finding the perfect space, and once land- lords are competing for you, you’ll get better rates, he adds.

Connect with developers and real estate agents

Working closely with local develop- ers and real estate pros can give you security, says Wes Hodgson, manager of Popeye’s Gym in Kitchener, ON, and Fitness 360 in nearby Waterloo. “They can tell you about all the available op- tions and, at least in a smaller city, even where other clubs are considering locat- ing.” Another plus: “With a developer who owns a large radius of property, you can negotiate to lock down the club busi- ness for that particular development.” But be cautious, warns Dean

Hartman, president of Nubody’s Fitness Centres in Atlantic Canada: “Not all real estate agents know the fitness business and that we don’t typically pay the rent that other retailers pay. Our company likes to sit down with developers and get creative with their least desirable space and see how we can make it work for both of us.”

Map out FSAs

Once you’ve narrowed down a location, visit www.canadapost.ca for details on the number of residents and businesses in that specific Forward Sortation Area (FSA). “Print out a map and pinpoint your potential location, your competi- tors’ locations and available land where you or competitors might locate,” rec- ommends Hodson. “Then look at the marketing and corporate opportunities around you.”

Check out the landlord

If you’re considering a location, ask sev- eral long term tenants for their opin- ions of the landlord. If he’s slow to deal with repairs or difficult to work with, you may want to move on. But don’t au- tomatically dismiss a landlord who is simply disorganized, suggests McPhee. “If he’s just slow to fix something like a roof leak but the rent is good deal, it might be worth a few headaches to pay for the expense yourself and then de- duct it from your next rent payment. For example, if you have a 30,000 sq. ft. club and the rent is only $10 per square foot versus the $20 you were expecting to pay, you would save $300,000 per year.”

Consider room for expansion

Dream of owning a 25,000 sq. ft. club but can only afford 15,000 sq. ft. right

TOP DRAWER CREATIVE INC. 235 Carlaw Avenue, Studio 101, Toronto, Ontario, Canada M4M 2S1 T 416.462.1570 F 416.462.1689

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now? Be sure that the space you lease of- fers options for expansion or, if your ceil- ings are high, room to add a mezzanine, advises McPhee. “Always put in a first right of refusal on adjacent spaces. If it becomes available, the space is yours. Without this clause, to expand you will have to walk away from all your leasehold improvements – like special flooring, your HVAC system, showers, etc. – and perhaps pay a penalty to break your lease.” You never want to move, he adds. It’s far too expensive.

Analyze and negotiate the lease

It is important to understand that the ge- neric lease the landlord presents will al- ways be outrageously in favour of the land- lord, says McPhee. There will always be room for negotiation with a good landlord. “You need to take the lease apart clause by clause. About 25% of the clauses in a ge- neric lease can be modified in a club’s fa- vour without much negative impact to the landlord and great long term implications for the tenant.” If you’re leasing in a strip mall, “Be sure

your lease says they won’t lease space to another fitness club,” says Hodgson. “You should also request exclusivity on all of your current and potential revenue streams,

like tanning, massage and racquet sports, for example.” He also suggests looking at the top five revenue services in the most successful clubs in the industry and consid- ering adding them to your exclusivity list. Before you pull out your pen, take one

more step and let a real estate lawyer eval- uate the lease. ”A lease might look quite straight forward, but money spent to have a lawyer look it over could be the best money you ever spend,” says Hartman. “One little surprise, resulting from some- thing you didn’t understand in the lease, can ruin a partnership between a club and a landlord.” Hartman’s company presents potential landlords with its own very de- tailed lease that it has developed over the past 25 years of business. For example, re- garding operating costs it includes details about responsibilities around snow re- moval, landscaping, security, common-area maintenance and cleaning, and real estate taxes. According to Hartman, “You need to deal with these items upfront so you don’t get blindsided down the road.” FBC

Barb Gormley is the managing editor of Fitness Business Canada, a freelance fitness writer and a certified personal trainer. Contact her at www.barbgormley.com.

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Enhancing the Fitness Experience

January/February 2009 Fitness Business Canada 31

7/11/08 4:28:30 PM

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