Let’s cut to the chase…the answers is yes—equipment leasing is one of the best ways to acquire fitness equipment. But even though we’ve answered the question right up front, you really should read on to find out why. Here are four reasons to lease your gym equipment.
1. You’ll have the latest and greatest.
It’s no secret that a top reason members choose a gym is because they want the shiniest machines with all the bells and whistles. Not only does newer equipment work better, but it also looks modern and cleaner, which is a vital consideration these days as we all focus on health and safety.
You don’t want to skimp on an expense that will drive business, yet you don’t want to be stuck with older equipment once you’ve made the investment. “If you lease your equipment, it’s easy to do upgrades and refreshes when manufacturers introduce new products or features,” says Carolyn Collins, vice president of sales in the fitness division of Hitachi Capital. “With a lease, you can easily acquire that product without much out-of-pocket expense.
According to World Gym COO Jarrod Saracco, cardio machines, especially those that incorporate tech, will need to be switched out more frequently. “For example, a treadmill with an LCD console touchscreen and lots of tech will probably need updating in three years, whereas that treadmill with a simple LED screen may get more life.” But ultimately how long your equipment lasts will depend on usage and care. “Typically I like to see cardio get changed out every three to five years, and strength can go seven to 10,” he says. “I usually recommend leasing the cardio and turning that over methodically, while purchasing the strength outright if you can.”
2. You can keep more of your money.
Speaking of lower out-of-pocket expenses, cash is king, Collins reminds us. Gyms make their money with monthly memberships and need to pay all their bills through that. By leasing equipment, you can add the payment in with your other regular payments and know how much will be spent month in and month out. “When you’re comparing financing with a lease with purchasing, leasing allows you to keep more of your money upfront, boosting your cash flow and opening up the doors to other opportunities.”
Specifically Collins cites the unique position that clubs like World Gym franchisees are in today to grow through acquisition or opening up new clubs on their own. It’s more important than ever to have cash reserves available to take advantage of opportunities in real estate that you couldn’t if your money was tied up in equipment. She recommends looking for landlords who might be offering deals right now with deferred rent, which gives you more time to ramp up your membership without money going out the door.
3. You can lease more than equipment.
Cardio machines are likely the first thing that come to mind when you think about leasing gym equipment, but your lease is likely to go beyond that, provided you’re working with a total solution provider. Collins says they can help you with an entire package that covers everything from lockers and front-desk furniture to signage, flooring and even tanning and hydro massage machines.
4. You can partner with a lender that understands your business.
When you’re looking for a lease, sometimes your local bank might not be your best bet because they don’t always understand the membership-based model, Collins cautions. She says that it’s best to work with a lender who is aware of how gyms function because they are more likely to offer you the appealing lease terms you deserve.
Terms of 36 to 72 months are typical, says Saracco, adding that there can be a wide variety of programs, such as $0 down, six months deferred and/or interest-only payments. The eventual “buy out” will fluctuate too, at usually a 20% residual or a $1 buy out.
“Working with a lender who understands the space is the key to a successful relationship, but you want to make every lender your friend,” Collins advises. That’s because every lender has an exposure limit, and as you grow you might need several lenders to meet your leasing needs. However, she recommends you first check with your bank to confirm there’s nothing in your agreement that prevents you from using an outside lender.
Collins also adds that lenders prefer to work with a gym that’s part of a franchise family, like World Gym. “We know that the franchisor has specific requirements for net worth and liquidity, and we know they already did their due diligence regarding the viability of the business plan and model, which makes a World Gym franchisee a customer we’d like to work with.”
Want to know more about financing a World Gym franchise? Contact us at https://www.worldgymfranchising.com/franchising-options.