Advantages and Disadvantages of Opening Benoff’s Fitness for All

Presented to:

Professor Anita Manders

Business Studies Department

Bucks County Community College

Prepared By:

Zachary Benoff

Business Communication Student

April 28, 2015

Zachary Benoff4559 Camel Road www.Benoff.comBensalem PA 19020 (215) 456-2910

April 28, 2016

Professor Anita MandersBusiness Studies Department275 Swamp RoadNewtown, PA 18940

Dear Professor Manders:

The Attached report, requested by you in an assignment dated January 22, describes the advantages and disadvantages of opening a gym Bucks County. I believe you will find the results of this study useful in evaluating future development of a gym within Bucks County.

This study was designed to examine: Calculate start-up costs for opening a new gym including purchase or rental of facility Examine demographic options in Bucks County, PA Investigate a variety of advertising methods including cost analysis

Primary research consisted of an interview with Frank Schiano, who owns Retro Fitness in Philadelphia going on twelve years now. Also there were fifty surveys sent out to individuals who participate regularly at the gym. Secondary research sources included: Zimmerman, Eilene. "A Planning Tool For Start-Ups," "Bucks County Quick Facts from the US Census Bureau", Kim, Cookhwan, et al. "Random Effects Model For Estimating Effectiveness Of Advertising In Online Market places", books, and other online resources. Results of this research, discussed more fully in this report, indicate Benoff’s Fitness for All…

I would be pleased to discuss this report and its conclusions with you at your request. Thank you for your confidence in selecting my company to prepare this comprehensive report.

Sincerely,

Zachary Benoff StudentBusiness Communication

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TABLE OF CONTENTS

INTRODUCTION: Advantages and Disadvantages of Opening Benoff’s Fitness for All………………. 1

BACKGROUND: Statistics and information on opening gym…………………………………………………… 1

DISCUSSION: Startup Costs, Demographics, and Advertising…………….…………………….……………… 1

Startup Costs……………………………….………………………………………………………………….................... 2

General startup costs………………..………………………………………………………………………………. 2

Business Expenses…........................................................................................................ 3 Capital Investment…………………………………………………………………………………………………….. 3

Demographic……………………………………………….……………………………………………………………………. 3

Statistics on the Bucks County area……………………………………….…………………………………… 4

Present and Future Trends…………………………………………………………………………………………. 4

Advertising………………………………………………………………………………………………………………………… 5 Advertising methods…………………………………………………………………………………………………… 5 Affective Forms…………………………………………………………………………………………………………… 5

CONCLUSIONS AND RECOMMENDATIONS………………………………………………………………………….... 7

REFERENCES………………………………………………………………………………………………………….………………. 8

LIST OF FIGURESFigure

1 General startup costs for opening your standard fitness gym…………………….……………….………. 2 2 Population and the average income from household to household ………….……………….………. 4 3 Statistics from surveys on effective advertisement …………………………………………………….….... 6

APPENDIX A

APPENDIX B

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INTRODUCTION: ADVANTAGES AND DISADVANTAGES OF OPENING BENOFF’S FITNESS FOR ALL

This research report was designed to analyze the advantages and disadvantages of opening a fitness gym in the Bucks County, Pennsylvania area. The report seeks to answer the following statements:

Calculate start-up costs for opening a new gym Examine demographic options in Bucks County, PA Investigate a variety of advertising methods including cost analysis

BACKGROUND: THE ROLE OF BENOFF’S FITNESS FOR ALL IN THE BUCKS COUNTY AREA

Bucks County Community College’s Business studies Department commissioned this study of opening a fitness gym at the request of Professor Anita Manders. Before any development could take place the advantages and disadvantages of opening the business needed to be outlined and examined to determine whether or not it is a good fit for the Bucks County area. Investigation of this business will conclude: start-up costs, the examinations of demographics, and different advertising methods.

For those who are unfamiliar with starting up their own business it can be a very difficult and confusing process. It is very important for anyone who is thinking of running their own business to be careful and always have some sort of plan. You need to know what you are trying to sell, who your trying to sell it to, where you are going to sell, how much it is going to cost you to sell it in that area, and many more aspects of starting a business. “The only way to run a successful business is by having a well written plan and following it (Guillebeau).”

In this report the goal is to discuss a few important areas when starting a business such as: startup costs, Demographics, and advertising in opening Benoff’s Fitness for all in the Bucks County area. The Bucks County area from the research provided seemed to be a great place for this kind of business to flourish and be successful.

All firsthand data was collected from surveys of individuals who actively go to the gym, and personal interview from a successful gym owner. All other data was found from online sources and a few books.

