UFC Gym is a fitness center that offers physical training classes for individuals and groups. Members get access to coach-led group classes, individual training, weightlifting and free weights, martial arts and MMA-inspired fitness training, youth programming, yoga, Pilates, among others. The company was founded in 2009 as the first major brand extension of premium global sports brand and premier MMA organization, UFC.
Adam Sedlack is the current CEO of UFC GYM since January 2021. Before then, he served as the president of UFC since December 2008.
The company began offering franchises on January 1, 2013 and as of December 31, 2020, they had 63 franchised business outlets. UFC competes with major fitness centers in the US including Crunch Fitness, Healthworks Fitness, Gold’s Gym, Planet Fitness, and American Family Fitness.
The initial franchise fee for a UFC GYM business depends on the category of the franchise. There are three models for a UFC GYM: Class (2,500 to 3,500 square feet), Core(6,000 to 10,000 square feet), and Signature(18,000 to 40,000 square feet). For the Class model, the initial fee is $30,000 and for the CORE and SIGNATURE models, the initial fees are $40,000 and $50,000 respectively.
The total investment to begin operation of a UFC Gym Franchise depends on the model that one chooses.
The initial investment for a Class Model ranges from $199,130 to $393,130 including an initial fee payable to franchisor, the equipment for the GYM, a retail package and music licensing.
The total initial investment for a Core model UFC GYM ranges from $368,130 to $1,062,130 which includes fees to be paid to the franchisor that ranges from $202,130 and $325,630 depending on the size of your Core UFC GYM franchise.
For a Signature model, the total initial investment cost ranges from $1,079,630 to $4,211,630 which includes fees to be paid to the franchisor that ranges from $645,630 and $1,464,630 depending on the size of the franchise.
To buy a franchise with UFC GYM, you’ll need to have at least $100,000 in liquid capital.
Royalty Fees: UFC Class = 6% of weekly Gross Revenues, UFC Core = 5% of weekly Gross Revenues
Marketing: 2% of weekly gross revenues
|12/31/2019||12/31/2020||Average||FY 2020||Per Sq. Ft. FY 2020|
|Sq. Ft||Member Count||Revenue||Dues||# of Member||Monthly Dues|
For the year ending in 2020, the average revenues of UFC franchises was $1,836,848.
The median annual revenue in 2020 was $1,832,804 which we can use to predict the time it will take you to recoup your initial investment in each of the three UFC GYM categories.
The midpoint investment of all the three business models is $2,205,380
|Initial Investment (Midpoint)||%Profit Margin of Average Franchise Revenue||Estimated Profits||Time to Recoup Investment|
The time to scale up the business has been incorporated in the time to recoup initial investment which is about 2.5 years.
To assign a valuation multiple for UFC GYM, 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 fitness franchise industry as well as selling price multiples for larger systems like Anytime Fitness where more transaction data is available.
When you go to sell a UFC GYM franchise based on the median multiple of .54 and net sales averaging $1,836,848 in 2020, it would sell for $991,897. This figure falls between midpoint investments of the Core and Signature UFC GYM categories of $715,130 and $2,645,630. For example, if we consider the Core category, selling the UFC GYM will actually lead to a profit of over $250,000.
As an owner of multiple UFC Gym franchises, you do have the ability to make more profit. Gym owners with over b million in sales have a median multiple of 1.21. So, if you had 10 UFC GYMS this would be ~$18,368,480 in average sales given the 2020 sales figures.
Therefore, selling your multi unit franchise system would amount to $22,225,860. The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner operators.
|Initial Franchise Fees||$2,404,776|
|Franchise Royalty Fees||2,199,415|
|Product and Equipment Sales||4,417,502|
|Cost of Revenues||3,910,314|
|Selling, General and Administrative Expenses||3,028,744|
|Loss on Asset Impairment||18,564,088|
In 2020, UG franchise operations, LLC(the franchisor) made a net loss of $15,977,494. Asset impairment contributed the most to the loss with a total cost of $18,564,088. This is not a great indication of the profitability of the franchisor.
|Cash Flows For Operating Activities|
|Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:|
|Amortization and Depreciation||155,647|
|Provision for Inventory||249,208|
|Allowance for Doubtful Accounts||541,215|
|Loss on Asset Impairment||18,564,088|
|Changes in operating Assets and Liabilities:|
|Prepaid Expenses and Other Current Assets||(25,602)|
|Accrued Expenses and Other Current Liabilities||(1,717,068)|
|Due to Related Parties||51,406|
|Net Cash Provided by Operating Activities||1,715,442|
|Cash Flows For Investing Activities|
|Due From Affilliates, Net||(1,492,965)|
|Purchases of Equipment||(1,658)|
|Net Cash Used in Investing Activities||(1,494,623)|
|Net Increase in Cash||220,819|
|Cash – beginning of year||113,320|
|Cash – end of year||$334,139|
|Supplemental Disclosures of Cash Flow Information|
|Cash Paid During the Year for: Interest||–|
|Supplemental Disclosures of Non-Cash Financing Activities|
|Related Party Liability Forfiveness (Note 3)||$1,883,624|
At the end of 2020, the franchisor(UG Franchise Operations, LLC) had cash of $334,139 left after all adjustments of operating activities were made. Despite the net loss, this shows that the company has healthy financials as it manages its investing, operating, and financing activities appropriately.
|Outlet type||Year||Outlets at the Start of the Year||Outlets at the End of the Year||Net Change|
In 2020, UFC GYM saw a net change of -14 in the number of franchised outlets. There were a total of 63 franchised outlets at the end of 2020 which was a decline from the number of outlets in the previous two years. In 2019, there were 77 outlets at the end of the year and in 2018, the number of outlets was 86. It is also clear that UFC GYM has more franchised outlets than company-owned outlets indicating that most of the income comes from franchising.
UFC Gym provides potential franchisees an opportunity to be a part of a business making over $1 million in revenue per year. Based on your financial situation, you can choose to purchase one of UFC GYM’s franchise models: Class, Core and Signature.
The cost of investment increases from the Class model to the Core model to the Signature model. Based on our analysis, it will take a significant amount of time to recoup your initial investment. With a 20% profit margin, it will take approximately 8 years to recoup your initial investment. We advise that you speak to at least 5 UFC Gym franchise owners before deciding to purchase a franchise.