F45 Franchise Cost & Profit Worth Failure Risk In 2022?

F45 franchise

F45 Franchise Cost & Profit Worth Failure Risk In 2022?

Table of Contents

The F45 franchise is a training studio which provides exercise training that involves alternating periods of short, intense anaerobic exercise. Below, we are going to make a complete analysis on the F45 franchise cost and the ups and downs of owning one.


F45 franchises are a community based, functional training system that prides itself on innovation, motivation and results.


Adam Gilchrist has been a Director and CEO since the formation of the company. He is also a Director and the Co-CEO of each of F45 Training Pty Ltd, F45 Training Canada Limited, F45 Training Asia Private Ltd., and Functional 45 Training Limited. Adam is based in Sydney, Australia.

The F45 Training system was launched in Australia in 2012 and currently has over 2,200 franchises sold in 63 countries. In the United States, F45 began offering franchises in 2015 and now has 469 franchise units and 3 company-owned units.

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F45 is a public company backed by notable investors such as Mark Whalberg and David Beckham. The shares began trading on the New York Stock Exchange on July 15 of 2021, under the symbol “FXLV.” F45 received net proceeds from the offering of approximately $279.0 million.

How is the F45 Franchise Positioned in the Fitness Industry?

The F45 is uniquely positioned to grow within the Fitness Industry because of the management team behind it. F45 boasts notable investors that are committed to growing the brand internationally and Mark Whalberg is actively helping grow the brand name in the United States. The F45 franchise has also reported that margins can be up to 30%, while the industry average in the fitness sector is 9.6%. They are competing in a $37 billion market with an expected 4.7% growth rate.

The fitness industry as a whole is facing uncertainty because of the COVID-19 pandemic and the shift to online home workouts such as Peloton. However, as the consumer demand for normal life reemerges and the safety of vaccines, we believe that this competitive fitness model will excel as people want to compete in a live setting against other people. The most comparable company to F45 is Orange Theory. Orange Theory takes an average of over 12 years to make your money back compared to F45 franchises which can be under 3 years.

f45-logo

How Much is an F45 Franchise?

The initial F45 Franchise Fee is $52,000. You have to pay this upfront fee when opening a F45 franchise.

To be considered for a franchisee of a F45 franchise, you need to have at least $120,000 in liquid assets.


This article’s primary source is the 2021 F45 Training Franchise Disclosure Document (FDD). You can purchase it and have full access to all the data by clicking here


Franchise Cost

The estimated total investment necessary to begin operation of a F45 Franchise ranges from $313,200 – $485,100

The following costs are part of the upfront costs included in the initial investment for a F45 franchise. Many of these are onetime fees that are needed to launch the franchise.

Review the chart below to see how much it costs to buy an F45 franchise in 2021.

F45 Franchise Cost (Detailed). Estimated Initial Investment

Type of expediture
AmountMethod of paymentWhen dueTo whom payment is to be made
Initial Franchise Fee
$50,000Lump SumOn the Effective DateUs
Document Preparation Fee
$2,000Lump SumOn the Effective DateUs
Opening Package
$125,000As Arranged$10,000 on the Effective Date of the Franchise Agreement; balance is due upon ordering the Opening Package, or 6 months from the Effective Date of the Franchise Agreement, whichever occurs firstUs
Opening Package Taxes and Duties
$5,000 to $12,000As ArrangedUpon ordering the Opening Package and/or when required by the relevant taxing or other authorityUs or the relevant taxing or other authority
Architectural Floor Plan Design
$14,500As ArrangedAs invoicedUs, Our Affiliates and/or Suppliers
Leasehold Improvements
$1,000 to $100,000As ArrangedAs InvoicedSuppliers
Utility Deposits
$1,000 to $2,000As ArrangedAs ArrangedSuppliers
Exterior and Interior Signage
$5,000 to $10,000As ArrangedAs ArrangedSuppliers
Furniture, Fixtures, Other Equipment
$4,000 to $10,000As ArrangedAs ArrangedSuppliers
Office Equipment and Supplies
$1,000 to $3,000As ArrangedAs ArrangedSuppliers
Computer System
$1,000 to $2,000As ArrangedAs ArrangedUs, Our Affiliates and/or Suppliers
Business Licenses and Permits
$1,000 to $3,000As ArrangedAs InvoicedGovernment Agencies
Training Expenses
$1,000 to $2,000As ArrangedAs InvoicedEmployees and Suppliers
Professional Services
$1,000 to $5,000As ArrangedAs ArrangedAccountants, Architect, Lawyers, etc.
Insurance
$1,000 to $4,000As ArrangedAs ArrangedInsurance Broker
Grand Opening
$25,000As ArrangedAs Arranged, but starting 90 days before Opening Date of Studio and continuing for 30 days after the Opening DateUs or suppliers
Nutritional Supplements
$3,000Lump SumAt least 30 days before the Opening DateUs
AED
$1,500 to $2,100As ArrangedAs InvoicedUs, Our Affiliates and/or Suppliers
F45 Body Fat Scanner
$8,500 plus shipping and handling charges and taxesAs ArrangedAs InvoicedUs, Our Affiliates and/or Suppliers
Music Licenses
$1,700 to $2,000As ArrangedAnnuallyPerformance Rights Organizacions
Additional Funds (initial 6-month period)
$60,000 to $100,000As ArrangedAs ArrangedEmployees and various suppliers
TOTAL
$313,000 to $485,100   

