Contours FranchiseContours Franchise? United Nations - Universal Declaration of Human Rights
Article 19. |
Franchisors will often claim that your chance of success at your own business is greater with a franchise, this is simply not true. That is a lie, the research shows the opposite, go here for details.
Although NO franchisor will give you projected earnings claims, (they don't have to by law), they will instead use the media to build up hype about themselves and make indirect or implied earnings claims. This helps them build a buzz about themselves and this is not specificially about a Contours Franchise, but about any franchise. Here are some quotes from publicly available sources, again this information is not confidential but freely available and I have provided references. Notice the implied earnings claims and the inconsistencies.
In a trade magazine called "Fitness Business Pro" Volume 24; Number 3; 1 March 2008 Page 17, Pamela Kufahl reports the following 1. The simplicity of the model makes it affordable for people looking to become franchisees. It costs less than $100,000 to start up and Mr Hundt said it took about three months for franchisees to break even.(BUSINESS Shape of things to come Joanna Tovia 479 words 12 April 2007 Herald-Sun)
2. Unlike most franchisors that take a percentage of the revenue franchisees make, Contours charges a flat fee and that stays the same regardless of how much money a franchisee makes. (BUSINESS Shape of things to come Joanna Tovia 479 words 12 April 2007 Herald-Sun)
If a franchisor is confident that you can make money, wouldn't it make more sense for them to charge a percentage of earnings as the royalty fee. That way the franchisor can make more and the franchisee only pays on what they actually earn. Could it be they may not be as confidentin their contours franchise as they say.
3. With an initial investment of below $100,000, Contours says their franchisees can break even in the first few weeks of operation with known monthly revenues for the year ahead. (Finance In great shape for success - FRANCHISING: A SPECIAL ADVERTISING REPORT MATP 477 words 1 February 2007 The Australian)
4. "We've put a lot of time and effort in making sure that each individual business is successful," Hundt says. "When most people do their due diligence, they contact a couple of studios to see how they're going and 95 per cent of them have reached profitability in about six months. So, the attraction from a business point of view is very high, which is why the franchise has grown so quickly." (Supplement Gym franchises are fighting fit Pam Kershaw 808 words 17 October 2007 The Sydney Morning Herald)
What is due diligence exactly? Find out Here.
5. Hundt says most franchisees become profitable after signing up about 200 members, which generally takes six months. A studio reaches maximum capacity at about 700 members. (Supplement Gym franchises are fighting fit Pam Kershaw 808 words 17 October 2007 The Sydney Morning Herald)
200 members, let do the maths 200 x approx $50 colection fees are taken out. = $10,000. Rent $3,000 Royalty/Marketing $1,000 Insurances, Sound system, Software, Electricity, Internet Connectiom, Stock, local marketing, GST, superannuation for staff. All add up to another $3,000 at least. Let's assume you have 2 workers, covering 70 hours per week at $18 an hour. + $1,276 per week which is $5,100 in wages. Leaving you a net profit of minus $1,000 each month.
It is important to note that break even does in fact mean to recover your initial investment. Remember franchise agreements are for a term, if you invest $150,000 on a franchise, you are not making a single cent until you first pay yourself back the $150,000, that is $15,000 a year you need to make clear after expenses just to get your investment back if you last the full ten years. Of course most people would like to start making a profit much sooner, like 5 years, which is $30,000 a year you need to make on top of regular earnings.
That's is assuming you had the money already and didn't borrow a single cent, don't forget if you did borrow to add the interest you will be charged over the term. This is just simple maths, you would apply the same theory to any business investment, not just a contours franchise, any business or otherwise, or really any investment at all, after all the point of any investment is to make a profit.
$100,000 invested to start - three months to break even would be $33,000 profit per month. I smell something........
Now just to drive the message home about earning claims Richard Solomon is an attorney that has written a a great article on this very topic on his website "Franchise Remedies" Figures Don't Lie, but Liars Figure Long and well worth a read
Contours Franchise failure rates, currently 144 studio open, 15 or more for sale, over 10% currently for sale, a telling statistic.............
If you want to know the real figures ask Contours to show you the financials of all studios combined, this data is kept by them as all studios must submit their monthly sales reports. So it should be easy to access this information. This information is kept by the Franchisor for one reason, to workout the best locations to sell another Contours Franchise
Update: Upon finding this site Contours has sent me a letter stating I put in writing, that I will close this site down - they end the letter asking me not to tell anyone about that letter and their request - I never agreed to any of that - my response is HA!
Visit the excellent Australian based site Australian Franchise Lies
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