Variable Costs Essay
Any cost which is not fixed and will change in same amount when there is change in production volume is accounted as variable costs. This also means that they change in total rather than per unit whenever there is production or activity change. In production- labor, material or overhead could be the variable costs involved in the business. In Fitness center, there are different variable costs involved and each variable cost has its own unit and it changes with the change in the activity of that unit.
Cleaning Supplies: No customer would like to exercise or do workout if the workout area and machines are not cleaned properly. Therefore cleaning equipment is needed to clean machines and disinfect workout area on daily basis. The cost of supplies increases or decreases depending on how many customers attend the facility. If number of customers increases then the supply used for cleaning the area and equipment also increases (Attwood, 2011) Water and Laundry costs: Cost involved in customers taking shower and using towels, after exercise also depends on how many customers took shower in facility. Water and laundry costs may vary each day depending upon customers.
Electricity Costs: This cost also depends on the operational hours of the facility. Considering the change in the operational hours of the facility will also bring in change in the consumption of electricity, which directly affects the cost of the electricity. Therefore any changes in electricity cost with change in hours would be considered as a variable cost. Sporting Centers: Any fitness center may provide a squash, boxing or tennis rooms in their facility center. Customers will need items like tennis balls, boxing gloves or rackets to use these centers. Buying or replacing these items will depend upon the usage of these items and would change as the usage change. Sporting Merchandize: Fitness centers offer various sporting equipment’s, itemized by the cost of goods sold. Items like yoga rugs, workout balls, energy drinks to sporting clothes can be sold in a fitness center. Their cost and volume depends upon the number of customers buying those products or items.
Therefore they are included in variable costs as they change depending on their sales (Attwood, 2011) Employee Wages: Majority of fitness centers do not employ all full time employees. Apart from few full time employees, majority of them are part time or called in as requested, like fitness experts or employees helping in sporting centers. Therefore cost involved in wages depends upon the employee needed for covering busy business hours or customer asking for expert advice which can change depending upon customers. Apart from above examples there are many more variable costs involved in the functioning of fitness centers. Examples like shower dispenser, hygiene rolls, napkins, computer receipts, office supplies, liquid detergents are among various variable costs involved in the running of fitness facility.
Snap Fitness Franchise Opportunity: Business owners, when opening new business always considers different options. Depending on their experience and expertise in starting and running of a business, they can always choose to go solo (Independent) or seek help from experienced and experts known as Franchise. If a business owner chooses to go for Franchise, apart from paying franchise fee, owners also have to follow many rules of franchisor, like merchandize setup, type of equipment, Training programs, number of employees, facility operational hours and many more. Like many fitness businesses, Snap Fitness also offers its franchise to different owners. Requirements to own Snap Fitness Franchise includes startup cost, ongoing fees and Financing. Total Investment: $76,113 to $361,695 with $15,000 as franchise fee.
They also have ongoing Royalty Fee of $449.00 per month. Their term of contract or is for 5-10 years which can be renewable for another 10 years (Snap Fitness Franchise, 2012). Financial Requirements: Owner should have assets worth $250,000 net and $50,000 liquid cash in hand for staring up the business. As per Snap Fitness website, their 40% of franchises have more than one fitness facility and 20% of facilities are run by themselves rather someone else running for them, as absentee ownership is allowed in their franchise contract. Also there will be 2 days trainings held at the headquarters in Chanhassen, Minnesota and all the marketing materials will be provided by the franchisor (Snap Fitness Inc., 2012)
Attwood, E. (2011). Properly Cleaning and Disinfecting Fitness Equipment. Athletic Business. Retrieved from http://athleticbusiness.com/articles/article.aspx?articleid=3847&zoneid=42 Snap Fitness Franchise. (2012). Snap fitness. Retrieved from Snap Fitness Inc. (2012). Entrepreneur. Retrieved from http://www.entrepreneur.com/franchises/snapfitnessinc/328995-0.html