This week we're looking at how refurbishment costs can change the real value of a fitness club acquisition.
A seller might think they're getting a 5x EBITDA multiple, but the buyer has to consider the additional capital needed to upgrade the club. Once refurbishment costs are included, that same deal might feel closer to a 6x multiple to the buyer.
The condition of your club can directly impact your valuation.
The EOS acquisition of former Gold's Gym locations is a good example. With less deferred maintenance and fewer capital expenditures required, the seller was in a stronger position.
But the costs don't stop with the buyer.
Franchisors like Crunch can require mandatory capital expenditures before approving a transfer, especially when a club needs to upgrade from one franchise model to the next.
These requirements aren't just about how the gym looks. Franchisors also care about collecting royalties, generating product rebates, and ensuring clubs meet their brand standards.
For independent operators considering a sale, the lesson is clear: your EBITDA multiple is only part of the equation. Deferred maintenance, refurbishment costs, and mandatory franchise upgrades can all affect what a buyer is truly willing to pay.
Until next week—Go HALO!
We go into much more detail in the HALO Academy. Registration is open now for our next cohort: https://www.thehaloacademy.com
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RESOURCES
https://www.integritysq.com
https://www.halotalks.com
https://www.thehaloacademy.com
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ABOUT YOUR INSTRUCTOR
Pete is the Founder, Managing Partner and Chief Dream Architect at Integrity Square (""ISQ""), a leading boutique financial advisory firm focused on the $4.7T Health, Active Lifestyle, Outdoor (""HALO"") sector.
Since founding ISQ in 2010, the firm has played an active advisory role in 100+ mergers & acquisitions, private placements and advisory assignments across North America. Pete Moore and his team have also invested in passionate entrepreneurs at HigherDOSE, XTEND, and Promotion Vault.
ISQ's media and ""live education"" properties include HALO Talks, the leading B2B podcast in the sector, Time To Win Again, and the HALO Academy, an Executive Education Bootcamp Series.
Prior to ISQ, Pete was Head of the Active Lifestyle & Wellness Group at Sagent Advisors (2003-2010.) Prior to 2003, Pete was co-founder of FitnessInsite, a SasS sales management platform with 1500+ clients (based in AZ.) At FitnessInsite, Pete invested his personal capital, leveraged his credit cards and learned what it takes to manage a startup.
Pete built his business and financial acumen on top of the foundation laid at three critical positions early in his career: Senior Associate at Brockway Moran & Partners, the private equity owner of Gold’s Gym International, Inc; worked as an Associate at Donaldson, Lufkin & Jenrette; and an Analyst at Chase Securities. (Now JP Morgan.)
ISQ saw a need for a deeper & more useful level of education in the HALO sector. In response, we launched the HALO Talks podcast, with 500+ completed interviews and over 120,000 downloads. HALO Talks has become a “must listen” for anyone working or investing in the sector.
Pete graduated from Emory University (BBA, 1994) and received his MBA from Harvard Business School (1999.) While at HBS, he co-founded IRON PLANET, the leading B2B auction site for used heavy equipment, which was sold to Ritchie Bros for $758 million.
His hobbies include: Football, basketball, tennis, podcasting, amateur ventriloquism, pro bono DJ and fitness enthusiast.
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Find HALO Talks / Integrity Square at:
Website: https://www.halotalks.com
Integrity Square: https://www.integritysq.com
HALO Academy: https://www.thehaloacademy.com
LinkedIn: https://www.linkedin.com/company/integrity-square
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