Buisness Plan Paper for Ahmed Jezzani

I. Table of Contents

I. Table of Contents ……………………………………….…. 1

II. General Company Description ……………………………. 2

III. Products and Services …………………………………….. 3

IV. Marketing Plan ……………………………………………. 6

V. Operational Plan …………………………………… …….. 15

VI. Management and Organization ………………………… … 18

VII. Startup Expenses and Capitalization ……………………… 18

VIII. Executive Summary ……………………………………… .. 19

IX. Appendices ………………………………………………… 20

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II. General Company Description

The Elite Fitness Center will be competing in the fitness centers industry. It will be located in downtown Cleveland, Ohio. The goal of the Elite Fitness Center is to provide the means, expertise, motivation, and atmosphere that will enable people, of all fitness levels, the ability to achieve their individual fitness goals and simply feel better about themselves. The center’s business philosophy is to provide elite services to customers with excellent customer service.

The Elite Fitness center will provide its services to all individuals who are interested in becoming fit and healthy. The center will offer special discounts to students and to corporations with “corporate membership”. The main target corporations will be banks, considering the fact there are more than 20 banks in downtown Cleveland.

The U.S. fitness centers industry includes about 22,000 companies and nonprofits in the U.S. that operate about 30,000 fitness and recreation centers with combined annual revenue of around $22 billion. Major companies include Curves, Life Time Fitness, Spectrum Club, and Town Sports International, operator of the Sports Club brand. About 2,600 centers are operated by YMCAS and another 2,500 by community centers. The industry is fragmented: the 50 largest companies account for about 30 percent revenue, and only a few dozen companies own more than 10 centers. ("First Research")

The Elite Fitness Center will provide various fitness services with high level tech equipment. Its location will allow easy access to customers in Cleveland and surrounding suburbs. The legal form of ownership for the Elite Fitness Center will be sole proprietorship. I chose this form of ownership because the proprietorship has three important advantages:

It is easily and inexpensively formed It is subject to few government regulations Its income is not subject to corporate taxation but is taxed as part of the proprietor’s

personal income. (Ehrhardt 5-6)

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III. Products and Services

The Elite Fitness Center will provide a full range of fitness training programs and services to

customers.

The latest cardio equipment including Treadmills, Elliptical Cross-Trainers, Stair

Machines, Rowers, and Recumbent and Upright Bikes

Strength Training, Circuit Training and Free Weight Equipment

Group Fitness Classes

Private Women’s Workout Areas

Warm-Up and Stretching Areas

Play-land Childcare Centers

Personal Training

Full Service Locker Room and Shower Facilities

Saunas and Steam Rooms

TRX Suspension Training

Chiropractic Services

Tanning Services

Physical Therapy

Massage Therapy

Business Center with free Wi Fi Internet

Cardio Cinema Rooms featuring enormous theater screens to watch movies and/or TV

while working out

Plate loaded machines

Step Aerobics

Yoga

Nutrition Program

Smoothie Bars

Vitamins and Supplements

Membership Options

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Becoming a member of The Elite Fitness Center is painless! The fitness center offers a

variety of membership options allowing our customers the opportunity to choose the plan

and payment option that best suits their specific needs.

Month-to-month:

Our month-to-month automatic debit option allows the customer to cancel his/her

monthly membership with just 30 days’ notice. The Elite Fitness Center guarantees

the customer’s monthly dues will never be increased providing his/her membership

remains current and in good standing.

One Year Commitment:

The customer can get our month-to-month automatic debit option at a reduced rate

simply by committing for 1 year! After the year is up, the customer can continue as

long as he/she would like and cancel any time with just 30 days’ notice. The Elite

Fitness Center guarantees the customer’s monthly dues will never be increased

providing his/her membership remains current and in good standing.

One Year Paid in Full:

If the customer’s preference is to pay in full, the center will accept all his/her money

at one time! If the customer renews before his/her year is up then his/her membership

will be renewed at the original rate.

Short Term Paid in Full:

The Elite Fitness Center offers a variety of short term paid in full plans for those

individuals who may be visiting the area temporarily or those whose “plans” may

frequently change.

Student Membership:

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The Elite Fitness Center offers a variety of plans for students with valid college IDs.

Seniors Membership:

The Elite Fitness Center offers a variety of plans for seniors who are older than 65

years

Corporate Memberships:

Companies interested in establishing a corporate discount for their employees should

contact The Elite Fitness Center to discuss available options. The level of

participation required from the company is entirely up to the individual company and

as everyone knows, fit employees pay huge dividends.

