 70% of the respondents replied

that they are satisfied or very satisfied with their fitness facility. However 29% are either

somewhat satisfied or not satisfied. The results were nearly split on if they would consider

switching gyms with 46% a yes and 54% responding with no.

The survey questioned all 147 respondents with what their most important gym feature

is. Most respondents (35%) selected amenities and 27% stated price as their most important

feature. Location also seems important with 20% of respondents choosing it. For this question,

the survey had an other option in which respondents could type a short sentence detailing

their choice. 22 respondents choose this option and 10 of them listed hours as the most

important feature. Other notable responses were types of weights and equipment offered, a

non-judgment area, how crowded the gym is, the atmosphere of the gym, an indoor pool, and

group fitness classes along with educated and friendly instructors.


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Questions nine and ten were constructed to give insight into how tech savvy our target

audience will be. On a side note, question nine should have allowed respondents to select

multiple responses. Instead, it forced them to choose only one; therefore we are assuming their

choice is the one they use most. This question asked which social media platforms they

participated in and 78% use Facebook the most. 12% of respondents do not use social media.

Question 10 asked respondents if they use an app to record their workouts and/or their weight

and 85% responded with no.

The last question of the survey was aimed at discovering how many of the College of

Business and Technology students would be remaining in the Tri-Cities after their graduation.

This helps gauge how large the target audience for our proposed fitness facility could be. The

responses were nearly split with 52% stating they will remain in the area. The graphical results

of the survey are located in Appendix A.


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A DIFFERENT APPROACHWe want to take a different approach for additional benefits we will offer within the

facility. Recently there has been a trend to package services to better serve clientele.

Regarding the well-being industry, many people are seeking alternatives to the traditional gym

set up. Therefore, we have differentiated ourselves as a company that would offer a fitness

facility along with added benefits such as nutrition, massage, and various therapies. This

combination will allow our clients to receive in-house attention that they would otherwise be

left alone to acquire. We feel that this approach will not only appeal a clientele that possibly is

not being served but it will also attract clients from other facilities who may not even realize all

that their gym experience is lacking.

Nutritional Guidance

The USDA states that most Americans are overweight or obese. Simply put, this means

we take in more calories than we use. In the year 2000, the direct medical cost of obesity and

indirect economic loss to obesity was $61 billion and $117 billion respectively (Wellman &

Friedberg, 2002). Obesity has been a contributing factor to an estimated 100,000-400,000

deaths in America each year (Blackburn & Walker, 2005). It is the cause of many preventable

illnesses including type II diabetes, hypertension, and cardiovascular disease. For a large

percentage of Americans, a proper diet and exercise routine could eradicate their illness(s).

Armed with this knowledge, we have decided to employ a nutritionist on our staff. Our

hope is to offer clients a personalized nutrition plan that complements their physical activity

level in order to provide them with a sustainable healthy lifestyle. We feel this is an

appropriate option for clients of all sizes. The first session with the nutritionist is one hour long


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and will produce a tailored diet plan. The cost will be $80 and any subsequent appointments

would last for 30 minutes and cost $45. We plan to employ the nutritionist on an appointment

only basis earning $25/hr.

Sports Massage

Our two largest competitors offer massage therapy for clients. We felt it was an

important addition to our company in order to remain competitive. Further, the research on

sports massage indicates that it can help prevent and treat injuries (Massage: Get in touch with

its many benefits, 2011). From a risk management perspective, offering massages to our clients

will help lower physical activity related injuries that occur in all fitness facilities. We plan to

offer one hour massages for $60 and half hour massages for $35. We plan to employ the

masseuse on an appointment only basis earning $20/hr.

Various Therapies

Functional therapyis to restore yourself back to how you were designed to move, says

biomechanics expert Katy Santiago, M.S., director of the Restorative Exercise Institute in

Ventura, Calif. Some call it the bridge between personal training and physical therapy

(Funtional Fitness 101, 2011). This option would be provided through our personal trainers that

have been educated in functional fitness. Many Americans deal with chronic pain on a daily

basis and because of it do not attempt exercise. With functional therapy, our personal trainers

will use various techniques to help not only rehabilitate the client but allow them to exercise

effectively by tailoring the workout to their ailments. We do not want to be considered a pain

management facility but would like to offer clients or potential clients the benefits achieved

from this type of fitness regimen.


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The following two therapies, electrical muscle stimulation and ultrasound therapy are

mostly conducted by physical therapists. We have decided not to hire an in-house therapist at

this time. Though it is something we are passionate about and will be perusing after the

company has reached break-even and begins to profit. Our plan is to seek out partnership with

a local physical therapist office in hopes that we can refer our clients to them until we are able

to provide this service full-time.

Electrical Muscle Stimulation (EMS) causes muscle contractions using electric impulses.

The use of EMS machines has increased in popularity over the past few years. This is mostly due

to its usage as a strength training tool for healthy subjects and athletes; a rehabilitation and

preventive tool for partially- or totally immobilized (clients) and (as) a post-exercise recovery

tool for athletes (Maffiuletti & Marco A Minetto, 2011). We feel that by adding EMS therapy

as an option, we will gain a competitive advantage in the market.

Ultrasound therapyis the use of ultrasound to help with soft tissue injuries. Though the

exact science behind why therapeutic ultrasounds work is still being debated, we feel it is an

option we could not overlook. Current research shows that it may speed the recovery of and

can reduce pain sustained from soft tissue injuries (Ultrasound Therapy, 2011). We feel this is a

benefit that our clients would appreciate.


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Tri-Cities FitnessThis section of the analysis will look into the location of our facility, start-up costs we

will encounter, and the equipment and amenities we will provide in our gym. We will also

detail the hours of operation in this section.

Location

The location selected for Tri-Cities Fitness is in an affluent part of the city at the

intersection of North Roan Street, Sunset Drive and Browns Mill Road, with 56,000 SF available.

Tri-Cities Fitness will be located in the old Lloyd building, located at 112 Browns Mill Road,

Johnson City, Tennessee. This commercial property presents a great opportunity, as it is a

popular shopping and dining location. Currently in the shopping mall there is an existing 46,000

SF Kroger. The location also presents important highlights as it is in close proximity to the Mall

at Johnson City, the Target shopping center and it is a short distance from I-26. This location

would be attractive to people in surrounding communities such as Gray, Elizabethton, Piney

Flats, Bluff City, and Blountville. The property is also surrounded by several median income

neighborhoods which represents much of our target market, allowing our potential members to

have an attractive location close to home.

Start-Up Costs

As for all businesses, start-up cost it is one of the most important calculations to

adequately create a financial projection of where the business will be in the near future and

what type of financing it will require in order to accommodate the high initial costs and the

accelerated wrought that can be expected at the beginning of operations. One of the ways the

company has decided to tackle the start-up costs is by leasing instead of purchasing land to

build on.


