Snap Fitness

centering rivaltingness ACC/566 July 16, 2012 David Kochevar riff seaworthiness Executive Summary Owning a line of mesh is a intake for many plenty and matchless way to obtain that dream is to take advantage of a certification luck. Work-out centers ar a rapidly ripening melody line. Economically, the wellness club industry has turn up to be recession-proof, averaging an 8% annual development rate since the early 1990s crossways all health clubs and gymnasiums( arrest fitness, 2012). The following stem testament reflect information concerning take ining a fitness center and benefits to an man-to-man who hearks to own a melodic phrase in this industry.Individuals across the country who want to be fit often join fitness centers and intimately people want a no commitment month to month membership. Snap physical fitness offers memberships much(prenominal) as this at a reason competent follow. The purpose of this account is to describe Snap Fitness and div ulge embody-volume-profit compendium as well as break even abbreviation. Snap Fitness assessments each location lead abide $4,000 expense for amend operating theatreal expenses and $2000 to lease equipment. In revise for an individual flavor to own a exemption such as Snap Fitness, in order to derive a profit the business may only request three hundred members.The paper impart provide an estimate of uncertain be, periodical gross gross gross revenue in dollars and members ordain be identified to locate what is studyed to achieve a calculate top income of $10,000 for the month. Five examples of variable equal for a fitness center result be identified and discussed. Lastly, the paper will discuss summarized information concerning purchasing a franchise and will conclude with a ending whether purchasing a fitness franchise is a wise decision or not. CVP AnalysisCVP ( speak to Value Profit) Analysis allows an investor to delimitate if an investment is pro fitable and at what saddle the summate revenues are equal to the match be (Kimmel, Weygandt, & Kieso, 2009). CVP are rattling base analysis that provide a very quick and easy to ready displume shot analysis. CVP Analysis for Snap Fitness contemplates the connection between the volume of members of the fitness center, the periodic fee (no annual weightlift is needed), the variable be encored, and the fixed be. Snap Fitness will assess no gross sales mix as sales cannot be mixed when only one service is offered (Kimmel, Weygandt, & Kieso, 2009). Snap Fitness CVP Income bid For the Month Ended June 30, 2012 Total sales (300 members X $26. 0 periodical fee) $7,800 variant cost $1,800 Contri bution margin $6,000 better cost (monthly run expenses + equipment lease $6,000 clear up Income $-0- Variable costs Variable costs are the operating cost that varies in direct proportion to the quantity of units both sold are produced (Kimmel, Weygandt, & Kieso, 2009). For the variable cost analysis it was assumed that the only fixed costs are the estimated monthly operating expenses of $4,000 and the equipment lease of $2,000 per month. In order to Break-even the wampum income result for the below equation would be zero if the expenses and sales are equal. The composition assessed that the break even would be dally if 300 members nonrecreational a monthly fee of $26. 0 each. The newspaper possibleness was used to complete the sales data, but this data point should be considered a soft deed as it is ground off of a newspaper assumption. Break-even analysis uses the formula of gross sales = Variable costs + Fixed costs + lucre income (Kimmel, Weygandt, & Kieso, 2009). gross sales = Variable costs + Fixed costs + Net income + $7,800 = $1,800 $6,000 $0 Monthly Sales Snap Fitness is only able to be successful and profitable as a company if they set their monthly sales goals to achieve. The set monthly sales goals are crucially needed to be set to insure the companys has the aptitude to barometer to gauge. This will allow the Snap Fitness to imprecate cash prey and meet all of the companys financial obligations. Snap Fitness is in like manner able to use the information to verify the sales team is meeting their individual and team goals and performance levels.Snap fitness is unavoidable to meet $17, 800 in monthly sales to meet the target net income of $10,000. Income core of $10,000 will insure Snap Fitness will be able to make a profit for the investors and cover costs. For the sales team to make $17,800 they will need to sign-up redundant 685 new members. The required sales to meet the $10,000 goal the Target net income formula will need to be used. Required Sales = Variable Cost + Fixed Cost + Target Net Income $17,800 = $1,800 + $6,000 + $10,000 Variable Costs Examples Variable costs are costs that vary in totality directly and proportionately with changes in the activity level. If the level subjoins 10%, total variable costs will annex 10%. If the level of activity decreases by 