There will be special discounts for banks. There are more than 20 banks locations in

Cleveland and to have corporate memberships with any of those banks will benefit

both; the bank, and the Elite Fitness Center.

IV. Marketing Plan

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The Fitness Centers Industry:

The Gym, Health and Fitness Clubs industry grew at an average annualized rate of 1.7

percent. The U.S. fitness centers industry includes about 22,000 companies and nonprofits in the

U.S. that operate about 30,000 fitness and recreation centers with combined annual revenue of

around $22 billion. Prior to 2008, an increasingly health-conscious population, generally strong

economic conditions and healthy consumer confidence all benefited the industry. The industry

faced greater challenges from 2008 onward as economic growth slowed and income levels

dropped significantly. However, gyms and fitness centers have been remarkably resilient. The

economic downturn has had little impact on the industry, and some of the lower-priced franchise

model gyms were even able to expand operations in 2008 and 2009. Even in the midst of the

economic downturn, the industry has maintained steady growth, with membership rates growing

consistently and profits remaining solid. Demand for gyms and health and fitness centers will

continue to rise, as the general public becomes more health-conscious and the aging population

places a greater emphasis on staying fit. Additionally, the amount of leisure time and growth in

household incomes will positively affect the business, leading operators to expand into larger

facilities. ("IBIS World")

The impact of the media: On annual basis, the fitness centers industry receives hundreds of

thousands of pages of free promotion, extolling the myriad of benefits of regular exercise. This

extends from the nation’s most prestigious publications (such as the Journal of the American

Medical Association) to tabloids. Regarding the power of the media relative to the business, three

factors stand out:

Every major media outlet, whether print or electronic, has a health journalist whose

job is to report on new research that points out the benefits of regular exercise.

American lifestyle journalists are continually reporting how the nation’s most

prominent celebrities –whether they be political figures, TV personalities, Hollywood

stars, sports celebrities, or music mavens –are all involved in regular exercise on a

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daily basis and who consider their involvement with exercise to be essential to their

performance.

Any issue of any major women’s magazine will have numerous articles that either

implicitly or explicitly advise and encourage its readers that the path to health and

happiness passes through the door of regular exercise.

Corporate and HMO (Health Maintenance Organization): In recent years, two factors begun to

change the industry’s exclusive reliance on retail sales.

The involvement of corporations. Today, approximately 31 percent of America’s

larger corporations subsidize the fitness centers memberships of their employees. The

percentage of companies that are providing such subsidies has increased significantly

in the past several years.

The involvement of health insurers. An increasing number of HMO’s, including Blue

Cross, Pacificare, Aetna, Oxford, and Wellpoint, either reward their subscribers for

their involvement in exercise programs or make payments to fitness centers based on

their subscriber’s usage of these facilities.

The industry is the beneficiary of an increasingly health-conscious, weight conscious nation.

Numerous studies show that Americans prize health –their own and that of their loved ones –as

the most important value in their lives.

The industry enjoys significant landlord and equipment financing. Because this a fixed cost

business, landlord financing can be a key success factor. Landlords who are looking to fill new

retail malls and/or commercial buildings maybe especially interested in health clubs and fitness

centers as anchor tenants, due to the daily off-hours traffic clubs generate for retail areas and the

amenity value of the club to their businesses.

The industry’s working capital requirements are stable. Unlike other industries where working

capital requirements increase as the business grows, in the fitness centers industry this is not the

case. For example, as the business of a restaurant or manufacturer grows, the business will be

required to tie up more and more capital to service its expanding book of business. In the fitness

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centers industry, on the other hand, once the center is developed, working capital requirements

do not significantly increase even as the membership grows. (“IHRSA”)

By entering the fitness centers industry, I will face several challenges. I will need a loan to cover

the high capital costs, and to buy all the equipment needed for the center. I will need to find

professional trainers and skilled instructors. I will need to find suppliers for the vitamins and

supplements that I will be selling in the center. I will try to overcome those challenges by (1)

finding a bank that is willing to give me a loan so as to pay for all the necessary expenses, and

(2) looking for, interviewing, and then hiring professional trainers and skilled instructors.

A change in technology would not affect The Elite Fitness Center significantly, as it will have

the most up to date equipment. A change in government regulations wouldn’t have significant

effect on the center either. However a change in economy could affect the business and prohibit

some customers from attending fitness centers as they try to cut out their extra expenses.