DISCUSSION: START-UPCOSTS, DEMOGRAPHICS, AND ADVERTISING

The results of this research indicate that Benoff’s Fitness for All may show potential of being a successful business in the Bucks County area by showing the advantages and disadvantages. All findings gathered for this report will be presented into three categories: (a) Start-up Costs, (b) Demographics, (c) Advertising.

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Start-up Costs

The initial startup costs for opening a gym vary from gym to gym. It really depends on how you decide to open your business. For example, will you open on your own, or will you open it through a franchise. Each of these choices both have their advantages and disadvantages. For this report we will discuss the startup cost for someone who is going to being opening a new gym as a sole proprietor. It is also important to keep in mind that when taking an inventory pf startup cost that you determine if they are essential or optional. The Small Business Administration states, “A realistic startup budget should only include those things that are necessary to start a business” (SBA.gov).

Figure 1

GENERAL STARTUP COSTS FOR OPENING YOUR STANDARD FITNESS GYM

Startup Inventory Startup costs Furniture Gym Equipment1,000.00

10,000.00

100,000.00

1,000,000.00

General startup costs

Source: http://blog.projectionhub.com/a-powerful-financial-model-for-a-startup-gym/

General start-up costs

The data shown in figure one are only estimates because we can only make assumptions for the different costs for this business due that they vary from business to business. Shown in the bar graph we can see that start up inventory will cost us $1,500, and startup cost will also cost $1,500. To furnish the entire gym it will cost about $3,000, and for gym equipment it will cost around $175,000. As you can see most of the investment is in gym equipment because high cost of new gym equipment.

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Business expenses

Besides your initial startup cost you also have costs pertaining to running and maintaining your fitness facility. Here we can also make assumption for these costs: Accounting = $100/month, Advertising = $250/month, Insurance = $3,000 the first month of each year, Legal = $500 in the first month, Office Supplies = $100/month, Rent = $3,500/month, Telephone = $100/month, Travel = $150/month, Utilities = $300/month, Website = $25/month, Owner Draw = $1,000/month in the first year then $2,000 and $3,000/month in year 2 and 3 respectively. As stated above these are monthly costs so you must keep in mind how much you will need to earn each month to cover your fixed costs. Also if you want to make a profit you will need to take in more income than your paying for expenses. This will be determined by how you price your cost for memberships. Discussed later in the report is advertising which is how you will promote your gym and attract the most costumers.

Capital Investment

From the information that you have read above we can see that there is a large amount of money being invested into this type of business. The money for starting up this business has to come from somewhere and there is a mass amount of ways to find capital for starting your first business. When starting your own business, it is very important that you first have some of your own capital to invest into it. The reason this is so important is because this is the only way any bank will give you a business loan. If you do not have your own money to put into the business than the bank will not take a risk of losing money on an investment that you do not have a stack in.

Before you plan to open your business make sure you have a substantial amount of capital accrued of your years of working to invest into your business. There is also different way to find capital for your company such as: creating a go fund me account which is an account that everyday people donate money to help you raise capital for your business, you can also find private investors to help you find the needed capital. The only thing important to know about private investors is that when they invest in your company they will want either some of the income earned for some period of time or an actual piece of the company and sometimes both.

Demographics

When starting any new business, it is extremely important to look at the demographics of the area where you will be placing your business. This information will show many details on the population surround that area such an as average earned income, average age, income, education, and much more. “Whether the demographics describe national or local markets or small groups such as those within an age range, the information helps you avoid the hit-and-miss marketing method” (Sessoms). All the specifics on the population around your business are very important because they are all potential customers. The information will tell you how you should price your memberships, and the best way to promote and advertise the business to its customers.

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Statistics on the Bucks County Area

The total current population of the Bucks County area consists of about 625,249 people and 89.4% of those individuals are white Caucasian. The average earned income per capita $37,910 and the median household income was estimated at $76,824. Poverty in the area is only 6.6% which is low when compared to a majority of other areas. Working citizens in the area amass a number of 244,396 people of the 625,249 people living in the area (Bucks County QuickFacts from the US Census Bureau). With this information we can see that there is great potential for this business because the average person has excess income that they may want to invest in physical fitness. Also there is a large population who are all potential customers.

Figure 2

POPULATION AND THE AVERAGE INCOME FROM HOUSEHOLD TO HOUSEHOLD

Total Population

$37,910 $76,824 $23,400 or below

Source: http://www.census.gov/quickfacts/table/SEX255214/42017

Present and Future Trends

In figure 2 we see the present trends of what the total population of the buck’s county area from household to household earns. The average house hold earns around $37,000 a year and the median home earns around $76,000 a year. The individuals who earn $23,400 or below for a four-person family are considered to be below the poverty line and will not contribute to the income of the gym because they do not possess any extra income to spend on luxuries such as the gym.

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Future trends are looking good for the fitness area because of all the promotion towards living a healthy lifestyle. The population is starting to become more health conscience. Do to technology the population has become more educated, and are aware of the health effects of the foods thatthey eat and inactivity. These are all good signs that the future of fitness will have an increase in participation.

