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Business Management

How Much Does it Cost to Open a Fitness Studio

If you’re dreaming big and are ready to jump into gym ownership, the #1 question you’re probably asking is: How much does it cost to open a fitness studio? Between now and 2028, the fitness industry is expected to grow 171.75% to $434.74 billion. There’s obvious opportunity here, especially for boutique fitness studios where profit margins can be three to four times those of traditional big-box concepts. ‍

July 11, 2022

The 2021 U.S. fitness industry revenue was $33.25 billion with 39% of Americans holding gym memberships.

Between now and 2028, the fitness industry is expected to grow 171.75% to $434.74 billion.

There’s obvious opportunity here, especially for boutique fitness studios where profit margins can be three to four times those of traditional big-box concepts. 

If you’re dreaming big and are ready to jump into gym ownership, the #1 question you’re probably asking is: How much does it cost to open a fitness studio? 

In this post we’ll give you the latest industry stats on the cost of starting and running a fitness studio, along with key considerations that anyone thinking of opening a gym must know before diving in. Afterall, opening a fitness studio may be the single biggest investment you’ll ever make. You want to go smart!

Location, Location, Location

Choosing the right location for your fitness studio can make a huge difference in your success.

Key factors to consider when shopping for the right space are:

  • Proximity to competition
  • Neighborhood demographics (average age, income, lifestyle)
  • Availability of free parking
  • Visibility to passersby
  • Nearby complimentary businesses
  • Cost

Since we’re focused on breaking down the startup costs of a small studio, let’s talk about rent for minute.

Assuming you’ve already crafted a business plan (click here if you haven’t) and have some rough estimate of what your annual gross and net revenue will be, the way to find out how much rent your gym can afford is calculate what five to 15 percent of your net will be. 

It’s easy: Divide your annual rent by your anticipated revenue.

Suppose you’re looking at a space that rents for $2,000 a month. That translates into $24,000 per year. If you expect to make $150,000 in the same year, the ratio is .16, or 16 percent.

Is that good?

It depends.

The ratio doesn’t outweigh your individual situation: If you can’t afford the first month’s rent, it doesn’t matter how good the price is.

What about buying?

The upside here is that all that money you spend each month on occupancy costs flows back to you in the form of a long-term investment. The downside is that this is a long-term investment and if your fitness studio doesn’t make it, or evolves over time into needing a different space, you’re stuck with ownership and possibly (a larger than desired amount of) debt. 

Renting v. Owning a Fitness Studio Space

Prices vary markedly.

If you’re in a premium urban market or upscale suburb you’ll pay dramatically more to rent AND own.

To rent: budget for around $150-$300 per square meter per year.

The average gym size is 278 square meters.

As an estimate, a 278 square meter facility that cost $200 per square meter, would require an annual rent of $55,600.

To buy: a 278 square meter warehouse style building will cost an average of $350 per square meter, for a total cost of $97,300. The cost of the land will add an extra $20,000.

Typically landlords will require small business owners to make a personal guarantee when they sign a lease. This means that if your business defaults on rent, your personal income and assets are considered collateral. 

When buying a commercial space, you’ll need enough current proof of income and assets to qualify for a bank loan and make a substantial cash down payment. 

Buildout for a New Fitness Studio

Investment in building out the space for a start-up fitness studio is one of the most underestimated and overlooked costs of starting a fitness studio.

To customize a space with walls, flooring, lights, a reception desk, lounge/waiting area, fitness classrooms that require specialized flooring, mirrors and HVAC systems plus locker rooms with all the extra plumbing required for sinks and showers can add-up fast.

That’s not to mention the additional cost of equipment, props and retail. 

Costs for buildout of fitness studios vary widely by region and certain materials such as wood have been heavily affected by the recent pandemic and supply chain issues.

Expect to pay anywhere from $65,000 to $100,000 for a very basic, barebones start-up space.

For a mid-market fitness brand the cost will be more in the range of $300,000 to $500,000.

Big brands like Core Power Yoga, Soul Cycle and the like typically spend closer to $900,000 to over $1 million to build out a new fitness studio space. 

How Long Will a Buildout Take? 

Depending on the extent of your fitness studio’s buildout, and local market supply of contractors, construction will likely take anywhere from six to nine months.

Be prepared to factor this into your start up costs.

If you are renting, you could end up paying rent before you have revenue coming in.

It’s smart to negotiate with your landlord if you expect a lengthy build-out process to see if you can arrange for any rent-free initial months as part of you lease. 

Also, be mindful that many commercial leases give the landlord – not the small business owner – ownership of any interior build-out components that are fixed to the space such as plumbing, electrical, HVAC systems, flooring, tiling, lockers, mirrors, custom shelving, basically anything that’s attached and that you couldn’t just pick up and walk out with when your lease is over. 

New Fitness Equipment

Obviously the amount and type of equipment needed with vary widely depending on the type of fitness studio.

For some boutique gyms, like spin studios, Cross-Fit-type spaces, rowing and boxing gyms there can be a substantial up-front investment. 

For the average small start-up fitness studio, equipment costs are likely to be between $10,000 and $50,000, depending on the quality and quantity.

