Buying an Existing Gym: Obstacle or Opportunity?
Buying an existing gym can be a smart proposition in many ways—ranging from built-in clientele to existing facility and equipment. However, it’s important for both seller and owner to do due diligence beforehand to make sure it doesn’t devolve into a sour deal or ongoing game of “He said, she said.”
Take for example the real-life case of George Strauss*, whose dream of buying his own gym quickly turned into a nightmare for both him and cheer professional Sherry Jones*. Less than a year ago, the two made arrangements for Strauss to buy Jones’ Midwest-based gym—today, each person has a distinctly different account of why that now-defunct deal imploded. Read both sides of the story:
Strauss:
A former college and all-star cheerleader, Strauss first sought to buy the gym in order to enter a new market. At the time, he was living an area of the West Coast where the all-star market was already congested and the cost of doing business incredibly high—making the idea of buying a Midwestern gym extremely attractive. After visiting Jones’ gym, he was sold. Strauss claims he made a down payment of $25,000 to secure the sale, but signed no contract—a decision he says he deeply regrets.
“It was very young-minded of me to do that without any paperwork and without any signatures,” says Strauss. “There was a lot of pressure on their end, saying they were going to sell the gym to other people if I didn’t give the money down. I paid them in good faith, based on many promises that if it didn’t work out they would return the money.”
After his family’s move to Indianapolis, reality set in, and Strauss says he felt blindsided. According to Strauss, the 14,000 sq.-ft. facility that he had been told was bringing in $20,000/month was actually only making around $6,000; he also says all of the clients he thought were members of the gym actually were not. “We had no business when we moved there,” says Strauss.
Strauss says the situation put his family in financial duress, and after the deal fizzled, he was upset that they never received their money back or a return on his investment. He thought of hiring an attorney, but says he couldn’t afford one. It was a painful lesson that Strauss hopes to never repeat.
Jones:
Jones tells a very different tale about what happened between her and Strauss. She says that Strauss did not pay $25,000, but instead agreed to put down a sum of $7,500 as an non-refundable payment in order to show that he was serious about buying the gym. (At the time, Jones had several interested buyers.)
“He knew that if he didn’t have the paperwork done by a certain date, the deal would be off and he would lose his earnest money,” says Jones.
After Strauss moved to the area, but before the deal was finalized, he began coming to the gym every day while it was still under Jones’ direction—and she didn’t like what she saw. “He was horrible to the employees,” remembers Jones. “He kept saying things like, ‘When I take over…’” She also learned that Strauss had been kicked off his college cheerleading team for assaulting a female teammate. Adds Jones, “It was red flag after red flag.”
Jones says that after about five weeks, one of her coaches informed her that Strauss had abruptly disappeared. “When I contacted him, [I found out] he had abandoned his apartment,” says Jones. “He was here for maybe a month, then in the middle of the night, boom—gone. He went into default on his end of buying the gym out.”
Looking back, Jones says she feels it was a “blessing that he walked away. I felt like I was putting my parents and kids who’d been with me for over a decade in jeopardy.”
The story of Jones and Strauss’ business deal gone wrong brings to mind an old saying: “There are two sides to every story, and then there’s the truth.” Though it’s doubtful anyone will ever know what really happened in their situation, it does point to several useful lessons for others considering buying or selling a gym—namely making sure both sides sign contracts to protect their interests. Jones says she also regrets not doing a more thorough background check before entering into the agreement, while Strauss says he should have done better research on the gym before relocating his family.
Gina Nicholas, who owns Legion of Allstars in Griffin, Georgia warns against making any deal that doesn’t feel right. One of the most important things to do, she says, is your homework. “Find out the reason they want to sell or buy,” Nicholas says. “If you’re not comfortable in a deal, just walk away from it.”
Nicholas, who has a background as a dental hygienist and a homemaker, stumbled into gym ownership when her then 9-year-old daughter was looking for a place to develop her cheerleading skills. Since buying her gym nearly six years ago, Nicholas has focused on the nuts and bolts—considering herself a “strictly business owner” while hiring the expert staff she needs to train the students her gym serves. The gym now boasts seven all-star teams with more than 100 athletes, says Nicholas.
Though Nicholas’ purchase went smoothly, she feels strongly about warning prospective gym owners before making such a major purchase. “You never leverage anything you’re not willing to lose, like your house,” Nicholas advises. One of her top tips is to tour the gym several times before purchasing and hire a professional who sells equipment to look over the gym’s assets; that way, you can find out what they are worth based on depreciation. This approach can protect people from being taken advantage of and paying too much for used equipment, she says.
Nicholas also suggests considering alternatives to buying. “If at all possible, rent a facility,” she says.
After months of struggle, Strauss says he was finally able to recover financially. He has since relocated his family to the South in hopes of a brand-new start with his own camp and choreography business. While he wishes he had done things differently, he hopes others learn from his mistakes. “Don’t get your heart set on something and pay for more than what it’s worth,” says Strauss. “Look at things smartly. If you feel like something is wrong initially, it probably is.”
-Writer: Karen Jordan; Photo: via AK Athletics
*Names and details changed for privacy