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The Lease agreement has been negotiated though Mitch Cox realtors, and has been

established at a monthly charge of $18,500 for the 56,000 SF. This facility will allow for

adequate space for equipment and comfortable accommodations for all our members. The

start-up of this business will require financing from different sources. The first of these sources

will be by equal participation of $10,000 by all six founding members. The second round of

financing will be lender financing totaling $1,450,000. Demanding a total investment of

$1,510,000 to start and operate the facility. This investment will be crucial to begin work on site

preparation and modifications, purchase equipment, and to completely cover expenses in the

first year of operations.

Tri-Cities Fitness will be incorporated initially as a corporation this will shield the owners

and all other investors from issues of personal liability. The investors will be treated as

shareholders and therefore will not be liable for more than their personal investment. The

lender financing, in addition to the capital contributions from the owners and shareholders will

allow our Fitness facility to successfully open and operate through the year. This investment will

allow our company to provide potential clients with a state of the art fitness facility and

equipment that brings a unique, upscale, and innovative environment that is currently missing

in our area.

We have calculated a start-up cost of $995,000 by allocating estimated value to all the

expenses that will be necessary to open the facility. We have also considered our monthly

operating costs and have allocated $168,000. As financing to cover these costs will be

necessary, we have included three months worth in our loan balance request. Also, $505,000


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has been allocated to prevent any problems with low operating cash flows. The financial goal of

this operation is to be a self-sufficient operation in year two. The Tri-Cities fitness concept, as

detailed in our Start-up Costs, and Profit and Loss Projection spreadsheets (see Appendix C & D)

present an excellent profitability level combined with a very conservative growth rate. These

results create a positive cash flow of $51,291.00 by year two.

Amenities

When creating a fitness facility, there are many essential amenities which customers

desire. First, we must have a basketball court in our complex. A full size basketball courts

dimensions are 94 feet long by 50 feet wide. We will also need ceilings of 14 15 feet so there

is vertical space for the entire backboard(s). The basketball court is going to be located at the

back of the gym since it fits perfectly with the dimensions which we have to work with. A

basketball court is essential since all three of our main competitors have at least one. We will

be able to schedule basketball tournaments at our gym which should appeal to a certain

portion of customers. A basketball court is also good for individuals who want to run sprints.

The nice thing about having a basketball court is one can easily set up a net which will allow for

volleyball and/or badminton. The basketball court will cost roughly $100,000 (parts &

assembly). However, this court is crucial to our gyms success.

Second, we intend on having two racquetball courts in our gym. Racquetball court

dimensions (per court) are 40 feet long by 20 feet wide by 20 feet high. Certain individuals

enjoy racquetball so having these courts should help us appeal to those customers. Also, when

not being used for racquetball, our gym members can use the courts for non-damaging athletics

such as yoga, crunches, and jumping jacks. The racquetball courts will also be in the back of the


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facility next to the basketball courts. The two racquetball courts should cost approximately

$160,000. Although this is a very high cost, the basketball/racquetball combination should help

us remain competitive.

Another amenity which is critical to our gyms success is a track. Almost all gyms have a

track and it would be very unwise to try and build a gym without one. Therefore, we have

opted to build a 1/8 mile track around our main workout room. This track will not be the

fanciest track ever built, since some tracks can cost up to $2,000,000. However, we are going

to do what we can. Based on the dimensions of our building, we have to build a square track

rather than the traditional rectangle. A 1/8 mile track is 660 feet around. This 2 lane track

should cost us roughly $75,000.

We will also be adding 100 double lockers and six 8 benches to both the mens and

womens locker rooms. This should provide storage space for our members as well as a good

way to protect belongings. There will be six water fountains placed strategically throughout the

facility so our members can refresh themselves during intense workouts. Four sanitization

stations will also be placed around our weights and machines so members can stay healthy and

clean while working out. For the convenience of our members, we will also have ten 39 TVs

and surround sound throughout the main free weight room, machine room, and cardio room.

The total cost of the lockers, benches, water fountains, sanitization stations, TVs, and surround

sound is $51,000. Other included costs; towels, washer & dryer, security system, check in

machine, and computers & printers for our employees. All prices include installation.


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Having a basketball, racquetball, make-shift volleyball, and make-shift badminton

court(s) will allow for us to set up some awesome intramural sport competitions. Many

members like being involved in activity where they are able to meet new people. Intramural

sports allow members to fraternize and engage in friendly competition. Intramural sports are a

great way to bring competitive individuals to our gym.

*Note to reader: Prices given above are rough estimates. Without actual intensions to open a

facility obtaining exact numbers proved difficult. However an interview was conducted with

management at a Rush fitness facility in Knoxville for confirmation that our price estimates

were close to par.

Equipment

The equipment offered in a gym can make or break the success and popularity of it. Our

gym will feature brand new, state of the art equipment. Research and personal experience has

determined what brand and pieces of equipment will be needed in our gym to satisfy our

members. We will be offering more types and total amount of equipment than our

competitors do in Johnson City which will give us an upper hand. The equipment will cost us

approximately $417,000. We will be using Life Fitness and their other product line, Hammer

Strength, for the larger pieces of equipment and machines in our facility. We will be using Iron

Grip dumbbells with a urethane cover because this cover is the strongest and most durable for

heavy usage. We plan to have three sets of 5-50lb, two sets of 55-100lb, and one set of 105-

150lb Iron Grip dumbbells. This is because the majority of people who use dumbbells in our

facility will be using between five and 50 pounds. The plates that we have chosen to use are

also very well known among the fitness community. Intek plates are used in multitudinous

fitness facilities around the nation and provide ample durability with a competitive price. Each


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set of Intek plates contains 16x45lb, 4x35lb, 8x25lb, 12x10lb, 12x5lb, 8x2.5lb plates and we

have estimated that we will need ten sets of these plates for our facility.

Our main equipment and machines will be furnished by Life Fitness and Hammer

Strength. Life Fitness is one of the largest suppliers to gyms in the nation. All of our equipment

and machines come directly from their warehouse and have a ten year warranty. A couple of

highlighted pieces of equipment that our members will enjoy are the squat racks, smith

machines, dual cable adjustable pulleys, and benches. However, the most state of the art piece

of equipment that our gym will have is the Life Fitness MJ12. This piece of equipment allows

for up to 12 individuals to work out at once with various stations and attachments. The MJ12

has a hefty price tag of $22,000; however, it will likely be the machine with the highest use in

our entire gym. The Life Fitness MJ12 is pictured below.

We will be using Life Fitness ellipticals, treadmills, and exercise bikes. We will feature

twenty-five of the Life Fitness 95xi ellipticals at a price of $2,200 per, twenty-five 95t treadmills

at a price of $2,500 each, and fifteen 95c exercise bikes at a price of $1,500 each. For our


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spinning room we will offer thirty Spinning Spinner Edge bikes at a price of $899 each. The total

cost for our ninety-five pieces of cardio equipment will be $166,970.