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Products and Services

The Elite Fitness Center will strive to provide elite services with excellent customer

service. The center will make exercising great fun for its customers. The center’s cardio cinema

rooms combine fitness with entertainment, and the customer can watch movies on enormous

theater screens while getting fit. The customers will get ample quantities of cardio equipment,

strength training equipment, and free weights so that they can get in and out quickly without a

wait. The Elite Fitness Center will also offer group fitness classes, private women workout areas,

warm-up and stretching areas, a play-land childcare center, personal training, full service locker

room and shower facilities, saunas and steam rooms, TRX suspension system, chiropractic

services, tanning services, physical therapy, massage therapy, business center with free Wi Fi

Internet, plate loaded machines, step aerobics, and yoga classes. The Elite Fitness Center will

also offer smoothie bars, vitamins and supplements, and a nutrition program. The Elite Fitness

Center will also offer a 60-Day Money-Back Results Guarantee. If after 60 days of the

customer’s join date, he or she has failed to achieve a positive change in at least one of these

categories: (Body Mass Index, Resting Heart Rate, and Thigh Circumference), he or she may

discontinue his/her membership with a complete refund. Complete Money Back Results

Guarantee details will be available at the center.

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Customers

The Elite Fitness Center will target customers of both genders within different groups of

age: (18- 24) years, ( 24-40) years, and those who are 41 years old and above. The center will

target each age-group differently with its various membership plans. The Elite Fitness Center

will offer other amenities such as maintenance and monitoring like checks for blood sugar, blood

pressure, and bone density. There also will be various plans for students with valid college IDs.

For the corporate memberships, the main target customers for the center will be bankers in

Cleveland and surrounding suburbs. There are more than 20 bank locations in downtown

Cleveland, and the center will offer special membership plans for bankers. Most of the banks in

Cleveland have major locations in the downtown area, for example Key Bank, U.S. Bank, PNC

Bank, Chase Bank, Fifth Third Bank, Huntington Bank, and Dollar Bank. If The Elite Fitness

Center succeeds in attracting area banks into subscribing to one of the center’s corporate

membership plans, then this will bring huge benefits to both sides the bank and the center. The

Elite Fitness Center will benefit from more subscribers, and the bank’s management will benefit

from having healthy employees. Studies show that a healthy employee is more productive.

Banks’ managements will also benefit from having healthy employees by having huge savings

from the employee’s health insurance expenses. It is a win-win situation. The center will have an

increasing number of subscribers, and hence generating more revenue and the bank management

will have healthy employees that are more productive, and will have huge savings in health

insurance expense.

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Competition

The Elite Fitness Center will face two types of competition:

1- Direct Competition: from other fitness centers and health clubs in the area.

2- Indirect competition from:

Increases in people running for exercise with the appeal being that is free, similar

to online exercise plans.

Consumers can decide to buy their own home fitness equipment, such as

treadmills and elliptical machines that can steer them away from gyms and fitness

centers altogether.

Some residential buildings offer gyms for their residents, such as Statler Arms,

The Chesterfield, and Reserve Square.

Most schools offer fitness centers to their students with no membership fees

required, such as the recreation center at Cleveland State University.

The two major competitors are:

FITWORKS

530 Euclid Ave. Suite 23A

Cleveland, OH 44115

(216) 344-9267

Web page: http://www.fitworks.com/trainerfinder/websites/60101/colonialmarket/

index.html

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Club Hours:

Monday – Thursday 5am – 9pm

Friday 5am – 8pm

Saturday 8am – 5pm

Sunday Closed

It is located in the middle of downtown Cleveland, close to several banks in the area and

it is possible it will give The Elite Fitness Center strong competition. (Fitworks)

Rezults Downtown:

1500 West 3rd Street #550

Cleveland, OH 44113

(216) 771-6900

Web page: http://rezultsdowntown.com/

Hours of Operation:

Monday – Thursday: 5:30am – 9:00pm

Friday: 5:30am – 8:00pm

Saturday: 9:00am – 5:00pm

Sunday: 1:00pm – 5:00pm

Because of its location, Rezults Downtown might give the Elite Fitness Center less

severe competition than Fitworks. (Rezults Downtown)

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Factor Me Strength Weakness Fitworks Rezults Downtown

Importance to Customer

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Products Better than competitors

/ better good 2

Price Not better / better better 1

Quality Better than competitors

/ good good 1

Selection better / more selection

less selection

2

Service better / good service Good service

1

Reliability better / good good 1

Stability better / good good 2

Expertise Not better / good good 2

Company Reputation

Not better / better good 2

Location better / better good 2

Appearance better / better good 3

Advertising better / good good 4

Image Not better / better good 4

The Elite Fitness Center will have several advantages over its competitors such as product selection, amenities, services offered, various membership plans, quality of equipment, and accessible location. However, it will have some disadvantages such as pricing, expertise, and company reputation. The center will be new to the business and it will need a reasonable amount of time to establish a decent reputation.

