It’s March Madness at PushPress! We’ve asked our community of fitness business owners to share their craziest stories. With every story comes a lesson that the gym owner learned the hard way so that you don’t have to. Today, we’re talking about renting gym space, so sit back, relax and enjoy the shenanigans!
For most gym owners, generating additional revenue is always top of mind. Even better if it’s passive and recurring. After all, if the business can generate income while you’re not there, you can work less while making more.
One way for gym owners to do that is renting part of their space to other businesses or health-related services. These could include things such as physical therapy, massage, chiropractic care, personal training and nutrition. Not only does this increase your bottom line, it benefits your members as well.
There are plenty of ways to generate revenue by renting gym space, but planning and execution can prevent you from a disastrous outcome.
Kurt Miller and Kacie Heilman, owners of South Mountain Community Fitness in Allentown, PA, learned this lesson the hard way.
How It Started.
Four years into owning their gym, things were going well for Heilman and Miller. They did some research and decided it was time to expand.
“We thought we had a really good niche market,” said Heilman. “We thought we could justify doubling our space and increasing our overhead.”
So they took over the space next to their gym and overnight, went from 5,000 to 10,000 square feet. In order to make the decision profitable, they decided to rent the extra space to various other practitioners. Their new tenants included a massage therapist, chiropractor and nutritionist, as well as a handful of personal trainers.
The trainers were already members of their gym and people they considered friends. As a result, they kept things somewhat informal.
“Sure, we’ll give you the first couple months free, no rent,” Heilman remembers promising. “And then we’ll do a rental agreement.”
She says, “We wanted to see people succeed. We knew how hard it was for us, so we gave them things to help them out.”
“What Is Happening?”
Things were okay for a brief period of time. But pretty soon people started to overstep the boundaries that they had loosely set.
Heilman saw it happening, but admits that she just ignored it, hoping it would go away.
Unfortunately, over time, trainers started taking up more space and more hours than both parties had previously agreed to. They often overstaying the time and used equipment they weren’t supposed to. Heilman says they were essentially just running amok in the gym without consideration for anything else that was going on.
One evening, she discovered a trainer hosting a cheerleading clinic at her facility on a Tuesday night.
“There’s a whole cheerleading squad in here,” Heilman said, laughing at the memory. “What is happening?”
As time went on, she and Miller realized renting gym space caused nothing but problems. Gym members felt imposed on, and coaches were often confused as it felt like the facility was devolving into chaos. Heilman says they eventually decided it wasn’t worth the headache.
Today, they’ve gone back to their original, 5,000-square-foot gym. They no longer rent space to other businesses and they’re sharing the lessons they learned from their experience.
Five Tips For Renting Gym Space:
1. Start With Formal Agreements.
Heilman says to create a formal gym agreement upfront, even if you have a great relationship with your new tenant.
“Have everything in writing,” she said.
This includes parameters such as the days and hours they’re allowed to be at the facility. Clearly outline the space they’re allowed to operate from and the equipment they’re permitted to use.
She says that things will inevitably come up through operating the businesses. So build in amendments as you go, but at least start with an air-tight contract.
“Iron out as much as you possibly can (and put it) down on paper.”
2. Address Issues Immediately.
Heilman admits that one of her biggest mistakes in renting gym space was not dealing with problems the instant they arose. Instead, she turned a blind eye until the problem became too big to solve.
“The little things added up and added up and added up, and then they blew up,” she said. “You have to nip problems in the bud. And you also have to be prepared to cut the cord before the relationship goes totally sour.”
She added, “If they break any (rules), address it immediately. Don’t shy away from it. Don’t be afraid. If you feel like in your gut it’s not a good thing, or that you’re not sure, you probably shouldn’t do it. It’s probably not going to be worth it financially.”
Because if things don’t go as planned, it becomes stressful. Not just for your members but for you as a gym owner. You run the risk of your reputation being tarnished, causing even more damage to the business.
3. Avoid Overlapping Services.
If she decided to do it all over again, Heilman says she’d choose to rent to a business with a “completely different offering” than that of her gym.
For example, if your gym offers a nutrition coaching program, it’s best not to rent an office to a dietician.
Heilman is confident that she wouldn’t rent to personal trainers again for several reasons. First, she says it can create an unclear vision of what your business offers. Personal trainers may have different training methodologies, causing confusion in your gym. Second, you run the risk of trainers leaving to open their own space and poaching your current clients.
“You can’t be naive to this,” Heilman said. “There’s always a potential risk.”
4. Focus On Revenue.
As the gym expansion began, Heilman and Miller wanted to be accommodating to their new tenants. They offered a couple months of free rent, which she now admits was the wrong way to go.
“We tried to cut people breaks,” she said. “And we learned it’s never appreciated.”
In the end, all it did was increase the overall damage of the experience. Their advice is to remember the reason you’re renting gym space: Additional revenue. Inviting new tenants in without achieving any revenue goals is just adding people to your space.
5. Assign Space For Each Service.
The last piece of advice Heilman gave was to make sure each business has its own space.
For instance, if you have a massage therapist and chiropractor with a shared schedule in the same office, you’re setting yourself up for trouble.
“Sharing space isn’t ideal for anybody,” Heilman said.
Instead, and especially if you’re adding multiple businesses at once, start conservatively. Make sure each business is able to operate effectively in the space provided. Then add others as you’re able to accommodate.
In Summary: Choose Wisely When Renting Gym Space
If you’re considering renting gym space, take Heilman’s advice and do your due diligence.
Be sure in your gut that you have a good feeling about the person or the business. Write up formal contracts and be very clear about your expectations. Deal with problems the moment they arrive. Focus on revenue so you don't give anything away for free.
And above all, make sure it’s the right decision for the success of your business.