The total cost for our fifty-three pieces of equipment, dumbbells, kettle bells,

attachments, fixtures, and other miscellaneous equipment is $417,637. This is a small price to

pay to have brand new equipment that will provide our users with the amenities that they

desire. We believe that our equipment choices will help bring in new clients and the gym

layout, shown in Appendix B, will allow for maximal efficient use of our location.

Hours of OperationTri-Cities Fitness plans to have regular business hours Monday- Saturday from 5am until

midnight. On Sunday we will open later at noon and remain open until midnight. The deciding

factors for our operating hours came from our survey results in which most respondents

worked out either early morning or late evening and into the night.


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COMPETITIONThe Center for Physical Activity

The Wayne G. Basler Center for Physical Activity (BCPA) opened in April of 2002. This

100,000 square foot facility was built by, and currently operates on East Tennessee State

University student activity fees and is staffed by student workers. The building is located on the

East Tennessee State University campus and is only accessible at no cost to enrolled students,

faculty/staff, and retired faculty/staff members. Currently enrolled students can purchase a

spouse/domestic partner pass for $17 per month and/or a dependent pass for $5 per month.

Current faculty/staff can purchase a spouse/domestic partner pass for $27 per month and/or a

dependent pass for $8 per month. Also, guests can attend with a current student or

faculty/staff member for $5 per visit. However, if you do not have some sort of connection to a

user of the facility, you are not permitted to enjoy use of the facilities.

The Center for Physical Activity has many different types of workout areas which include

a 1/8 mile indoor track, martial arts training area, indoor cycling area, basketball/volleyball

courts, racquetball/squash courts, outdoor challenge/rope course, indoor and outdoor climbing

wall, indoor swimming pool, aerobic studio, yoga studio, 2 outdoor intramural and sport club

fields, locker rooms, casual care center for child care service, and a 15,000 square foot weight

and cardio room. In addition, several other services are offered such as kayak sessions, swim

lessons, walking trails, bike rentals, and outdoor equipment rentals. Kayak sessions occur at

7:30 PM every Monday and Wednesday night in the indoor pool. Swim lessons are offered to

children ages 3 12 as well as adults and can occur as either a group lesson or a private lesson.

All swim instructors are trained through the BCPA based on American Red Cross swim level


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skills. Lessons are only available to ETSU students, staff, and faculty. For safety reasons,

children ages 15 and younger are not allowed in the weight room and cardiovascular

equipment area, indoor track/workout area or in fitness classes. Children ages 12 15 can

partake in the climbing wall as long as they have a parent/guardian present. Children ages 3

months 8 years are eligible to attend the casual daycare facility.

The BCPA has many different sports clubs and intramural sports which members can

participate in. Some intramurals sports include flag football, softball, basketball, volleyball,

soccer, table tennis, and ultimate Frisbee. All current students and faculty members are able to

participate in sports clubs and intramurals at no cost. Intramural leagues are generally broken

up into competitive and casual leagues each of which are refereed by fellow students who work

for the BCPA. Games are scheduled Sunday Thursday between 4 PM and 11 PM.

Personal trainers are offered through the facility. All trainers are required to hold and

maintain a nationally recognized certification. The personal training service offers six free

sessions for students, faculty, staff, spouse/domestic partner members, and dependent

members over the age of 16. Following the completion of six free sessions, clients have the

option to pay $60 for each additional package of six training sessions. Due to popularity of this

program, if a client cancels a session within 12 hours of the start time, they will be charged for

one session. This program is not meant to be a replacement for physical therapy or

rehabilitation. The BCPA also offers several classes which members can partake in free of

charge. Some of these classes include; dance classes, martial arts classes, yoga, cycling, and

group fitness. These classes are generally set up as a group aerobic event where one instructor


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relays instructions on to all participants. In addition, non-credit courses are offered such as CPR

and First Aid, Red Cross Lifeguard Certification, Rape Defense, and Wilderness First Aid.

BCPA HOURS

Facility Mon-Thurs: 6am-midnight & Friday: 6am-9pm

Saturday: 10am-6pm & Sunday: 2pm-9pm

Pool Mon-Fri: 6:15am-8:15am, 11am-1pm, 4pm-7:30pm

Saturday: 10am-2pm & Sunday: 4pm-6pm

Family Swim Friday: 5pm-7:30pm & Saturday: 10am-12pm

Casual Care Mon-Fri: 9am-12pm, 3pm-7pm & Saturday 10am-12pm

Open Climb Mon-Thurs: 4pm-10pm & Friday: 4pm-7pm & Sunday: 4pm-7pm

**The BCPA is closed on all major holidays and remains open during the summer

Overall, the BCPA has many benefits and few downfalls. Some of the benefits are that it

is centrally located within Johnson City, it offers many different classes, members can

experience the personal training system prior to locking themselves into a long contract, and

childcare is provided at no additional cost. However, there are also some downfalls. First, you

must be a current student or faculty member in order to use the BCPA free of charge. As stated

prior, family members of the student or faculty member can use the facility at a cost. Second,

the hours are somewhat limited conforming to the availability of student workers. Since the

BCPA is associated with East Tennessee State University, the hours are based on when the

campus is open. Third, sometimes the facility can seem a bit overcrowded since many students

like to work out. None the less, the BCPA is a great place to work out. It offers a great product


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to its users. Unfortunately, not all Tri-Cities residents can use the BCPA since many do not have

any associations with East Tennessee State University. Lastly, it is quite unfortunate that ETSU

graduates cannot utilize the facilities upon graduation from the university.

Tri-Cities Lifestyle Center

Tri-Cities Lifestyle Center is located on 2517 Knob Creek Rd in Johnson City, TN. The

50,000 square foot facility is located on the north side of Johnson City near interstate 26. The

location provides access to members from Johnson City, Gray, Blountville, Kingsport, and Bluff

City. Members range from families with teenagers, college graduates, young professionals, and

seniors. Some of the prominent features that Tri-Cities lifestyle offers are an abundance of

trainers, dozens of free classes, a child care facility, relevant equipment, a local masseuse, a

smoothie bar, clean locker rooms with showers and saunas, an indoor track, a racquetball

court, and a basketball gym.

Each guest is allowed to try out the lifestyle center for 2 weeks without being charged.

Other perks for new members include one free session with a trainer, a 50% off coupon for a

smoothie, $10 off a one hour massage, and a free t-shirt. Potential members are presented

with two commitment options: a 12 month and a 24 month plan. The first includes monthly

dues of $49 with a $29 per month add-on for each family member. If you decide to prepay the

whole year, you can save 20% which equates to $549. If you select the 24 month plan, the

monthly dues are $39 with a $24 per month add-on for each family member. If you decide to

prepay the whole two years you can save 20% which equates to $828. If you decide to join

within 30 days of the 2 week free trial, there is no enrollment fee. Otherwise, the enrollment

fee is $49.