Strategy

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The Elite Fitness Center will adopt a strategy in attracting customers by offering a full range of services at various membership plans. The center will have professional trainers and skilled instructors. It will also offer other services such as play-land for children, maintenance and monitoring checks for blood sugar, blood pressure, and bone density. The Center will use these extra amenities as advantages over its competitors, as they do not offer them.

Promotion

The Elite Fitness Center will use different type of advertising to attract customers and to have the name of the center recognized. On an annual basis, the fitness centers industry receives hundreds of thousands of pages of free promotion, extolling the myriad of benefits of regular exercise. Many people already know how important exercising is, so the question is –where do they go to get exercise? With effective advertising, Elite Fitness Center will attract those who are interested in exercising to its facility. The center will use printed ads, special logo design, cards, brochures, newspaper ads, (The Plain Dealer), interior design, and TV ads. I will spend approximately $50,000 before start up, and I will specify a monthly advertising budget of $7,500 for ongoing advertising. The Elite Fitness Center will have a system to identify repeat customers and then systematically contact them.

Pricing

The Elite Fitness Center will offer various membership plans. The price of membership will be slightly higher than the average prices in the industry. The prices will range from 10 percent to 20 percent higher than the industry average. The center may not attract customers who are price sensitive and will seek out other health clubs with lower fees. With effective advertising the customers will be aware that the increased price is reasonable, considering the numerous amenities and the excellent services The Elite Fitness Center offers. Even though the center will have prices slightly higher than those of its competitors, customers will still find it reasonable to pay a little extra to get additional amenities and better service.

V. Operating Plans

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Products and Services

The Elite Fitness Center will offer a variety of services to its clients. Keeping the center’s customers happy is important. Customer satisfaction is guaranteed. There will be a 60-Day Money Back guarantee. The center will have up to date equipment, and well trained friendly staff. The center will not have huge inventory as it is only going to sell vitamins and supplements. However the center will make sure to offer quality products and excellent services to customers. The center will try to reach an agreement with vitamins and supplements providers such as GNC. The trainers will be professional and will use the latest training programs in order to provide the customers with the best expected results.

Location

The proposed location for the Elite Fitness Center is downtown Cleveland, on Superior Avenue, specifically between East 9th and East 4th Streets. This location is in the middle of downtown Cleveland. There are many banks within either walking distance or a few minute commute. With special promotion and effective advertising, some banks will be willing to subscribe to one of the center’s corporate membership plans. This location has several advantages such as: it is easily accessible, it is in the middle of downtown which means people from either side of Cleveland will not have problems getting to the center, it is close to many banks, to Cleveland State University, and to major hotels and buildings in the city. With the center’s various short term membership plans, even visitors who are staying at nearby hotels might be willing to become customers to the center during their visit. There is noticeable potential growth in the city such as the building of the new convention center on Superior Avenue, the expansion of Cleveland State University, and the building of Cleveland’s Casino. However, there are few disadvantages with this location such as traffic in the city. Sometimes construction work in the city creates congestion. The weather of Cleveland also creates congestion, often in the case of heavy snow, and blizzards. The Elite Fitness Center will have a decent size building, or it can occupy an entire floor in one of nearby buildings. There are several parking lots in the area, which will save the customers the hassle of looking for places to park

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their cars. There is also a bus route close to the center. The two competitors are located in downtown as well. Fitworks is located on Euclid Avenue, and Rezults Downtown is on West 3rd Street. Having the two competitors close to Elite Fitness Center might not affect its business significantly. With effective advertising, customers will have several reasons why to choose the center, such as: the amenities, the services, skilled personal trainers, and up to date equipment.

Legal Environment

The Elite Fitness Center will obtain the required licensing and authorizations. It will follow all the regulations and rules imposed by the state of Ohio. The center will make sure all the equipment in its facility is proven and safe. The center will run background checks, and drug testing checks for all members of its staff. The center will try to get the required licensing from suppliers for selling their vitamins and supplements. The center will obtain full insurance for its building and equipment.

