4 Considerations for buying a fitness center or gym in Colorado

May 17, 2017 By

Maybe you’ve always dreamed of owning your own gym and being your own boss. Maybe you just stumbled upon a great opportunity at a local fitness center you believe in. Either way, purchasing a fitness center is a complicated legal move that requires a lawyer and accountant’s careful structuring. Remember, just because you wear yoga pants to work doesn’t mean you’re not a sophisticated business person!

Price: How much are you paying for the gym? Count up the value of all assets. Is the price you are paying greater than the value of the assets? If so, why? It may be because you are purchasing the “good will” associated with the gym and the existing membership. It is important you make sure you are comfortable with the amount of money you are paying for these intangible assets. The amount you pay for the assets versus the amount you pay for the ‘good will’ of the company have tax implications for you, so you’ll need a CPA on board to advise you on this split.

Branding: Am I going to keep the gym’s name? It’s colors? It’s signs? How about the website? If so, you’ll need to state that up front and make sure you have the Seller properly assign the intellectual property to you as a part of the transaction.

Due Diligence: You might be familiar with the phrase “do your due diligence.” Good news, you are currently in the middle of the situation where that phrase originated! Doing your ‘due diligence’ means you know as much as can possibly be known about the Seller and the Seller’s company. Have a credit check done on both the owner and the business itself. Perform a UCC search on the owners and the entity. Talk to employees, talk to customers, investigate the competition. Obtain all the financials of the company and compare them to another similar gym. Some industry associations can help you out by showing you their average financials.

Membership fees and pre-paid packages: One issue unique to the fitness industry is the issue of prepaid packages. A customer may purchase a ten pack of services up front. If the capital stays with the Seller, the Buyer still has the obligation to provide services to fulfill the package. It is important for you to know how many packaged services you will be needing to honor after the acquisition. You will want to iron out a specific approach to these pre-paid packages early on because I have seen disagreements on this point kill deals.

So treat your purchase of the fitness center as a serious business transaction. Make sure you surround yourself with the right team of affordable and responsive attorneys and accountants. And congratulations, you are set up for success!

Sara Sharp is a corporate attorney in Colorado with years of experience advising clients on complicated business transactions.