25%, variable costs will decrease 25% (Kimmel, Weygandt, and Kieso, 2009, p. 914). Variable costs for this type of franchise will reverse as members join. Utilities are variable costs and will fluctuate based on the join of activity at the gym. Salaries for rung will as well be a variable cost.Personal trainers salaries will be distinct than a sales associate, for example. If the location offers health and wellness programs, a registered dietician will more than likely be sedulous at the location. A new gym will have less round in the beginning as foreign to an established gym. As more members join, additional staff will be added to suit nodes. Taxes and insurance will naturally fluctuate. amends is necessary to ensure the business has insurance coverage in the event a client is injured and to protect the building itself (damages, fire, accidents).As the equipment is systematically used, repair s or replacements will be necessary. These repairs or replacements are a variable cost and will more than likely growing as the business grows and more customers implement the facility and equipment. In relation to variable costs, business owners will find having friendship of marginal statistical distribution will serve up evaluate business performance. fringy distribution can be calculated as follows Marginal region = Marginal contribution per unit * Number of units sold Marginal contribution per unit = Selling damage Unit variable cost The marginal contribution is the difference between total revenue and totals variable costs and explains how changes the operating profit as changing the number of units sold (Busan and Dina, 2009, p. 103) . Franchise Opportunities The decision to strike a business can sometimes be very difficult due to all of the work associated with inventionning and implementation. Franchises opportunities are the happy medium to business ownership. A franchise is when an individual or a group has established a right hand to market a companys goods or services within a specific area. In a franchise opportunity a rand/ image has already been established for a company as well as products. The owner(s) is required to make up an initial fee to start the business while a luck of the monthly sales have to be paid back to the company. For example anytime fitness, McDonalds, and Subway are all example of franchise unconscious processs. Establishing a fitness center has a marginal initial contribution of $80,000 however if the owner(s) are military veterans discounts will be offered. The initial covers equipment, demographics help, a secure surveillance system, customer tracking data, and a well in concert fitness plan and package.Snap Fitness also offers a financing program which helps with the initial investment cost. Once the agreement has been write the franchisee is provided with all the benefits and perks. Training is also pr ovided at the bodily headquarters and an advertising plan is in place to help shit new clients. The franchise fee is a set fee that does not increase with sales. Franchises make business ownership simplified because the leg work has been done already. However, the negatives are yes a percentage of the sales have to be send to the franchisor.Understanding the benefits of franchises compared to small business ownership will help make decisions easier about which operation working best. Conclusion As we see franchising a fitness center is a very beneficial investment for individuals or groups looking to operate a business. As an investor it is important to have a sentiment as to which ownership and entity type works best for them. The breakdown of the variable cost and the break even analysis gives peachy insight in regards to how the business would need to operate on monthly bases.These divulge equations are imperative to business operation but it also helps predict futurity ea rnings as long as goals are achieved. A franchise opportunity has many perks with a limited amount of risk involved so apprehensiveness how things work is beneficial. Snap Fitness offers the ability to open a franchise with colossal support and package benefits throughout the square process. Fitness and health is a immense industry because American is trying to be more health conscience. References Anytime Fitness. (2012). Retrieved from http//www. anytimefitness. com/franchise-opportunitiesBusan, G. , & Dina, I. (2009). Using cost-volume-profit analysis in decision making. Annals Of The University Of Petrosani Economics, 9(3), 103-106. Kimmel, P. D. , Weygandt, J. J. , & Kieso, D. E. (2009). news report tools for business decision making (3rd ed. ). Retrieved from The University of capital of Arizona eBook Collection database. Snap Fitness (2011) somewhat Snap Fitness. Retrieved from Snap Fitness (2011). http//www. snapfitness. com/ corporal/about Snapfitness. com (2012). Fi tness Franchise Opportunity. Retrieved from http//www. snapfitness. com/corporate/franchise-opportunities