I’m Jon Fraser, the owner of Starting Strength Chicago. I’ve been working in the financial industry for the last nine years, but I’ve always wanted to start my own business. Over the last three years or so, I’ve been looking at several different options for a business, investment, or other passive income opportunity. I performed a detailed assessment of the options available to me, including purchasing a franchise, and decided to share this assessment with the Starting Strength community, especially those of you that are considering owning a Starting Strength Gym.

Before I get started, let me first say that the following does not constitute business, financial, or legal advice. This is my assessment, and if you are considering an investment of any kind, perform your own analysis and/or hire a professional to help you. All investments carry some degree of risk. The following is for informational purposes only. It is important to do your own research, come to your own conclusions, and potentially speak with your financial adviser about your access to capital, risk tolerance, and performance needs, as the costs and benefits can vary significantly for different individuals. I am not being compensated by the franchise company to write this article.

Reasons to Start a Business

Increased Earnings Capacity: In a typical job, one’s earnings capacity is limited by the value of their labor and how many hours they can work. It is very difficult to earn a lot of money with this approach. If you can use money that you have saved to make more money, then this limit on earnings capacity can be increased significantly.

Cash Flow Diversification: Starting a business provides another source of cash for expenses that is different from a normal salary/wage job or some other investment. Jobs can be lost, markets can retract, and businesses can go out of business, but having another source of income can help, should the worst happen.

Independence: This is a big one for many people who would replace their day job with their new business opportunity. In a typical job, you are at the mercy of your superiors and/or shareholders, but with your own business, you take those roles on as well. Independence is becoming more important with the increasing precarity, or lack of job security, in the modern labor market.

Additionally, current workplace policies are being shaped by political ideology, without much regard for their practical effect on the workforce. This makes independence even more important to those that would pursue business ownership in place of a day job. While this independence is great for the self-starters and risk takers, not everyone has that level of risk appetite.

Lower-Risk Entrepreneurship

An often-suggested route for a beginner to start their own business is to go through a franchise system. The reason for this is the balance of risk and reward that can be had with this model, as opposed to starting a one-off business. Entering into a franchise business fills in some of the variables that would remain unknown otherwise. Here are some of the key points that support the benefits of a franchise business:

Recognized Brand and Specifications: This is the defining feature of franchise businesses. Having a recognized brand instantly draws pre-existing demand to your business. “Jon’s Barbell Club” would not generate the same kind of demand on an early interest list the way that “Starting Strength Chicago” did. As of this writing, Starting Strength Chicago has over 450 early interest list subscribers. A strong and/or well-known brand is the most important factor in making the upfront franchise fees and continuing franchise royalty payments worth it relative to starting a non-franchise business.

In addition to the brand name, franchise businesses typically have specifications for the type of real estate, vendors, staff, and overall product/service being offered to ensure quality and a uniform experience between locations, effectively benefiting both the franchisor and each franchisee, as well as customers that might visit more than one location.

A Nationwide Audience: Startingstrength.com gets several million hits from the US each year, and around 50,000 of those are from the Chicago area. Since Starting Strength has a large and growing audience, marketing spent for each individual franchisee is not as high as would be needed for a one-off company to reach the same audience. Additionally, customers of an existing location can tell their friends, family, and co-workers in other geographies about their experiences if a new location is opening in their vicinity. For example, I have had trainees at Starting Strength Dallas tell their friends and family that Starting Strength Chicago is opening, which has led those friends and family members to speak with me.

Business Launch Assistance: There are myriad issues that come along with opening a business, especially as a first-time owner or a new industry entrant. Having a franchise team to help you make decisions and avoid problems can save time and money that you can’t afford to give up in the pre-opening launch phase. Buyer beware: Other than initial training and access to preferred vendors, guides and manuals, franchisors are not required to provide any business launch assistance. Interview other franchise owners before purchasing a franchise to find out how supportive the franchise team is.

The franchise team has exceeded my expectations with their level of support. Ray, Jen, Ben, Nick, Cathy, Phoebe, Inna, Andrew, Lacy, and Dana have been indispensable in helping drive me to the goal of our opening. The team has gone out of their way to support me with gym design, construction, hiring, marketing, social media, purchasing, opening, lease negotiations, technology, sales, and operations.

Operational Expertise: Having several other franchise owners is a great source of feedback for new franchise owners. They have seen what works and what doesn’t. As a group, best practices can be communicated and documented.

Track Record: The Federal Trade Commission (“FTC”) requires franchisors to disclose openings, closings, and the financial performance of franchise locations. This gives the potential franchisee some background on feasibility and sets a range of expectations for potential financial returns.

Network Effect: The more a franchise brand grows, the more it generates brand awareness. The more brand awareness, the more demand; the more demand, the more the brand grows. If each gym has 30,000 cars per day passing by the store front sign, 100 gyms will create 1 billion impressions for the Starting Strength brand.

Survival Rate of Franchise Businesses vs. Pure Start-Ups: Franchise businesses typically have lower failure rates than pure start-ups, although this may not be true at the individual brand level.

Startup Costs

Relatively Low Capital Investment: Big box gyms, restaurants, and even some of the smaller boutique fitness concepts have high capital investments. Many restaurants and fast-food concepts will require at least $500,000 in initial capital investment, and in some cases in excess of $1 million.

In the health/fitness/sports space, an Orangetheory is going to run you somewhere between $600,000 and $1.5 million, and an F45 will be between $300,000 and $500,000 to open and operate for the first few months. Starting Strength Gyms’ initial investment range is between $175,000 and $375,000, depending on the market price of labor and materials, the extent of the build-out, and tenant improvement allowances. This places Starting Strength Gyms at the lower end of the small floorplan fitness and business services concepts, just above cleaning businesses, and below the ‘express’ type food/restaurant concepts. To get a feel for some of the statistics on other franchises, visit Entrepreneur's Franchise 500 list.

I invested in a Starting Strength Gyms franchise due to the low cost of entry, the attractiveness of the concept, the power of the brand, and the strong business fundamentals. Their performance to date has exceeded my expectations and the support team has been the most valuable aspect of this investment to date. I’ve found that this undertaking is much like physical training, but for my mental faculties, business savvy, and work stamina. It has not been easy, but it is my first step towards becoming an owner of several Starting Strength Gyms in the greater Chicago area and as Rip points out, “Comfort is highly overrated, and almost always incompatible with progress.”  

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