Personnel

The Elite Fitness Center’s staff will consist of skilled trainers, professional instructors, such as yoga instructor, cleaning personnel, and front desk customer service representatives. The total number of staff members will be 12. Every member of the staff will be paid on a salary basis, twice a month. At the beginning, I will hire contract workers to do all the necessary installation, and interior design work, but once it is all done I will hire workers, trainers and instructors to work at the center.

Inventory

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The Elite Fitness Center will not have a huge inventory. It will primarily offer services. Its inventory will consist of the vitamins and supplements, and the smoothie bar items.

Suppliers

The Elite Fitness Center will have suppliers from which it will buy all the necessary equipment. Then, the center will have regular suppliers from which it will buy all the vitamins, supplements and the smoothie bar supplies. The center will look for high quality products from reputable suppliers. Below is the contact information for some of the center’s suppliers:

1- Sole Fitness866-780-Sole (7653) http://www.soletreadmills.com/Ellipticals

2- Treadmill World1-800-928-1258http://www.treadmill-world.com/

3- American Fitness.net8630 SW Scholls Ferry RoadSuite 323Beaverton, OR 97008800-895-4181http://www.americanfitness.net/wholesalefitnessequipment.html

VI. Management and Organization

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The structure of the Elite Fitness Center will consist of instructors, personal trainers, customer service representatives, cleaning staff, and child care employees. I will be the one in charge of managing the center.

VII. Startup Expenses and Capitalization

The Elite Fitness Center will need a startup budget of about $1,500,000. This budget can be broken down as follows:

Equipment Expense ……………………………………………… $600,000

Installation and interior design expenses ……………………… 600,000

Rental expense (one year) ………………………………………... 250,000

Advertising Expense …………………………………………….. 50,000

Total Startup expenses …………………………………………. $1,500,000

The prices of the equipment were obtained from the supplier’s websites.

I will apply for a loan of $2,250,000 to cover the startup expense and the ongoing (operational) expenses such as salaries expense, insurance expense, inventory expense, utilities expense, and ongoing advertising expense.

VIII. Executive Summary

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This business plan is to open a fitness center in downtown Cleveland. The center will be called “The Elite Fitness Center”. It will be located in the middle of downtown, Cleveland on Superior Avenue (check the attached map to see the proposed location). The center will offer a full range of services to customers with various membership plans. Customers can enjoy the numerous amenities the center offers. The center will offer many services such as: the latest cardio equipment, group fitness classes, private women’ workout areas, play-land childcare centers, personal training, saunas and steam rooms, tanning services, physical therapy, massage therapy, yoga classes, nutrition program, and other services. The center will offer corporate membership plans. The main target companies for the center will be banks. There are more than 20 banks located in downtown, Cleveland. Most of the banks in Cleveland have major locations in the downtown area, for example Key Bank, U.S. Bank, PNC Bank, Chase Bank, Fifth Third Bank, and Dollar Bank. The Elite Fitness Center will use effective advertising to attract area banks into subscribing to one of the center’s corporate membership plans. The center will benefit from more subscribers, and the bank’s management will benefit from having healthy employees. Studies show that a healthy employee is more productive. Bank’s management will also benefit from having healthy employees by having huge savings from the employee’s health insurance expense. It is a win-win situation. The center will have an increasing number of subscribers, and hence generating more revenue and the bank management will have healthy employees that are more productive, and will have huge savings in health insurance expense. The center will face two types of competition, direct competition from other health clubs and fitness center in the area, and indirect competition. The direct competition will primarily come from two fitness centers in downtown: Fitworks and Rezults Downtown. The indirect competition will come from some residential buildings in the area which offer gyms to their residents, and from the increasing number of people who prefer running as an exercise. The center will use different type of advertising to attract customers and to have the name of the center recognized. The center will use printed ads, special logo design, cards, brochures, newspaper ads, interior design, and TV ads. I will spend approximately $50,000 before start up, and I will specify a monthly advertising budget of $7,500 for ongoing advertising. The center will have a system to identify repeat customers and then systematically contact them. The center will look for high quality products from reputable suppliers. The Elite Fitness Center will need a startup budget of about $1,500,000. This budget is needed to cover the total startup expense which includes equipment expense, installation and interior design expense, rental expense, and advertising expense. I want to apply for a loan of $2,250,00 to cover the startup expense and the ongoing (operational) expense such as: salaries expense, insurance expense, inventory expense, utilities expense, and ongoing advertising expense.

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