If you are considering buying a gym, there are a ton of factors you need to consider. Most of them to can boiled down to legal and/or financial factors. If you need help with the financial factors, like valuation or due diligence, let us know. We can refer you to the best in the industry. Our expertise is in the legal factors. Thus, below are the four primarily ”legal“ factors you need to consider before buying a gym.
Ideally, you will consider these four factors in the beginning. We are talking about before you ever make your initial offer to buy (hopefully through a letter of intent). If any one of these four factors are in the negative, it is a big sign you should consider walking away.
Four Factors to Consider When Buying a Gym
- Is the current space leased or owned? We assume you plan to leave the gym in its current space. Assuming we are correct, you need to know whether the current gym owner leases or owns the commercial space. If the current gym owner owns the space, then your consideration is whether you plan to buy it or lease it from the current owner. If the current gym owner leases the space, you need to ask to see the current commercial lease to understand what limitations exist for subleasing or assigning that lease to someone new.
- What are the assets vs the debts? Every gym business, even those not making any profit, has assets. Assets may include equipment, brand, a current membership list, or a unique reputation in the town or city. You need to know what these assets are. You also need to know what debts or liabilities exist on the business. This will help you determine the value of the business and whether you want to offer an asset purchase or a stock purchase.
- What are the current written agreements? Here, we are talking primarily about liability waivers, membership contracts, and employee/staff agreements. Ask the current gym owner for copies of all written agreements. Then, have those written agreements reviewed by an attorney. You may need to change those written agreements and that is a big consideration for the current membership.
- What State is the gym located in? Every State has individual laws impacting gyms. These laws change from State to State and may change year to year. Do not assume that the current gym owner is in compliance with all State laws. For example, some States may require you to file a fictitious name. Other States may require a business license. Most States are going to require form cancellation language in your written membership contracts.
Move Forward With Eyes Open
We don’t mean to scare you away from buying a gym. We simply want you to go into your purchase with your eyes completely open. You are about to embark on a big journey. Take the time to check the boxes so you are set up for success.