Should You Open a Second Location?
To a successful gym owner, expansion may seem like the logical next step. But will the new venture do as well as the first?
If you’re a gym owner, the thought of opening a second facility may eventually float through your mind. After all, only so many clients can fit in a single space before it starts bursting at the seams. While it might be enticing to open another shop elsewhere, there’s no guarantee the new venture will be a success. Launching and growing a first gym is risky enough—in the United States, 50% of new businesses are likely to fail within the first 5 years, says the Bureau of Labor Statistics (SBA 2012). Success and survival rates for second locations are less clear, but many experts suggest that the risk of failure is even higher. However, if you do your research, understand the risks and make smart decisions, a second studio might be a viable option. Consider these important points before breaking new ground.
Are You Clear on Your Why?
The first—and perhaps most obvious—question to ask yourself is why you want to expand, says Casey Washack, owner of Next Level Fitness, which has five locations in the Palm Springs/Palm Desert areas of California.
“This seems like a silly question, but I know too many gym owners who opened a second location for the wrong reasons,” he says. “If you find yourself bogged down and dreading going to work every morning because you don’t like the business you’ve created, then opening a second location is not for you. The grass isn’t greener. This is the gym-owner equivalent to the in-person trainer who’s struggling and thinks going online will be the key to success. At the end of the day, you’ll have two businesses that you don’t enjoy and twice the headaches.”
David Crump, success coach at Fitness Revolution™—a fitness business coaching organization in Indianapolis—advises doing a deep dive into your motivations before going any further. Like Washack, he says that if you’re in it for the wrong reasons, your chance of succeeding is limited. Crump suggests asking two questions:
- Am I doing this because it’s what I want for my business and my life or because I don’t see any other options for growth?
- Is there another way I could reach my long-term vision without opening a second location?
Do You Have Solid Systems?
Just because your first business struck gold doesn’t mean you can expect to recreate the magic.
“There are a lot of things that can go right your first time around—getting a great deal on rent, opening in an area that is just getting ready to take off, etc.—but the second location will be the real proof of concept,” says Crump.
That’s why it’s important to have a business that can be duplicated.
“The big difference [between opening a first location and a second one] is that the growth [of the second] will be determined based on the strength of your business model rather than your personal strength to grow a location,” explains Travis Barnes, who has gyms throughout New York State and Pennsylvania. “When we opened our second location, we had to make sure that our systems were dialed in, because we could not be in two locations at the same time.”
Would you feel comfortable stepping away from your current location for an undisclosed amount of time? If you would, then you’ve likely developed strong systems that can be replicated elsewhere.
“There’s a saying in business: ‘You don’t know your shortcomings until you open a second location,’” Washack adds. “Everything—from how you answer the phone to how you train your clients—[should be systematized]. Would a member from one of your gyms have the same experience at your other location? There needs to be consistency throughout your business and even between locations.”
Bottom line, says Barnes, if you don’t have a tried-and-true operations manual, you should rethink the idea of adding another location.
Can You Handle the Costs?
Naturally, a new business requires significant initial expense. Retrofitting a space to meet your needs, purchasing equipment and hiring staff are just some of the costs you’ll likely incur.
“Having adequate funding for the buildout, as well as working capital while you build up your clientele, is important,” says Washack. “This is a business killer. Most gyms are underfunded from the start. In many cases, this situation then begins to put added pressure on the original, more successful gym to carry the expenses of both facilities.”
“Building a second team—including a strong manager—and reaching profitability are the biggest mountains here,” according to Crump. “One plus one doesn’t usually equal two, because expenses are often doubled whereas profits don’t double for quite some time (or ever).”
Barnes adds that it’s important to be aware that the new location has other costly ramifications. “It will require some of your time, so it will cost you time and freedom. Also, more locations mean more problems, so it will cost you some peace of mind.”
Should You Reconsider?
After 5 years in business, Robin Dayer, owner of BURN STUDIO in Conway, Arkansas, gave serious thought to breaking new ground.
“At year 5, we hit a ‘tailwind,’ so to speak,” she remembers. “We took on new clients, and the needs of our clients started to change. We also grew with the industry (i.e., more class offerings, new class formats, more equipment) to stay competitive, and to continue to deliver the best, we needed more space.”
After doing some soul-searching and number-crunching, Dayer decided her best next step would be to move BURN to a new, larger location instead of opening a second one.
“The realistic business owner in me knew that [adding a location] would be incredibly expensive,” she admits. “I know what it takes to run one location with all your heart and soul, and I wasn’t sure I could be in multiple places at once and still bring it.”
Her decision turned out to be a good one.
“Our business has more than doubled since we moved to our bigger location,” she says. “We have more new clients than ever, and they continue to keep coming. So I would say it’s a huge advantage over a second location, because I’m creating more business and I’m still in one place. The one location gets all of me and my time, which I think is crucial to BURN’s success.”
Look Carefully Before You Leap
All of our experts agree: You shouldn’t seriously consider expanding to a second location until all other options have dried up.
Crump says that you’ll know it’s the right time to open a new gym “when you’ve exhausted every other opportunity in your business for growth, you’ve objectively assessed your risk, and you’re passionate about moving forward despite knowing the challenges associated with doing so.”
Before You Open a Second Location
There are lots of things to reflect on before opening a second location. Here are a few additional tips, courtesy of our experts:
- “Never attempt to be the face of both locations, or you will always have one location upset that you are not there. Make sure you have a true community-builder in place to be the leader of the second location.” —Travis Barnes, owner, Journey Fitness
- “Do not negotiate your own lease. Get yourself a commercial real estate agent. It costs you nothing, and [the agent will] look out for your interests. When opening our first gym, we negotiated our own lease and found out toward the end that we were paying double what the neighboring businesses were paying.” —Casey Washack, owner, Next Level Fitness
- “Work with a coach or someone who can help you answer the right questions and prepare you to minimize possible failure.” —David Crump, owner, Fitness Revolution
SBA Office of Advocacy. 2012. Small Business Facts. Accessed Oct. 2019: sba.gov/sites/default/files/Business-Survival.pdf.
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