P360 Franchising – “How Does a Franchise Work?”
The following article does not constitute legal advice and should not be taken as such. Full contractual definitions and obligations can be obtained in our Franchise Disclosure Document. To get started, go here. Please consult with legal counsel prior to entering into any franchise agreement.
Since launching earlier this year, we’ve had nearly non-stop conversations with potential future new Performance360™ owners and chief among the primary themes is that most don’t know how a franchise actually works.
Why would you? When we first started researching franchising years ago, we literally googled: “how does a franchise work?” True story. After all, there is so much legal mumbo jumbo that we feel like the entire process is designed to be intimidating and confusing so we thought we’d start a new blog series designed specifically for those of you interested in owning a P360.
Franchising for dummies, if you will.
As a caveat, this is meant to simplify a basic understanding around the concept. It does not and should not constitute legal office of any kind, so please make sure you are always doing your own research.
What is a franchise?
In a franchise relationship, a franchisor (us, “Zor”) owns the brand they have developed along with all of its operating systems. A franchisee (you, “Zee”) pays for the legal rights to use them all.
In a franchise concept, Zee owns their own business and uses Zor’s systems and brand likeness to run it. In exchange for these things Zee pays Zor a one time franchise fee and an ongoing monthly “royalty”. Our royalties total about 7.5% so essentially, there is a 92.5% / 7.5% revenue split between Zee and Zor.
What do I get for my royalties?
Another common question and in short, Zee gets Zor’s experience, leadership, and relevant expertise to give Zee a much better chance of success than going at it alone. In the same way that people can make a chicken sandwich but pay about a million bucks for the opportunity to make a Chic-Fil-A sandwich. (Don’t worry, the cost to open a P360 is not even in that same stratosphere.) Zee gets our ten year systems of program design, lead acquisition, marketing, coaching systems, steps of service, and our custom and 100% proprietary P360 business management software. Not only do you get all of those things but you are required to implement them and we help you do it every step of the way.
It’s a bit reductive to say, “you get our playbook, since Zee also gets the people behind it to help you implement it plus all of the ongoing updates that get made to it and the ongoing mentoring to maximize Zee’s ownership potential.
What kind of support do I get?
We provide our franchisee owners five stages of tiered support.
1. Finance Support – Most aspiring gym owners need to secure at least some partial financing to fulfill their dream. Because we are both an SBA approved small business and are partnered with Franchise Capital, we are able to help our Zees navigate the waters of financing in a very efficient process. We can’t guarantee approval or provide you lending ourselves, but we can give Zee a really good shot.
2. Site Selection Support – Rent, neighbor, community concerns, parking, traffic, demographics, neighborhood projectability, income trends. Our Zees have a large list of things to consider when searching for a site. We help with every step of the way based on data and experience. We are partnered with Cushman Wakefield for agency representation in San Diego so that Zee is in the hands of professionals, and we will visit and discuss pros and cons of a site so that Zee has an informed brand decision.
3. Buildout Support – “When do I order equipment? What equipment do I order? Where do I go for flooring? How do I shop for a trusted contractor?” All questions that if improperly answered can sink Zee’s gym before it even opens. We are partnered with American Barbell who has sourced and curated the P360 brand list of equipment. We also have preferred contractors should Zee wish to use them. We’ll help you with your scope of work, timeline, and overall project management to help you stay on time and on budget.
4. Pre-Opening Support – No one wants to open doors only to hear crickets on the first day. We’ll help Zee with pre-launch marketing, setting up your social media, and building your membership to drive revenue for Zee from the very first day.
5. B.E.A.R Owner Mentorship – This is our game changer. Did you know that gym consulting runs about $1,500 per month and that’s for someone who s not even familiar with your concept? It is shocking to us that so many Zor concepts outsource their business mentorship to companies who have idea what their gym is about! Once our Zee is open, we don’t just leave them out to dry. We’ll have scheduled calls to review your numbers, discuss your challenges, and problem solve on an ongoing basis so that you can run as successful of a P360 as possible.
How does this compare to other concepts?
You will need to make that determination on your own through research, let’s take a look at some existing industry options.
CrossFit is a license model, not a franchise model. They charge you for the name and that’s it. Meaning the costs are low but there is little to no support as mandated by law, since it is illegal to provide brand guidelines if you are only a licensing model. They have tried to figure a way around this for years, but law is law. This is why there are no regulations on territory guarantees, brand standards, program design, or anything that would resemble a consistent brand experience. It’s why you have some amazing CrossFit gyms and some very bad ones. It’s the wild West.
There’s also a lot of nonsense out there. For example, did you know that in F45’s Franchise Disclosure Document they mandate you have a monthly DJ budget and that it can go as high as $400 per week? We prefer that you use that $1,600 per month for stuff that actually matters. Like staying open.
We operate under the same minimal effective dose principle as our fitness. Everything that is needed, nothing that isn’t. Our FDD is an open book, just ask us for it.
Can anyone open a P360?
Not exactly. The first barrier to entry is that anyone who owns a P360 at this time must be a current or former member or coach. Walk the walk first. If you’ve never purchased a P360 membership on your own, we fundamentally don’t believe you’ll be a highly effective leader within its community. The second hurdle is that we’ll be doing a deep dive into the compatibility of your personality. Are you coachable? Are you psychologically aligned to be a match with franchising? We use Caliper personality testing as part of our evaluation and prospect interview to make sure we set you up for success. It allows us to fully understand which areas you may need more support, and it may even tell us that you’re just not a great match for authority.
If this seems…thorough…it is.
Our brand growth is not in a hurry. For us, building P360 the right way is far more appealing than the fastest way. This is about creating the best group fitness brand in the world with the best people leading its growth, not just bodies to stack locations on a map. What interests us is being in business with like minded, compatible people who are equally as passionate about Performance360 as we are.
This is why we start with our member and coaching base.
If I am interested, what should I be doing now?
Research your financing options. The process for becoming a franchisee takes some time, so you are never under any rush. But financing is what will typically take the most amount of time. You’d like an introduction to our partners, just get started with us here.
It is up to you to weigh the pros, cons, and risks associated with opening your P360.
Interested in learning about start up costs and more about how it works? Start here.
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