Advertising

Advertising is probably the most important aspect for your business to thrive because this is how you will attract all of you customers. This is the most effective way of letting your costumers know of all your promotions, and what your gym has to offer.

Advertising Methods

Fortunately, due to the advancements of technology there are a massive amount of way to advertise your company. We can now advertise online through different social media apps free such as Facebook, Instagram, and twitter. These types of advertising are great because it does not cost you anything to get your name out there. You can also pay to have your advertisement shown on different sites related to your business for some fee. The price for internet advertising can vary from site-to-site depending on how popular that site is, and the amount of traffic it encounters.

Mobile advertisement is also a growing advertising market that many businesses are adapting to and using more frequently. One study showed that, “The results reveal that affective commitment toward a brand positively influences the attitude toward advertising. This relationship was shown by Okazaki (2009), who stated that when clients are committed, they identify with and feel a sense of belonging to an organization (see also Byun & Dass, 2015).This leads to the acceptance of advertising from that company. If affective commitment toward a brand is achieved, it will promote consumer loyalty and the creation of long-term customer relationship management” (Martin-Consuegra). The study showed how much of an impact mobile advertisement can have on its customers.

There is also your more traditional forms of advertising which are your print forms such as newspapers, magazines, newsletters, booklets, flyers, direct mail. Sometimes businesses will also use out door advertisement which is a physical interaction between customer and client in promoting a business somewhere not at that physical location.

Affective Methods

Although all of the above advertising methods are good some work better for different businesses than others. From a personal interview from an actual gym owner, he stated that flyers were the best means of advertisement. They communicated the promotions to the customers in the most effective way. He also said that you want to target individuals in a close perimeter around where your gym is located because most people do not want to travel far to go

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to the gym. Another effective advertising method for this business was TV advertisement. Surveys taken by actually gym members showed what forms of advertisement caught their attention, and eventually got them to join the gym. Figure 3 shows this information graphically.

Figure 3

STATISTICS FROM SURVERYS ON EFFECTIVE ADVERTISEMENT

Source: 2016 Appendix A Survey Questions

Figure three shows information gathered from an 80 surveys that were filled out. For question number eight that asked, “How did you hear about this gym?” showed what forms of advertisement were the best for this type of business. We found from the survey that forty-three individuals said that they hear about the gym through flyers. Twenty-five seen advertisements on the television, ten were referred by a friend, while only four people saw the advertisement from some internet source.

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Advertisement

The Internet

Flyers

A Friend

TV

CONCLUSIONS AND RECOMMENDATIONS

Analysis of start-up costs, demographics, and advertising leads to the following conclusions and recommendations about the opening of Benoff’s Fitness for All in the Bucks County area:

1. To start this business venture an investment of an estimated $181,000 would be needed for start-up costs; not including monthly business expenses.

2. An overview of the demographics in the Bucks County area showed that Benoff’s Fitness for All would be profitable due to genuinely higher earned wages of individuals in this area.

3. Advertising for this particular business was most effective when flyers were used as a means of advertisement, which was reflected by a personal interview and interviews of gym members.

In regards to these findings, it is recommended that when opening this type of business, you try to keep start-up cost as low as possible since it is projected you will not see a profit until the second or third year of opening the business. Also choosing who you receive investment money from is very important because you do not want to lose part of your business to investors who want a piece of it. It is also important to shop around for discounted equipment and materials for your facility to keep startup cost down. The person opening this business should focus most of their advertising on flyers, and televised commercials. The advantages and disadvantages of opening this business in the bucks’ county area show that Benoff’s Fitness for All could be a prosperous business if it is followed by the tips presented throughout the report.

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REFERENCES

"Bucks County QuickFacts from the US Census Bureau." Bucks County QuickFacts from the USCensus Bureau. N.p., n.d. Web. Retrieved February. 11,  2016. Retrieved fromhttp://quickfacts.census.gov/qfd/states/42/42017.html

"Estimating Startup Costs | The U.S. Small Business Administration | SBA.gov." Estimating StartupCosts | The U.S. Small Business Administration | SBA.gov. N.p., n.d. Web. Retrieved Febuary 11, 2016. Retrieved fromhttps://www.sba.gov/starting-business/business-financials/estimating-startup-costs

Guffey, Mary Ellen and Loewy, Dana (2014). Business Communication -- Process and Product.Cengage Learning, 8th Edition.

Guillebeau, Chris. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love,and Create a New Future. N.p.: n.p., n.d. Print.

