Start an orangetheory franchise by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your orangetheory franchise. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening an orangetheory franchise?
The costs to open an Orangetheory franchise are quite high. On the low end, the costs are just over $488.000, while on the high end, the costs can reach almost 1 million dollars. The majority of the cost of opening an Orangetheory franchise goes toward leasehold improvements, rent and the purchase of workout equipment. This cost includes everything except for ongoing fees.
Franchisees must have a net worth of over $500,000 and have liquid assets of $150.000 minimum to qualify for a franchise opportunity.
What are the ongoing expenses for an orangetheory franchise?
There are many ongoing expenses associated with an Orangetheory franchise. Besides the cost of labor, rent, utilities, insurance and other common business expenses there are franchise-specific costs. Orangetheory franchisees must pay an 8% royalty and a 1% brand fund contribution of gross revenue. If a franchise falls below a certain level of gross sales for the year, the franchisee must make up the difference in these fees. Besides these fees, there is also the monthly advertising fee of up to $4,000, a $250 per year per person refresher course fee, a $1000 per person cost to attend the annual conference and other assorted costs.
Who is the target market?
Orangetheory is not a run-of-the-mill gym. It attracts clients who are health conscious, but definitely not gym rats. Due to the class format, many Orangetheory customers are working people who are more serious about getting fit than hanging out.
How does an orangetheory franchise make money?
Owners of an Orangetheory franchise makes money through the sale of different tiers of memberships. These three different membership levels give members a set number of classes per month. Members can purchase additional classes at a discounted rate compared to non-members.
In addition to earning money on memberships, an Orangetheory studio can sell the brand's clothing and accessories.
How much can you charge customers?
The average cost of a membership at Orangetheory is between $59 - $200 a month depending on the membership level. Non-members can take a single class for $28.
How much profit can an orangetheory franchise make?
Revenue for Orangetheory is up overall, but there is no information on average revenue for individual franchisees. The number of franchises continues to grow and many franchisees have multiple units.
How can you make your business more profitable?
Franchise owners can make additional money through the sale of Orangetheory clothing and accessories. Additional add-on services are restricted according to the franchise agreement.
The best way to increase profits would be to open up another Orangetheory gym in a populated area far enough away from your first location that it would be able to develop its own local membership.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your orangetheory franchise is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, and it's easy enough to form by yourself, or check out the top business formation services.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a Orangetheory franchise business, if you’re opening your own studio. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a Orangetheory franchise business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your Orangetheory franchise business will be in compliance and able to obtain a CO.
To avoid liability and potential lawsuits, Orangetheory franchise business should have their clients sign waivers.
An example of an appropriate waiver can be found here.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market an orangetheory franchise
Part of the contract between franchisees and the corporation requires owners to spend between $2.500 and $4,000 every month on local advertising. Franchisees need to adhere to corporate standards to retain their licenses.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
One of the best ways to keep customers coming back is to provide a clean, welcoming exercise studio with a top-notch staff. Concentrate on providing individual attention to each member and ensure they have the best possible experience by making sure classes run on time.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start An Orangetheory Franchise In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
An Orangetheory franchise makes sense for anyone looking for a full-time opportunity in the popular health club industry. Owning an Orangetheory gym is the perfect match for someone who is interested in combining a healthy, active lifestyle with a well-known and respected business.
What happens during a typical day at an orangetheory franchise?
While some Orangetheory studio owners have a background as trainers and continue to teach classes after starting their own franchise, most owners fill their days by taking care of the same daily administrative and managing tasks which every business requires. There is one difference. Since Orangetheory franchise owners receive extensive support from the corporate headquarters, most franchisees find they can devote more time to promoting a welcoming atmosphere at their studios and are able to handle their customers' needs better than independent business owners.
What are some skills and experiences that will help you build a successful orangetheory franchise?
A background in physical fitness or strength training can be beneficial for new owners, but this does not mean that people new to the fitness market are unqualified to own an Orangetheory franchise. Although experience within the fitness industry is not mandatory, franchise owners need to have a solid business background, a passion for promoting a healthy lifestyle, and enough available funds to qualify.
What is the growth potential for an orangetheory franchise?
There is a huge potential for growth of the Orangetheory concept. As the only health club of its kind, Orangetheory franchisees are in the unique position of being able to offer a service with no real competition. Orangetheory began in 2010 with only one studio. Now there are over 525 gyms open with another 520+ gyms in development. The best news is that no Orangetheory studio has closed due to lack of members. Ever.
Since 2015, Orangetheory revenue has been up over 100 percent, and there is no reason to believe the business can not continue to grow.
Owning an Orangetheory gym is a great opportunity with a solid future.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting an orangetheory franchise?
One benefit of purchasing a franchise is the ability to take advantage of an established brand and business plan. Orangetheory has a very successful business model, and the best thing for a new franchise owner to do is to learn as much as he can about the business from the people who started the company.
How and when to build a team
A great team is essential to the success of an Orangetheory franchise. Everyone from instructors to reception needs to be friendly, helpful, passionate about fitness and focused on helping your franchise succeed. Franchisees should take advantage of the training program the corporate office offers to ensure every member of the staff knows how to do his job the right way.