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When a new member joins, the 150 different pieces of equipment give the member

plenty of options to improve their health. With many options comes confusion as well. That is

why each member can ask for an orientation session with a trainer where the trainer will show

you how to use each piece of equipment and tell you what parts of the body they are

specialized for. All of the machines are the most current Nautilus machines offered today.

If using the exercise machines is not your style, the dozens of free classes provides you

with great options on getting to know other members and finding an exercise routine that is

fun and enjoyable for you. The classes offered include: Blast of Power, Step Fusion, Power

Yoga, Spinning, Silver Sneakers, X Power, Zumba, Core Cuts, Kickboxing, Pure Pilates, Wally Ball,

Group Centergy, Group Power, High Energy Athletic Training, Move It Move It, Step: 2 or 1, and

Step for All. Each of these classes is offered several times a week throughout different times of

the day to meet their customers demanding work schedules.

The significant qualities of Tri-Cities Lifestyle Center are the people. There is always an

abundance of employees working there to help you with any of your needs. From the smoothie

girl to the physical trainers, each employee has a different background and knowledge of the

human body. Some of the physical trainers and other employees even have degrees in

nutrition. This type of knowledge base within your reach is the best quality of the Lifestyle

Center.

The downfalls of Tri-Cities Lifestyle Center are obvious though. They lack several

features compared to their competition in the area. There is no Olympic size pool, the

basketball gym is too small, and the whole facility feels cramped. Another problem the gym


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faces is their attention to detail. They let the seats and other wear items on the exercise

machines deteriorate for quite a long time before they are ever replaced. In the gym, the

basketballs provided are severely used and almost not worth playing with. The towels provided

are also worn and should be replaced. These little details for someone that is spending a large

amount of money can give the customer the wrong impression.

The Wellness Center

The Wellness Center which is operated by Mountain States Health Alliance is located at

200 Med Tech Parkway. They claim to differentiate themselves from the competition by first

offering a health and risk assessment. From this they develop individualized cardiovascular and

strength training programs for their clients. The facility offers many different fitness options as

shown in the following table.

Life Fitness Strength Equipment Cross Trainers Elliptical machines Free-Weights Rowing Machines Airdyne Bikes

Stability Balls Nu Steps Upright Bikes Treadmills Recumbent Bikes


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Members also enjoy benefits such as dry saunas in both the mens and womens locker

rooms, a Jacuzzi hot tub, and upscale locker rooms equipped with flat screen TVs located in a

lounge area. The facility also offers two 25 yard lap swimming pools (one indoor and one

outdoor) as well as a warm water therapy pool. Members can also employ the services of

either massage therapy or personal training for an additional fee. The below tables detail the

cost for these services:

To join The Wellness Center there is an initiation fee for the primary member of $185.

The second member will pay a fee of $60. There is no added cost for each additional member

past the first two members. Membership dues are $49.50 for the primary member and $37.50

for the second member. Third and fourth family members are $21.50 each.

90 Minute Massage

Non-Member $70 Member $65

60 Minute Massage


30 Minute Massage


Personal

TrainingMember

One Session$45

Four Sessions$170

Eight Sessions$300

Twelve Sessions$440

Sixteen Sessions$575

Personal

TrainingNon-Member

One Session$65

Four Sessions$248

Eight Sessions$430

Twelve Sessions$635

Sixteen Sessions$830


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There are a few downfalls of The Wellness Center. First, they do not have an indoor

track. However they are situated inside a 3.1 mile outdoor running path. This path can be

altered to allow runners/ walkers to run less than the 3 miles or more. Because they are

directly across the street from Lifestyles, they do share this attraction with their competition.

Runners/walkers do not have to be members in order to use this path. The other large

downfall, for our target audience at least, is the clientele that The Wellness Center appeals to is

much older. We were not able to obtain exact statistics regarding their memberships average

age but it is estimated to be higher than our young- middle aged adult target range.


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MARKET AND DEMOGRAPHIC ANALYSIS

We will assess relevant information pertaining to the sustainability and stability of the

fitness industry. Such information will likely include; industry statistics, growth/decline rates,

consumer preferences, and industry trends. We will utilize research conducted by the

International Health, Racquet, and Sports club Association (IHRSA). This organization provides

statistics related to the fitness industry that provides valuable input into the consideration of

our venture. We will research demographic information within Washington County and make

assumptions based upon the information. We will apply market statistics to that of the

demographic information to give an estimate of our potential market. We will also include legal

information related to our venture. Economic information related to our area will also be

included in the market and demographic analysis.

Legal Consideration

Our establishment will fall under the definition of a health club a ccording to

Tennessee law 47-18-301 (4) (A). This definition states, health club means any enterprise,

however styled, which offers on a regular, full-time basis, and pursuant to a health club

agreement, services or facilities for the development or preservation of physical fitness through

exercise, weight control or athletics(Health Club Law - Part 3). As an entity, we realize that our

responsibility is that of Operator defined under the law as any person, firm, corporation, or

business entity which operates as a health club. We must obtain a certificate of registration

under code 47-18-302 before operations can begin. This section states It is unlawful to operate

a health club unless a valid certificate of registration is obtained for each location where health

club services or facilities are provided and payment of the fee for required for such registration


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is made. Our entity will adhere to the additional regulations outlined in 47-18-30(3-20). These

sections define contract terms for health clubs in Tennessee and also pertain to registration and

license information. (Health Club Law - Part 3).

Market Trends

We will explore trends of health club membership, activities, and age demographics of

members. For our venture, we estimate that our main customer base will be Generation Y (21

to 30) and X (31 to 45) individuals. We will use information provided by The International

Health, Racquet, and Sports club Association (IHRSA). IRHSA provides a wealth of valuable

information that can be used in the assessment of our proposed venture. This organizations

purpose is as follows:

The International Health, Racquet & Sports club Association is the trade

association representing health and fitness facilities, gyms, spas, racquet and

sports clubs, and suppliers worldwide. IHRSA and its members are dedicated to

making the world healthier through regular exercise and fitness promotion.

IHRSA is the recognized leader on health club industry research. IHRSAs annual

reports provide a comprehensive, country-specific overview of the key fitnessindustry markets worldwide as well as a detailed view of the overall global

market. IHRSA also tracks U.S. industry trends on club performance, consumer

behavior, and employee compensation practices (Top Health Club Trends for

2012, 2012).

We will analyze various reports from this organization in order to make assumptions for our

venture. Also, we will attempt to formulate a plan for member acquisition, utilizing the

information given.