Owning an F45 Franchise Requires Ongoing Fees

Royalty: 7% of Gross Sales or $2,500 per month (whichever is higher)

Brand Fund: 2% of Gross Sales or $200 per month (whichever is higher)

Marketing Fee: $2,500 per month

The Fitness Industry Average has a royalty fee of 6.4% and a marketing fee of 2%. F45 has slightly higher royalties but makes up for it with large revenues per franchise unit.

How much do the franchise owners make?

F45 does not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. However, if you are purchasing an existing F45, the company may provide you with the actual records of that F45 franchise. 

However, Charlie Payne, Chief Financial Officer, provided some insight into the financials behind a F45 in a press release before their IPO that gave us some insight into how well franchisees can do financially after opening an F45 studio. 

“Our nearly 100% franchised model offers compelling economics to both us and our franchisees. The franchisees benefit from our highly attractive new unit economic model that features a relatively low initial investment, low four-wall operating expenses, and strong returns on investment. A typical F45 franchise requires an initial investment of approximately $315,000, significantly lower than other franchise models. In Year 3 of operation, franchisees produce an average AUV of approximately $359,000; average four-wall EBITDA margins in excess of 30%; and average cash-on-cash returns in excess of 35%. On average, it takes a studio approximately six months and 75 members to reach breakeven.”

Is the Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for  F45 franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems like Anytime Fitness, where more transaction data is available.

Under $1 Million Net Sales

  • Estimated Selling Price = Net Sales * 0.54

$1 Million – $5 Million Net Sales

  • Estimated Selling Price = Net Sales * 0.67

Over $5 Million Net Sales

  • Estimated Selling Price = Net Sales * 1.21

When you go to sell a F45 franchise based on the median multiple of .54 and net sales averaging $359,000, it would sell for $193,860. This is significantly lower than the average investment of $315,000. 

If you owned multiple F45 franchises, you do have the ability to make an even larger profit. Gym owners with over $5 million in sales have a median multiple of 1.21. So, if you had 15 F45 franchises, this would be $5,385,000 million in sales. And the sale amount would be $6,515,850.

f45-fitness-gym

Franchisor Income Statement:

F45 Training Incorporated. STATEMENTS OF OPERATIONS

 Year Ended December 31, 2020Year Ended December 31, 2019
Revenue  
Franchise$ 28,452,997$ 22,105,930
Equipment and Merchandise$ 14,076,619$ 28,081,224
Total revenues$ 42,539,616$ 50,187,154
Operating expenses  
Cost of franchise revenue$ 6,998,167$ 9,971,008
Cost of equipment and merchandise (Related party: $2,596,620 and $2,002,272, for 2020 and 2019 respectively)$ 9,831,886$ 14,200,071
Selling, general and administrative expenses$ 22,558,510$ 21,530,850
Total operating expenses$ 39,388,563$ 45,701,929
Income from operations$ 3,141,053$ 4,485,225
Interest expense, net$ (193)$ (333)
Other income (expense), net$ 38,879$ (638,784)
Income before income taxes$ 3,179,739$ 3,846,108
Provision for income taxes$ (1,101,975)$ (1,879,355)
Net income$ 2,077,764$ 1,966,753

Income Statement Key Insights:

In 2020, the F45 franchisor had a profitable year with a net income of $2.08 million and revenues of $42.5 million. Revenues from 2020 to 2019 dropped by 18% and this was largely due to the revenues from equipment and merchandise in 2020. Overall, net income was slightly higher in 2020 compared to 2019.

F45 Franchise Unit Openings / Closings:

Outlets and Franchisee Information. Systemwide Outlet Summary For Years 2018 to 2020

Outlet typeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised201859153+94
2019153310+157
2020310469+159
Company-Owned201807+7
2019770
202073-5
Total Outlets201859160+101
2019160317+157
2020317472+155

F45 franchises have been growing at a pretty exponential pace, averaging 136 new units opening each year over the past three years. This large growth can be attributed to the new capital invested in the business and the large public figures like Mark Whalberg and David Beckham getting behind the fitness franchise.

 

Conclusion:

In the final analysis, with powerful figures like Mark Whalberg and David Beckham supporting this fitness franchise and with the growth of competitive group workouts, it is positioned to grow exponentially in the United States. The Company raised a significant amount of money from their IPO and also minority stake investment from Mark Whalberg.

We strongly recommend you speak to at least 5 F45 franchisees to better understand the financials, and the F45 franchise cost if you are interested in investing (see questions to ask).

At last, think about whether F45 franchise is the right franchise for you, or whether are you interested in other franchise opportunities in the Fitness Industry? Check out our listings page on the Vetted Biz website for thousands of franchises available for your investment.

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