Imagine youre a police officer who works the evening shift. You go to work at 3:30 P.M.

Question:

Imagine you’re a police officer who works the evening shift. You go to work at 3:30 P.M. and complete your shift at midnight. You’ve always enjoyed working out late in the day but don’t have room for a home gym in your apartment. You’ve checked out the Gold’s Gym and the Bally Total Fitness Center near where you live. They both close at 11:00 P.M., so going to a fitness center isn’t an option—until now! Snap Fitness is a rapidly growing franchise organization that features gyms that are open 24 hours a day, seven days a week. The state-of-the-art fitness concept began franchising in 2004 and already has over 2,200 franchise locations in the United States, Canada, India, Mexico, Australia, and New Zealand, and is in the process of opening centers in the United Kingdom. Snap Fitness is currently opening about 20 to 30 new centers a month.
Beginnings

Snap Fitness was founded by Pete Taunton. For most of his career, Taunton ran big-box fitness centers that offered all the amenities. By the time he opened his fifth center, he was burned out. He recalls seeing his kids twice a day—when they woke up in the morning and when they went to bed at night. He left the fitness industry, but a year later a group of former employees approached him about opening a new business. He was tired of 75-hour workweeks and didn’t want to make a large investment. So he took a piece of paper and a pen and listed all the amenities that his former gyms had on the left-hand side of the paper and a smaller number of “must haves” on the right side. Taunton had learned long ago that rock-climbing walls, racquetball courts, and swimming pools were nice to have but most people never used them. The “must haves” list became the blueprint for Snap Fitness.
Business Concept

Snap Fitness’s centers are small gyms that are located near residential areas. The centers, which offer weights, treadmills, and exercise machines to customers, are staffed during the day and are available to members at night by swiping a key card at the main door. The equipment is state-of-the art, the centers are very clean, and they are secure. At night, security cameras monitor activities and members wear electronic devices around their necks that when pushed summon paramedics or police.
The centers offer their members a fast, convenient, and affordable way to stay fit. A membership costs around $40 a month for a single membership, $60 for a couple, and $70 for a family (rates vary by location), which is well below big-box fitness center rates. There are no contracts—members pay month by month—and membership in one Snap Fitness permits the member to use any Snap Fitness center in North America.
Because the centers are small—the average Snap Fitness center is 2,500 to 3,500 square feet compared to more than 20,000 square feet for a Gold’s Gym or a Bally’s Fitness Center—they can be located near where people live. In fact, the company claims that the majority of its members don’t have more than a twomile drive to the Snap Fitness center to which they belong. As a result, the members quickly learn each other’s names and have things in common, such as kids that go to the same schools or they live in the same neighborhoods.
Snap Fitness supports an online platform at www.mysnapfitness.com on which members can build their own Web pages. The Web pages allow members to construct their own wellness plan, tailor their meals to fit their weight loss goals, talk confidentially to health and wellness coaches by phone (for an extra fee), and build customized workout plans that can be tracked and are supported with video tutorials using 3-D animation.
Members can also sign up for a program called easyFit, which is a three-step program. Step 1: You receive a tiny monitor that you attach near your hip that monitors your activity and calories burned, whether you’re at a Snap Fitness center or anywhere else; Step 2: The activity is recorded on your mysnapfitness Web page; Step 3: You get points for exercise and other positive behaviors as a motivation tool. The point system makes it easy to set and track goals, compare progress over time, and compete with others. Points also help members win discounts and prizes.
Snap Fitness Centers are limited in the amenities they offer so they don’t appeal to everyone. There are no locker rooms, child care, juice bars, aerobic classes, racquetball courts, or swimming pools. A Snap Fitness membership is a strict trade-off between cost and convenience versus a larger array of amenities.
In addition, the small gym franchise concept is unproven, despite the early success of Curves International and others. A number of small aerobics studios opened a number of years ago, and the vast majority of them failed.

Franchise Operations
Snap Fitness is actively selling franchises. To qualify, a prospective franchisee needs a minimum net worth of $250,000 and $500,000 in liquid assets. The initial franchise fee is $15,000 and the royalty is a flat $499 per month (rather than a percentage of gross income). It costs between $79,400 to $195,800 to get a Snap Fitness Center up and running. The buildings are leased so there is no real estate purchase involved. A franchisee signs a five year commitment with the company, which is renewable.
The leanness of the company’s business model makes it attractive to many franchisees. The franchisor handles all billing and collecting processes. Because the centers are not manned at night, a person can own and operate a Snap Fitness franchise and keep normal hours. Most franchisees own more than one location and have only one to two employees per location. A total of 70 percent of Snap Fitness locations are owned by absentee owners. Many of the owners are semiretirees or have other jobs. The simplicity of Snap Fitness’s approach has also attracted young owners.
In fact, Snap Fitness was recently named one of the “Top 21 Franchises for Young Entrepreneurs” by Under30CEO.com. In November 2010, Samantha and Oliver Beltran opened a Snap Fitness franchise in Palestine, Texas. Both Samantha and Oliver were 22 years old at the time.
Looking Ahead
Snap Fitness has gotten off to a strong start. It’s the fastest growing franchise in the 24/7 category and was recently named one of the top 500 franchises in the United States by Entrepreneur magazine, ranking number 33 in Entrepreneur’s Franchise 500.
For its part, Snap Fitness attributes its success to the uniqueness of its approach, for both its franchisees and its members. In a press release commenting on its recent recognition by Entrepreneur, Snap Fitness founder and CEO Peter Taunton remarked, “Our ability to present our franchise owners with an easy to manage franchise opportunity and members with an affordable and convenient work out option is a testament to what (sets us) apart from the competition.”
Snap Fitness’s challenge now will be to maintain its momentum and properly manage its growth. The fitness industry is an $18.5 billion industry. Snap Fitness anticipates continued rapid expansion.

Discussion Questions
1. Snap Fitness has positioned itself as a “neighborhood”
chain of fitness centers and claims that the majority of its members are within a two-mile drive of the center to which they belong. How big of a competitive advantage do you think this positioning strategy provides Snap Fitness?
2. Look at Figure 15.1 in the chapter. What type of franchise system makes the most sense for Snap Fitness?
3. What types of characteristics do you think Snap Fitness looks for in its franchisees?
4. What do you think lies ahead for Snap Fitness? What are some of the things that can go right and what are some of the things that can go wrong as this firm continues to sell franchises and grows?

Application Questions
1. What similarities do you see between Snap Fitness and Curves International? What can Snap Fitness learn from Curves’ successes and its recent troubles?
2. Analyze easyFit, one of the tracking and motivational components of Snap Fitness’s offering. How important of a component of Snap Fitness’s business model do you think easyFit will become? If easyFit is successful, do you think Snap Fitness’s competitors will have a hard time or an easy time imitating it? image text in transcribed