The IHRSA recently released a report of the expected health club trends for 2012. This

top 10 list includes:

1. More people working out in clubs.


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2. Specific programming and certifications for Baby Boomers.

3. Youth programming.

4. Social exercise.

5. Small group personal training.

6. Technology.

7. Convenient fitness options.

8. Corporate wellness benefits.

9. Body weight exercise.

10. Physician prescribed exercise.

(Top Health Club Trends for 2012, 2012)

This list provides some expected results as well as some areas that have not fully matured in

the industry. We will look into these trends in further detail and discuss relevant characteristics

of each phenomenon.

Addressing trend #1 (more people working out in clubs) we see that indeed, health club

memberships have increased in recent years. The index provided by IHRSA contains 14 clubs

and a total of 501 facilities (IHRSA Index Indicates Health Club Growth in Third Quarter 2011,

2012). According to this index, memberships to health clubs are rising. The findings state,

Revenue at U.S. commercial health clubs reached $21.4 billion and memberships totaled 51.4

million in 2011, the International Health, Racquet and Sports club Association (IHRSA) reported

in a survey released Monday. The revenue represented a 5 percent increase while membership

numbers grew 2.4 percent from 2010 (U.S. Club Revenue, Memberships Rose in 2011, 2012).

The trend of more people joining health clubs appears to be expected to continue according to

IHRSA. The report also states that, For-profit club membership penetration (members who are


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6 and older) reached an all-time high of 18.1 percent (U.S. Club Revenue, Memberships Rose

in 2011, 2012). These figures would contribute to the assumption that the health club industry

is remaining stable. Melissa Rodriguez, IHRSA's senior manager of research states, In this

economy, even steady to slightly improved performance bodes well for the future of the health

club industry (IHRSA Index Indicates Health Club Growth in Third Quarter 2011, 2012). In

addition to increased club memberships, trends show that visit frequency to health clubs has

also increased. IHRSAs executive vice president, Jay Ablondi states, The health club industry

continues to attract new members and is engaging them with innovative programs that are

driving up frequency of club visits. According to IHRSA, members increased their usage of

facilities from 97.5 days in 2010 to 102.5 days in 2011(U.S. Club Revenue, Memberships Rose in

2011, 2012). Financially speaking, IHRSA index organizations provide the following information,

Membership dues revenue came in at a mean of $28.1 million and a median of $5.2 million.

Non-dues revenue came in at a mean of $11.4 million and a median of $2.4 million.

Membership accounts for the participating clubs grew by 6.1 percent for the quarter. EBITDAR

improved by 10.4 percent, up from a company average of $13.3 million to $14.6 million (IHRSA

Index Indicates Health Club Growth in Third Quarter 2011, 2012). Although the results from this

index provide a positive outlook for health clubs, it should be stated that the given information

is a small sample and does not represent the entire health club population. However, it does

provide significant information that could be assumed to be related to the population.

Trend #2 (specific programming and certifications for Baby Boomers) provides an

interesting factor to consider. This segment is the fastest growing demographic for new health

club members (Top Health Club Trends for 2012, 2012). Many Baby Boomers are concerned


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with their health and well-being but have a difficulty finding ways to execute proper exercise

activities. These individuals are often wary of large machines and crowded areas with younger

exercisers. They would rather have exercise groups and less strenuous activities that can

improve wellness. Baby Boomers are less likely to exercise for fun reasons, but rather for health

reasons. This generation is less concerned with technology enhanced and trendy methods of

exercise. Although Baby Boomers are the least likely demographic to join health clubs, 12% of

their population possesses memberships according to a study. In addition, Baby Boomers were

more likely to list cost as their top reason for not joining a health club than any other

demographic (Cost Is Top Barrier to Health Club Membership, Per Study, 2011). This

information is helpful in formulation of potential programs and activities for the Baby Boomer

generation. Pricing incentives for seniors as well as secluded meeting areas for relevant

activities could entice an influx of older customers. Instructor led group activities such as water

aerobics and balance exercises are popular with this age demographic. If our organization could

offer such services with a payment plan that appealed to specific needs, we could experience

above average membership rates of Baby Boomers. Payment plans based solely upon program

use may be beneficial for this demographic.

Trend #3 (youth programming) provides a similar consideration basis as trend #2. The

key in both trends is age appropriate programming and availability. Health clubs have

experienced growth from the youth segment in recent years. According to IHRSAs trend report,

health club memberships for individuals under the age of 18 grew from 3.8 million in 2007 to

6.1 million in 2010. Sport specific training as well as the government backed Lets Move

initiative for youth obesity are probable causes for the influx in youth involvement (Top Health


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Club Trends for 2012, 2012). Our organization may look into obesity cooperative programs for

children and implement ways to get them involved. Also, cooperating with sport coaches by

giving them a location for lessons and the opportunity to promote lessons (via business cards,

etc.) could be beneficial to our organization. We could charge monthly or per use fee for such

services. The youth market provides a potential competitive advantage if the correct

assessment of this demographic can be applied. This group is most likely to prefer technology

intensive, modernized methods of exercise.

Trends #4 and #5 pertain to increased group involvement in exercise activities. Trend #4

(social exercise) is not new to the fitness industry but has increased in the nature and number

of exercises now popular with members. Members of such groups often feel they are a cohort

with other members serving to encourage and share in fun activities. Popular programs within

this trend includes: yoga, kick-boxing, dance classes, and cycling (Top Health Club Trends for

2012, 2012). A fairly newer phenomenon is that in trend #5 (small group personal training).

Identified by the acronym SGPT, this trend involves a personal trainer leading a few members in

exercise activities. According to IHRSA, 4 million Americans used personal trainers in 1999. That

number has grown to approximately 6.5 million currently (Top Health Club Trends for 2012,

2012). Perks for such format include the efficiency for the club and trainer since more

customers can be served at once. Customers also pay a lower rate than would be paid for one-

to-one service. Furthermore, this format includes the group cohesion effect that strengthens

the customers relationship with the organization and other customers. Our organization plans

to provide various programs that can utilize the profitability of group exercise.


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Trend #6 (technology) presents an interesting variable for consideration. With young

individuals joining more health clubs, technology is a large part of their daily routines.

Technology is embraced by the majority of individuals up to the Generation X age. Baby

Boomers are less likely to use or want to use technologically advanced means of exercise.

Technology is beginning to be more prevalent with equipment and programs offered at health

clubs. Apps for phones and other handheld devices assist the user with keeping track of

exercise, dietary, and personal progress activities. Generation Y and younger will be the most

likely to embrace and use technology for personal fitness assistance. Incorporating technology

so that it is available to our customers will be an important factor to consider. Instructions on

the use and perks of technological enhancers should be readily available for customers.

However, we must be careful not to lose a certain degree of personal touch that is often

sacrificed as automation and technology increases. Providing age appropriate technology for

age appropriate activities would likely be most beneficial for our organization.