This includes things like free weights, treadmills, weight machines, cycles. You should also plan to invest in a professional-grade sound system, and television screens. 

Insurance Costs for a New Studio

Fitness is a high-liability industry.

Even with your legal liability waivers, you still must carry professional insurance for both your fitness business and each of your instructors or trainers. There are fitness studio-specific policies offered by major insurance carriers and a range of policies suited to different size operations. 

The primary types of coverage you’ll need are:

General Liability: this provides protection if your staff or equipment are deemed responsible for accident or injury to a person while they are on the premises. You will likely be required by your landlord to show proof of insurance as part of your lease contract.

Professional Liability: this provides coverage if a staff member is found to have committed ‘errors or omissions’ which have led to accident or injury. An example would be the staff member not picking up weights and the member tripping over them and sustaining an injury.

Business Income & Extra Expense Coverage: this provides a payment to allow you to repair and temporarily relocate if your business is affected by fire, flood or earthquake.

Worker’s Compensation: this provides coverage if an employee makes a claim against you for a work-related injury.

Equipment Breakdown & Facilities Coverage: this provides protection for expenses incurred due to equipment breakdown or in the event of an internal disaster like a plumbing leak. If the equipment is out of warranty or the repair is not covered by the warranty, the costs for repair will be repaid.

Expect to pay between $6,000-$12,000 in annual premiums for your insurance, with the lower amount providing more limited coverage, while the higher amount will reimburse you for such things as loss of potential membership fees.

Business License & Permits

It is critical that you find out what your local and national to legal requirements are and adhere with them.

In the U.S. this will likely be a state-by-state issue.

Most places require you to register your business with your state government so that you can start paying taxes. Fitness studio’s that offer retail will be taxed at the local sales tax rate. Be mindful that you are required to collect all necessary state and local taxes as part of your sales.

You may also need to complete, and pay for, the following:

  • Business incorporation and registration (as an LLC, for example)
  • A business license
  • A trade name registration
  • An employer registration
  • Health and safety certification

Legal & Other Professional Fees

Having an accountant or attorney – depending your local area’s laws, can be an immense help and even necessity when writing up your fitness studio’s operating agreement, reviewing and negotiating your lease, crafting incorporation papers, registering with your state and local officials and making sure that your fitness studio is in compliance with local tax codes.

You should budget $3000 to start, and $3,000 per year to cover the cost of accounting, legal fees, licenses and permits and other professional services associated with starting a fitness studio.

Marketing Costs

You’ll want to get the word out about your new studio and start attracting a clientele before you open your doors.

To do this you’ll need some marketing fundamentals such as:

  • A business website
  • Fitness business management software
  • Email marketing platform
  • Social media accounts and management
  • A business phone line
  • Professional branding
  • Signage

Whether you DIY your marketing or hire out some of the professional services, you can expect to pay anywhere from $10,000 to $20,000. 

Recurring Costs of Owing a Fitness Studio

Now that you’ve invested in the startup cost of starting a fitness studio it’s time to consider what it will cost you each month to keep this new space you’ve bought or rented and built out running smoothly! 

Here’s a quick breakdown of the biggest monthly operating expenses for gyms:

Rent or Mortgage: We’ve already established that this will be around 5-15% of your net revenue.

Utilities: For boutique fitness studios these can cost up to $6,500/mo or more, especially for specialized fitness businesses like hot yoga studios. Consider also that you’ll pay for phone, internet, and other front desk requirements on top of your work out space utilities. If you have locker rooms you’ll pay for water use and, of course, everyone will pay for trash. 

Cleaning Supplies and Amenities: The cost for start-up fitness studios for disinfectant, hand-sanitizer and other cleaning supplies plus laundry (whether you do it in house or outsource to a towel service) and any amenities such as shampoo, conditioner, lotions, etc. can add up fast!

Payroll: This is a biggie and another cost of staring a fitness business that many new owners underestimate. A good business rule of thumb, whether you pay independent contracters or have employees, is to keep payroll at or below 20 percent of revenue. Consider that the average salary for a fitness instructor is $55,000. Also, don’t forget to pay yourself! 

Other (operations you could put money into are marketing expenses): paying for advertising, signage, sponsorship opportunities to get your name out there, or a manager to create social media and email marketing content. 

Insurance & Professional Fees: We’ve already discussed this, but it’s important to factor in to your monthly expenses bookkeeping, accounting and legal services. 

Credit Card Processing Fees: Accepting credit cards is a fabulous way to make running a fitness business smooth and simple for you and your clients. It’s important to remember that making this service available isn’t free. Any vendor you use to set up your credit card processing will charge you for each transaction. This can be a big surprise for many start-up fitness studio owners. 

The average credit card processing fee for small businesses runs around three percent. 

What to Look Forward To!

You may be sweating bullets by now, but stay positive! You’re now armed with important tools for starting your fitness studio with your eyes wide open and enough cash in the bank to make it happen!

Remember, the fitness industry is growing like gang-busters and people are craving the health and community that small fitness studios can provide. As always, it’s the brave ones who go out and make their dreams happen that end up living lives with their passion as their profession.