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Keeping It Low
Several factors are at play in the growth of these facilities, but chief among them is that they are affordable to open, easy to implement with turnkey programs and require low overhead. Facilities for these franchises range from 2,500 square feet to 5,000 square feet and are located in B-tier strip malls. They include few pieces of traditional cardio and strength equipment. Instead, the main equipment is 40 to 60 heavy bags.
Payroll expenses typically consist of paying instructors per class and per personal training session and paying front desk staff. To get a return on the investment, many of these facilities need just 800 to 1,000 members. Start-up costs range from $98,000 to $306,000.
The cost of membership at these types of facilities is also kept low (typically $59 to $100 per month) partially because operators are aware that some of their members also belong to traditional commercial clubs where they can use the pool, basketball court or other services not offered at the studios.
However, LA Boxing members are more loyal than members of traditional clubs, says Philip Jacobs, director of franchise development at LA Boxing.
“They show up more,” Jacobs says. “Ours average three times per week.”
He adds that LA Boxing differentiates itself with efficient and effective workouts that teach members new skills, build their confidence and empower them. The staff also engage with members.
“Walking into an LA Boxing should be like walking into your local bar where they know your name and what you drink,” Jacobs says. “That engagement leads to more loyalty, fewer cancellations, more referrals—and they spend more money.”
DOLLARS AND SENSE
Up-selling for that additional revenue is a big part of the model for all three franchises. Franchisees earn additional revenue through personal training sessions and through sales of apparel and merchandise in the pro shop. Branded apparel sells well, according to the three companies.
LA Boxing recently began earning revenue by offering seminars to members and nonmembers on self-defense, weapons takeaway and antibullying.
“It’s a way for them to bring a friend—a referral vehicle—and we believe we are actually doing good by teaching something of value,” Jacobs says.
The model seems to be working. Growth for LA Boxing and CKO Kickboxing has earned them spots on Entrepreneur magazine’s Franchise 500 list. CKO, which was founded in 1997 by Joe Andreula and began franchising in 2007, had 21 locations (including four company-owned) in 2011, placing it at No. 360 on the Franchisee 500 list this year and at No. 35 on the magazine’s top new franchise list. In 2011, it ranked No. 428 overall and No. 48 on the new franchise list.
Its 2010 total revenue was $347,291, with a gross profit of $204,292, according to its 2011 Franchise Disclosure Document (FDD).
LA Boxing, which was founded in 1992 and was purchased by member Anthony Geisler, who began franchising it in 2004, appeared on Entrepreneur magazine’s list in 2009 (No. 496), 2010 (No. 427) and 2011 (No. 498). The company now has 70 open locations, 12 of which are company owned, and another 60 locations under development, Jacobs says. Total revenue for LA Boxing increased from $3.4 million in 2009 to $3.7 million in 2011. In first quarter 2012, LA Boxing brought in $1 million in total revenue.