Trend #7 (convenient fitness options) represents the consumer preference of having

fitness options available when they are personally desired and at a convenient location.

According to IHRSA, there were approximately two hundred 24-hour health clubs available five

years ago and this number has grown to over 2,000 today (Top Health Club Trends for 2012,

2012). Convenience is listed by all demographics as a major factor in choosing a health club. We

wish to provide members with convenient access times and location.

Trend # 8 (corporate wellness benefits) provides another cooperative opportunity for

our organization. Companies are investing more into employee health and wellness. Studies


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show that physically active employees report fewer sick days, cheaper insurance, and increased

productivity. IHRSA is attempting to make fitness offerings easier for businesses. Their trend

report states, At the federal level, IHRSA secured the reintroduction of the Workforce Health

Improvement Program (WHIP) Act, which would reclassify employer-provided fitness

memberships as non-taxable income. The WHIP Act is especially important to smaller

businesses that lack the space to build an in-house fitness center, which is already considered a

non-taxable benefit by the IRS (Top Health Club Trends for 2012, 2012). It may be beneficial

for our organization to provide incentives for local businesses so that our services can be

offered to their employees. Pricing discounts and member quantities will need to be considered

for such contracts.

Trend #9 (body weight exercise) pertains to changes in equipment and preferences from

users. Body-weight leveraging equipment has become a necessity at many fitness facilities in

recent years. Trend #10 (physician prescribed exercise) addresses a growing population, obesity

rates, and healthcare costs. IHRSA estimates that exercise as a prescription by physicians will

increase and take the place of many medications (Top Health Club Trends for 2012, 2012). This

new trend is expected to cause health insurance providers to create programs that promote

healthy lifestyles. This trend could contribute to the assumption that health club memberships

will see steady growth rates.

Although the top 10 IHRSA trends are meant to indicate a possible evolution of the

fitness industry, the point should be made that this study is merely a forecast of estimated

consumer preferences. IHRSA also states that although the trends are expected to alter health


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club operations, tried and true methods are still very stable and popular with health club

customers. IHRSA states, The top 10 health club activities per IHRSAs member census of 3,024

North American clubs are:

#1 free weights (hand weights, dumbbells and barbells)

#2 treadmills

#3 resistance machines

#4 elliptical trainers

#5 stretching

#6 abdominal machines

#7 stationary cycling

#8 low impact aerobics

#9 yoga

#10 stair-climbing machines (Top Health Club Trends for 2012, 2012).

Traditional methods prove to be the backbone of the health club industry. It is also

important to note that although trends can revolutionize fitness methods, they may also be a

mere fad that consumers fail to accept. Caution should be used when assessing trends and their

implications upon the fitness industry. After assessment of relevant statistics and information

concerning health clubs, the assumption could be made that the industry is experiencing and

expected to experience continued growth. Trends provide the information that contributes to

the overall sustainability and stability of the health club industry.


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Demographic & Economic Segment

The census of 2000 showed a population of 107,198 for Washington County. The census

of 2010 showed a population of 122,979 (State and County Quickfacts - Washington County). If

we wish to estimate the population for Washington County for 2012 we can apply the average

yearly growth rate from 2000-2010.Wasington county experienced a 14.72% population

increase from 2000-2010, or 1.472% per year. The adjusted population estimate for 2012 is

126,627. The following chart illustrates the 2009 population age distribution in Washington

County:

As of 2010, Washington County was composed of 91.6% White persons, 3.9% Black persons,

and 3% persons of Latino or Hispanic origins (State and County Quickfacts - Washington

County). Washington Countys per capita income was $30,695 in 2009, an increase of 6.5% from

2007. If we apply a 3.25% per year growth rate to Washington County income, we can estimate

the per capita income for 2012, = $33,786. The median effective buying income per household

in 2009 was $42,571. Washington County saw building permits for both commercial and

residential ventures fall dramatically from 2008-2009. Commercial permits dropped by 46%

while residential permits dropped 44.7%. This fact is undoubtedly cause by the economic

recession as well as the housing crisis. Retail sales for Washington County experienced a 5.3%


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drop from 2008-2009 (Johnson City/Jonesborough/Washington County Economic Development

& Demographic Profile). We are most concerned with the population and income of persons

most likely to patronize our facility. This is estimated to be individuals 18-45 years of age.

If we apply market information to the demographic information given, we can find the

estimated number of potential customers for our venture and make related assumptions. The

approximate American population that uses health clubs is 16%. We assume this percentage

accurately estimates the usage rate for Washington County. When we apply this percentage to

the population of Washington County, we find that the estimated number of health club users

is (.16 x 126,627) = 20,260. This tells us there are approximately 20,000 potential customers

within our county of operation alone. We realize that our potential customer base extends to

other surrounding counties. However, due to a convenient location being a necessity for most

health club members, estimating the percentage of distant customers is difficult. However, we

feel that an approximation of an additional 8,000 potential health club customers would be a

conservative estimate considering the surrounding populations. This brings our estimated

potential customer base to approximately 28,000. According to our survey, it can be assumed

that over 50% of students belonging to a health club said they would consider switching. If we

apply this percentage to the customer base population, we find that approximately 14,000 club

members would consider switching to another club if the conditions were favorable. We also

can calculate the approximate number of potential customers based upon their demographic

and likelihood of possessing a membership. According to IHRSA, specific ages belonging to clubs

are approximately:


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Youth 12%

Gen Y 19%

Gen X 17%

Gen 46-64 14.5%

Baby Boomers 12%

(Top Health Club Trends for 2012, 2012)

We can apply the demographic percentages from 2009 to calculate the approximate number of

potential health club members per demographic. For the youth demographic, we will not use

the under 5 age percentage but will rather only use the 5-19 age percentages. We will also

make the assumption that for ages 46-64, the likelihood of club membership should be

calculated by finding the average of the previous and following age brackets (17 + 12 2 =

14.5%). We will take the percentages, multiply them by the adjusted population and then

multiply by the expected percentage of club members. This information provides the

approximate number of potential customers based upon age.


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Youth 17.8% x 126,627 x 12% = 2705

Gen Y (20 to 29) 14.7% x 126,627 x 19% = 3537

Gen X (30 to 45) 20.55% x 126,627 x 17% = 4424

Gen (46 to 64) 24.22% x 126,627 x 14.5% = 4448

Baby Boomers 65+ 15.6% x 126,627 x 12% = 2371

The demographic information and research provided by IHRSA allows us to assess the

stability and nature of the market we are concerned with. Given the information above, we can

roughly estimate the likelihood of customer acquisition and also the supporting population. The

trends that were assessed help us determine the sustainability of the industry and factors that

could be used for competitive advantages. The indications appear to be positive for the health

club industry. Reports of growing memberships and increased participation among specific

demographics bode well for future operations. Changes in society and health awareness have

also contributed to the rise in health club participation. Although most sectors of the economy

have seen decreased business, the fitness industry appears to be remaining stable.