Kim, Cookhwan, et al. "Random Effects Model For Estimating Effectiveness Of Advertising InOnlineMarket places." Expert Systems With Applications 38.8 (2011): 9867-9878.Retrieved February. 11, 2016. Retrieved fromhttp://web.b.ebscohost.com/ehost/detail/detail?vid=14&sid=afc5452e-46fe-4a0a-a3db-bdb

Martin-Consuegra, David, Mar Gomez, and Arturo, Molina. "ConsumerSensitivity Analysis In Mobile Commerce Advertising." Social Behavior & Personality:An International Journal 43.6 (2015): 883-897. Academic Search Premier. Web.Retrieved April 18, 2016. Retrieved from http://web.b.ebscohost.com.proxy.bucks.edu/

Sessoms, Gail. "The Importance of Demographics to Marketing." Small Business. N.p., n.d.Web.Retrieved February 9, 2016.Retrieved fromhttp://smallbusiness.chron.com/importance-demographics-marketing-25365.html

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Appendix A

Advantages and Disadvantages of Opening Benoff’s Fitness for All

Interview of Frank Schiavino

1. How likely is it that you would recommend this company to a friend or colleague?Not at all likely - 0 1 2 3 4 5 6 7 8 9

Extremely likely -

10

It all depends on the individual 7 because what I recommend is to anybody for anybody who hasn't been in the business is to go through the franchise because they will get help to tend to the business. If the individual is already informed in handling the business then maybe opening their business on their own. Like I said it all depends on the individual and how eager the individual is willing to take risks.

2. What advertising methods do you most use?Mailers, because they deem to be the most successful for this business. Were on the internet such as Facebook, own website. They use TV advertising, billboards, pretty much all forms of advertisement.

3. How long do it take before you started seeing a profit?You should see a profit within the first three years.

4. Would you say it is important to have some of your own capital invested into your company when opening a business?Yes, because you will not get a loan if you do not have your own capitalNo

5. Did you obtain any type of higher education before opening your business?Yes, masters in project management but relative to this business he did not need any type of higher education besides a high school diplomaNo

6. How many hours do you typically put into your business in one week?When he first started he put in a about fifty five hours a week, eight years later he only needs to put in about thirty five a week.

7. How did you choose where to locate your business?I choose to be the first retro fitness in the Philadelphia market because it was the first to be the entrepreneur in this area. It was very exclusive for him and an achievement in his mind. You review the demographics and that includes population age income and you of course compare, you look at your license and you have to calculate. Is the risk worth the reward? When you identify a location you look at the demographics, the conditions of the site, the surrounding building, siting, parking, and all these things come into play when you look at where you're going to locate your gym.

8. How frequently do you have to upkeep on your equipment?It depends on how the equipment is abused by the clients. There is thorough maintenance twice a year. They clean the equipment every night. When anything breaks and only has typical wear and tear. As long as you enforce your gym rules than your equipment is more likely to last longer. Also promote standard gym educate.

9. What legal aspects did you need to consider before opening your business?Liability, any all the necessary legal of a corporation. Always carry insurance. You have to get bonded, and you have to incorporate yourself whether you do an s-corp or an LLC. You have to get all your insurance in place to protect all your liabilities and assets. Of course you have an attorney to review all your documentation that you are endorsing, such as you contracts with all your vendors, landlord, license, franchise agreement.

10. What quality do you offer that separates you from the rest of the competition?We like to think service, customer friendly service, competitive pricing. Value for a full service gym. Uniqueness such as the Theater room, smoothie bar, babysitting, TV’s on most of the equipment. Up to date equipment, top of the line equipment, profit centers like tanning. The supplement store in the front of the gym which is a big advantage because not many gyms have their own nutrition store.

Appendix B

Benoff’s Fitness for all Survey

Hello, my name is Zack and I am planning to open my own gym. This survey is to help me understand what aspects of the gym make you choose to participate there. Please answer each question as carefully as possible.

(circle one answer below each question)

1. How often do you go to the gym?Once a week

Twice a week

Three times a week

Four or more

2. How do you feel about the atmosphere of this gym?Lively

Good Bad Comfortable 3. What made you choose to come to this gym?

Convenience

Pricing

The hours

Peers

4. Are the hours of this gym open long enough for most of the customers?YesNo

What would you change?

5. How likely is it that you would recommend this gym to a friend or colleague?

Not at all likely - 0123456789Extremely likely - 10

6. Is pricing the main factor for you when purchasing a gym membership?YesNo

7. Would you spend more money for a gym membership that offered more than the traditional gym offers?YesNo

8. How did you hear about this gym that made you join? The internet A friend Flyers TV Other (please specify)

9. Are the promotions that the gym offers what made you want to join this gym?YesNo

10. If you could improve one thing about this gym what would it be?

11. Does the gym have to have all the latest equipment for you to want to join?YesNo

12. Do you prefer to go to a gym that offers classes: like Zumba, Yoga, and Soul Cycling?YesNo