The Little Gym: a Profitable Franchise With a 5 Years Payback

One of the leading children gym franchises, The Little Gym has more than 150 locations in the US alone today. It’s also a very profitable franchise, which explains partly why it’s so popular among franchisees.

Indeed, you would need to invest on average $327,000 to open a new gym, yet this business would make on average $433,000 in revenue per year! In addition, we found the payback period for The Little Gym is only 5 years which is very good for a fitness franchise.

So should you invest in a The Little Gym franchise? How much does it really costs? And more importantly: how much profits can you realistically make with this business? Let’s dive in!

Key figures

Franchise fee	$49,500
Royalty fee	8.0%
Marketing fee	1.0%
Investment (mid-point)	$327,000
Revenue	$433,000 per year
Revenue per square foot	$135
Sales to investment ratio	1.3x
Payback period*	5 years
Minimum net worth	$250,000
Minimum liquid capital	$75,000

What is The Little Gym?

The Little Gym is an American chain of infant and child-oriented fitness gyms headquartered in Scottsdale, Arizona.

It was founded by Robin Wes in 1976 in Bellevue, Washington and follows the guidelines set by USA Gymnastics.

Its studios offer classes in gymnastics, dance, karate and Kindermusic to foster the enrichment and development of children ages 4 to 12 and help build the confidence and skills needed at each stage of childhood.

The Little Gym began franchising in 1992 and currently, it has more than 345 studios worldwide and 170 in the US.

The Little Gym franchises pros and cons

The Pros:

• Quality training: The brand offers its franchisee extensive training to equip them with the business model and prepare them and their staff for a successful grand opening. Also, franchisees get an online training system to train their employees to ensure quality and continuity.
• Third-party financing: The franchisor guides its franchisees on the funding and referral of third-party lenders to finance their startup and ongoing costs. Also, it helps them with financial management training and reviewing proprietary financial and analytical tools to operate their gyms.
• Marketing and sales: The brand has an experienced marketing team to help franchisees grow their businesses. It offers them efficient marketing solutions and tools such as online marketing, email marketing, in-gym marketing, local studio-targeted promotional campaigns, print and public relations.
• Extensive corporate support: With an experienced corporate team, the franchisor helps franchisees get started quickly by giving them growth strategies. Franchisees also get consultations and regionalized calls with other successful franchise owners.
• Multiple income channels: The brand provides franchisees with a variety of classes to deliver excellent services to their members. In addition, it provides extras such as birthday parties, parents’ survival nights and camps, which improve sales and profitability.
• Site selection and construction: The Little Gym real estate team provides franchisees with site selection, design and buildout for their local studios. It also helps them with lease negotiation services to reduce development costs.

The cons:

• Not a home-based opportunity: The franchise cannot be operated from home or a vehicle. Franchisees must have a fixed office space, a warehouse or a retail facility.
• Not a part-time business: The Little Gym franchise is not a side business or part-time business. It requires franchisees to operate according to the parent company’s operating hours.
• Not a passive investment: The franchise does not allow for absentee ownership. It requires franchisees to fully participate in the daily management and decision-making of their studios.
• No exclusive territory protection: The franchisor does not grant its franchisees a protected territory. Franchisees may face competition from franchises granted by the parent company or from competitive units it controls.
• Competition from other children sports franchises such as Amazing Athletes or i9 Sports to name a few

How much does a The Little Gym franchise cost?

You would have to invest on average $345,000 to open a Little Gym franchise, which is typically 2,800 – 3,600 sq. ft. in size.

Note that this is the investment for a single franchise with a standard territory gym. Indeed, there are 2 kinds of formats for the franchise you can choose from:

• Standard Territory: $344,950
• Medium Market Territory: $309,950

The investment amount is an average. Indeed, it varies based on many factors, such as the location of your gym franchise, its size, etc.

Here’s the full breakdown of costs per gym format:

The Little Gym startup costs (Standard territory)

Type of cost	Amount
Initial franchise fee	$59,500
Start-up equipment and inventory package	$53,000 – $65,000
Signs and fixtures	$8,000 – $15,000
Training related expenses	$5,000 – $10,000
Working capital 3 months	$35,000 – $70,000
Other	$62,900 – $246,900
Total	$223,400 – $466,500

The Little Gym startup costs (Medium Market territory)

Startup cost	Amount
Initial franchise fee	$39,500
Start-up equipment and inventory	$51,000 – $60,000
Signs and fixtures	$8,000 – $15,000
Training related expenses	$5,000 – $10,000
Working capital 3 months	$35,000 – $70,000
Other	$49,400 – $237,500
Total	$187,900 – $432,000

What is the turnover of a The Little Gym franchise?

On average, a The Little Gym franchise makes $433,000 in sales per year, or $135 in revenue per square foot.

Note that this number is the average sales per franchised gym pre pandemic in 2019. Indeed, sales have been significantly impacted in 2020 ($209,000) hence 2019 is a good proxy for how much turnover a The Little Gym can realistically make in 2023.

How profitable is a The Little Gym?

We estimate the average The Little Gym franchise generates $142,000 in profits per year. That represents a 33% EBITDA margin.

Note that The Little Gym doesn’t provide a detailed profit and loss for its franchises in its FDD. Instead, we had to make some assumptions using industry average percentages (for staff for example) as well as cost information available in the FDD (rent, royalty and marketing fees).

Profit and loss	Amount	% revenue	Source
Revenue	$432,889	100%	as per FDD
Staff	$(121,209)	28%	industry average
Rent	$(66,000)	15%	as per FDD
Royalty fee	$(38,960)	9%	as per FDD
Marketing	$(21,644)	5%	industry average
Other Opex	$(43,289)	10%	assumption
EBITDA	$141,787	33%

Should you invest in a The Little Gym?

So should you buy a The Little Gym franchise? Are the profits worth the estimated initial investment? We think it does.

Indeed, if we compare the net profits (assuming 15% of revenue) to the initial investment of $327,000, we found that The Little Gym has a payback of 5 years, this is a great payback for a fitness franchise and, as such, a great investment.

Indeed we found fitness franchises have payback of 8 years on average: this means you would repay creditors and investors (anyone who provided the funds to pay for the initial investment, including yourself as the franchisee) within 5 years on average.

Yet, do keep in mind that profits shouldn’t be the only factor to take into account when choosing a franchise. Instead, you should also pay attention to things like competition, brand name, the franchisor’s support and training, etc.

How does it compare vs. other fitness franchises?

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