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CONCLUSIONThis analysis was conducted in order to explore the potential for a new fitness club

venture in Johnson City, TN. We have considered a wide range of aspects such as; competitor

offerings, specific location, current market prices for products and services, consumer

preferences, and current market conditions. We incorporated a collegiate survey into our

analysis that provided valuable information pertaining to a large portion of our target market.

We have also considered competitor product and service offerings in order to meet or exceed

industry standards. A thorough cost analysis of necessary products, construction, and services

needed to establish our venture has been conducted. Market analysis of the fitness industry

reveals that growth has been experienced by fitness clubs, in spite of a poor economy.

According to research, this trend is expected to continue in coming years. Also, the population

surrounding our area of business provides a firm quantity for sustainable operations.

After consideration of our combined findings, we feel this venture can achieve stable

profitability. Our cost analyses show that, according to our calculations, we could see

substantial profits after fixed costs are reduced. There are variables within our analysis that

could alter the decision to accept or reject the project. Our main concern is that of customer

acquisition. We feel if our estimates of customer acquisition can be met or exceeded, the

venture has a strong probability for success. Although all factors cannot be solidified, we feel

this venture has legitimate profitability potential.


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Appendix A: SURVEY RESULTS

The eleven questions are shown in the order

they were asked from left to right.


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46/51


Appendix B: Facility Layout


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FUNDING ESTIMATED ACTUAL Under/(Over)

Investors Funding

Owner 1 10,000.00$ (10,000.00)$

Owner 2 10,000.00$ (10,000.00)$

Owner 3 10,000.00$ (10,000.00)$

Owner 4 10,000.00$ (10,000.00)$

Owner 5 10,000.00$ (10,000.00)$

Owner 6 10,000.00$ (10,000.00)$

Other -$

60,000.00$ -$ (60,000.00)$

Loans

Bank Loan 1 (10 Years 4.8%) 750,000.00$ (750,000.00)$

Bank Loan 2 (10 Years 4.8%) 700,000.00$ (700,000.00)$

1,450,000.00$ -$ (1,450,000.00)$

Angel Investor

Angel Investor 1 -$

Angel Investor 2 -$

-$ -$ -$

Total FUNDING 1,510,000.00$ -$ (1,510,000.00)$

COSTS ESTIMATED ACTUAL Under/(Over)Fixed Costs

Deposit on Lease 18,500.00$ 18,500.00$

Building Improvement /Remodeling 50,000.00$ 50,000.00$

Deposit on Electrical Connections 2,500.00$ 2,500.00$

Deposit on Water Connection 400.00$ 400.00$

Deposit on Gas Connection 1,500.00$ 1,500.00$

Telephone Connection Fee 400.00$ 400.00$

Cable Connection Fee 400.00$ 400.00$

Internet Connection Fee 100.00$ 100.00$

Locked IP Address Fee 100.00$ 100.00$

Business Entity 200.00$ 200.00$

Business License/Permits 200.00$ 200.00$

Legal/Professional Fees 1,000.00$ 1,000.00$

Prepaid Insurance 2,500.00$ 2,500.00$

Signage 20,000.00$ 20,000.00$

Security Systems (Camera) 20,000.00$ 20,000.00$

Advertising for Opening 25,000.00$ 25,000.00$

Website 200.00$ 200.00$

Mobile App Development 2,500.00$ 2,500.00$

Business Start Up Cost Structure

Appendix C: Start Up Cost


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COSTS (Cont.) ESTIMATED ACTUAL Under/(Over)

Fixed Costs (Cont.)

Business Cards 300.00$ 300.00$

Computer Hardware & Software 10,000.00$ 10,000.00$

Point of Sale System, and Entrance Card System 5,000.00$ 5,000.00$

Operating Cash 500.00$ 500.00$

Reserve for Contingencies 2,000.00$ 2,000.00$

Initial Cleaning Chemical Inventory 400.00$ 400.00$

Initial Linen Inventory 500.00$ 500.00$

Laundry Equipment & Installation 6,000.00$ 6,000.00$

Laundry Supplies 400.00$ 400.00$

Machines & Equipment 417,637.00$ 417,637.00$

- Free Weights 147,067.00$

- Machines 37,200.00$

- Cardio 213,570.00$

- Miscellaneous 19,800.00$Courts (Basketball & Racquetball) 260,000.00$ 260,000.00$

- Basketball Court 100,000.00$

- Racquetball Courts (2) 160,000.00$

Running Track 75,000.00$ 75,000.00$

Television 6,750.00$ 6,750.00$

Sound System 5,000.00$ 5,000.00$

Tools & Supplies 2,000.00$ 2,000.00$

Office Furniture/Fixtures 8,000.00$ 8,000.00$

Childcare Furniture/Fixtures 4,000.00$ 4,000.00$

Childcare Supplies 2,000.00$ 2,000.00$

Lockers 38,600.00$ 38,600.00$

- 8' Locker (20) 180.00$ -$- Double Tier Locker (200) 175.00$ -$

First Aid Equipment 1,500.00$ 1,500.00$

Travel 1,000.00$ 1,000.00$

Others 2,000.00$ 2,000.00$

Total Fixed Costs 994,087.00$ -$ 994,087.00$


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Average Monthly Costs

Building Lease Payment 18,500.00$ 18,500.00$

Advertising (Print, Broadcast & Internet 1,000.00$ 1,000.00$

Business Insurance 2,000.00$ 2,000.00$

Employee Salaries and Commissions 108,000.00$ 108,000.00$


Loan & Credit card interest & Principal 15,240.00$ 15,240.00$

Legal/Accounting fee 500.00$ 500.00$

Merchant Fees 200.00$ 200.00$

Manager Salary 4,167.00$ 4,167.00$

Payroll Tax 6,480.00$ 6,480.00$


COSTS (Cont.) ESTIMATED ACTUAL Under/(Over)

Average Monthly Costs (Cont.)

Supplies 200.00$ 200.00$

Website Hosting 100.00$ 100.00$Mobile App Maintenance 150.00$ 150.00$

Utilities 5,010.00$ 5,010.00$

- Telephone 300.00$

- Cable 200.00$

- Internt Access 100.00$

- IP Adress Fee 10.00$

- Electrical 3,500.00$

- Water, Sewer & Trash Collection 300.00$

- Gas 600.00$

First Aid Equipment Supply 100.00$ 100.00$

Travel 2,000.00$ 2,000.00$

Misc. Expenses 2,000.00$ 2,000.00$

Other 2,000.00$ 2,000.00$

Total Averge Monthly costs 168,247.00$ -$ 168,247.00$

x Number of Months 3

Total Monthly Costs 504,741.00$ -$ 504,741.00$

Total COSTS 1,498,828.00$ -$ 1,498,828.00$

SURPLUS/(DEFICIT) 11,172.00$ -$ 11,172.00$


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INCOME 2012, Q4 % OI 2013 % OI 2014 % OI 2015 % OI 2016 % OIOperating Income

Membership ($ 40) 60,000.00$ 49% 960,000.00$ 49% 1,080,000.00$ 49% 1,200,000.00$ 49% 1,320,000.00$ 49%

Trainer Revenue 33,750.00$ 28% 540,000.00$ 28% 607,500.00$ 28% 675,000.00$ 28% 742,500.00$ 28%

Sports Massage Revenue 12,000.00$ 10% 192,000.00$ 10% 216,000.00$ 10% 240,000.00$ 10% 264,000.00$ 10%

Nutritional Guidance Revenue 16,500.00$ 13% 264,000.00$ 13% 297,000.00$ 13% 330,000.00$ 13% 363,000.00$ 13%

Total Operating Income (OI) 122,250.00$ 100% 1,956,000.00$ 100% 2,200,500.00$ 100% 2,445,000.00$ 100% 2,689,500.00$ 100%

Non-Operating Income

Space Rental Income

Extra Activities Income

Extraordinary Income

Other

Total Non-Operating Income -$ -$ -$ -$ -$

Total INCOME 122,250.00$ 1,956,000.00$ 2,200,500.00$ 2,445,000.00$ 2,689,500.00$

EXPENSES 2012, Q4 % OI 2013 % OI 2014 % OI 2015 % OI 2015 % OI

Operating Expenses

Building Lease Payment 55,500.00$ 45% 222,000.00$ 11% 222,000.00$ 10% 222,000.00$ 9% 222,000.00$ 8%

Depreciation 41,363.00$ 34% 165,455.00$ 8% 165,455.00$ 8% 165,455.00$ 7% 165,455.00$ 6%

Advertising (Print, Broadcast & Int.) 6,000.00$ 5% 15,000.00$ 1% 15,000.00$ 1% 12,000.00$ 0% 10,000.00$ 0%

Business Insurance 6,000.00$ 5% 24,000.00$ 1% 24,000.00$ 1% 24,000.00$ 1% 24,000.00$ 1%

Employee Salaries and Commissions 324,000.00$ 265% 1,296,000.00$ 66% 1,296,000.00$ 59% 1,296,000.00$ 53% 1,296,000.00$ 48%

Loan & Credit card interest & Principal 45,720.00$ 37% 182,880.00$ 9% 182,880.00$ 8% 182,880.00$ 7% 182,880.00$ 7%

Legal/Accounting fee 1,500.00$ 1% 6,000.00$ 0% 6,000.00$ 0% 6,000.00$ 0% 6,000.00$ 0%

Merchant Fees 600.00$ 0% 2,400.00$ 0% 2,400.00$ 0% 2,400.00$ 0% 2,400.00$ 0%

EXPENSES (Cont.) 2012, Q4 % OI 2013 % OI 2014 % OI 2015 % OI 2015 % OI

Operating Expenses (Cont.)

Manager Salary 12,500.00$ 10% 50,000.00$ 3% 50,000.00$ 2% 55,000.00$ 2% 55,000.00$ 2%

Payroll Tax 19,440.00$ 16% 77,760.00$ 4% 77,760.00$ 4% 77,760.00$ 3% 77,760.00$ 3%

Supplies 1,500.00$ 1% 6,000.00$ 0% 7,000.00$ 0% 8,000.00$ 0% 8,500.00$ 0%

Telephone 900.00$ 1% 3,600.00$ 0% 3,600.00$ 0% 3,600.00$ 0% 3,600.00$ 0%

Cable 600.00$ 0% 2,400.00$ 0% 2,400.00$ 0% 2,600.00$ 0% 2,600.00$ 0%

Electrical 10,500.00$ 9% 42,000.00$ 2% 42,000.00$ 2% 43,000.00$ 2% 44,000.00$ 2%

Gas 1,800.00$ 1% 7,200.00$ 0% 7,200.00$ 0% 8,000.00$ 0% 8,000.00$ 0%

Internet Access 300.00$ 0% 1,200.00$ 0% 1,200.00$ 0% 1,500.00$ 0% 1,500.00$ 0%

IPP Adress fee 30.00$ 0% 120.00$ 0% 1,200.00$ 0% 1,200.00$ 0% 1,500.00$ 0%

Water, Sewer & Trash Collection 900.00$ 1% 3,600.00$ 0% 3,600.00$ 0% 4,000.00$ 0% 4,000.00$ 0%

Website Hosting 300.00$ 0% 1,200.00$ 0% 1,500.00$ 0% 1,800.00$ 0% 1,800.00$ 0%

Mobile App Maintenance 450.00$ 0% 1,800.00$ 0% 2,000.00$ 0% 2,250.00$ 0% 2,500.00$ 0%

Travel 1,200.00$ 1% 4,000.00$ 0% 4,000.00$ 0% 3,000.00$ 0% 3,000.00$ 0%

Misc. Expenses 5,000.00$ 4% 15,000.00$ 1% 12,000.00$ 1% 12,000.00$ 0% 14,000.00$ 1%

Other 1,000.00$ 1% 5,000.00$ 0% 5,000.00$ 0% 5,000.00$ 0% 5,000.00$ 0%

Total Operating Expenses 537,103.00$ 439% 2,136,628.00$ 109% 2,136,209.00$ 97% 2,141,460.00$ 88% 2,143,510.00$ 80%

Non-Recurring ExpensesEqui pme nt, Furni ture & Software 4,000.00$ 3% 5,000.00$ 0% 3,000.00$ 0% 3,000.00$ 0% 5,000.00$ 0%

Gifts Given 3,000.00$ 2% 3,000.00$ 0% 3,000.00$ 0% 2,000.00$ 0% 2,500.00$ 0%

Special Promotion 3,000.00$ 2% 5,000.00$ 0% 5,000.00$ 0% 2,500.00$ 0% 3,000.00$ 0%

Other 3,000.00$ 2% 2,000.00$ 0% 2,000.00$ 0% 1,000.00$ 0% 2,000.00$ 0%

Total Non-Recurring Expenses 13,000.00$ 11% 15,000.00$ 1% 13,000.00$ 1% 8,500.00$ 0% 12,500.00$ 0%

Total EXPENSES 550,103.00$ 2,151,628.00$ 2,149,209.00$ 2,149,960.00$ 2,156,010.00$

Est. membershi p 2750

XXX GYM4 - Year Profit and Loss Projections

Est. membership 500 Est. membership 2000 Est. membership 2250 Est. membership 2500

Appendix D: Project/ Loss Projections

tricities fitness business plan final

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