{"id":3751,"date":"2015-12-08T20:56:09","date_gmt":"2015-12-09T01:56:09","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/amenzone-training-for-life\/"},"modified":"2015-12-08T20:56:09","modified_gmt":"2015-12-09T01:56:09","slug":"amenzone-training-for-life","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/amenzone-training-for-life\/","title":{"rendered":"AmenZone \u2013 Training for Life"},"content":{"rendered":"

Brief Personal Interlude <\/em><\/strong><\/p>\n

I discovered AmenZone working on a project in Arizona. Over the course of the project the entire team participated in AmenZone classes. \u00a0After the workout class, we\u00a0would discuss the inherent flaws in the business and operating model of AmenZone.<\/p>\n

The Business Model<\/em><\/strong><\/p>\n

AmenZone Fitness is a community of gyms that advocates a no weight, no machines, no mirrors, no frills approach to fitness. While its, \u201cno equipment no excuses\u201d attitude may seem reminiscent of CrossFit, the inspiration is much more personal to the founder.<\/p>\n

Story of AmenZone<\/a><\/p>\n

AmenZone monetizes in the following ways:<\/p>\n

Workout classes<\/u><\/em><\/p>\n

According www.AmenZone.com, AmenZone has five locations – three corporate owned Arizona locations and two franchises in Quebec, Canada. \u00a0Depending on the location,\u00a03- 5 classes are offered daily.\u00a0While prices are not posted on their website, from personal experience the drop in fee for a class is $20 and a monthly pass is $100.<\/p>\n

Personal Trainer Certifications and Franchises<\/u><\/em><\/p>\n

At the end of every class the instructor made an announcement was about the opportunity to become an AmenZone certified trainer and franchise owner. Click the link below to hear the pitch:<\/p>\n

Certification and Franchise Opportunity<\/a><\/p>\n

No particulars of the franchise agreement were ever shared, but due to their limited access to legal services I am assuming the franchise agreement was standard involving an initial investment of ($5,000 – $10,000) and then 5-6% of gross revenues thereafter.<\/p>\n

Merchandise <\/u><\/em><\/p>\n

AmenZone sells three categories of merchandise: (1) apparel ($20-$55); (2) DVDs and books ($10-\u00a0 $17) and (3) a signature workout tire ($50).<\/p>\n

Operations Model<\/em><\/strong><\/p>\n

Workout classes<\/u><\/em><\/p>\n

According to the AmenZone website, their first location is 3,000 square feet implying a maximum occupancy of 60 people.[1]<\/a>\u00a0\u00a0 \u00a0Assuming that in a month every class is sold out to drop in students only, that would imply monthly revenues of $183,000:<\/p>\n\n\n\n\n\n\n\n\n
Classes per day<\/td>\n5<\/td>\n<\/tr>\n
Days per month<\/td>\n30.5<\/td>\n<\/tr>\n
Classes per month<\/td>\n152.5<\/td>\n<\/tr>\n
Students per class<\/td>\n60<\/td>\n<\/tr>\n
Price per class<\/td>\n$20<\/td>\n<\/tr>\n
Monthly revenue per location<\/td>\n$183,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

[1]<\/a> https:\/\/cfo.asu.edu\/ehs-occupancy-limits?destination=node%2F1071<\/p>\n

However, the fully subscribed assumption is likely untrue given that the three Arizona locations are close to one another and likely cannibalize one eachother.<\/p>\n

\"Screen<\/a><\/p>\n

Initially, I thought the low number of classes per day and proximity of gym locations was to reduce the staff cost by having staff work at more than one location. However, class times are too consistent across locations for that to be true.<\/p>\n

While the topline number isn\u2019t that impressive, the real strength in the model is the low costs. \u00a0Consider the following:<\/p>\n\n\n\n\n\n\n\n\n\n
Expense<\/strong><\/td>\nNotes<\/strong><\/td>\n<\/tr>\n
Facilities<\/td>\nDue to limited number of classes, utilization is approximately 20%<\/p>\n

(5\/24 hours)<\/td>\n<\/tr>\n

Insurance<\/td>\n<\/td>\n<\/tr>\n
Utilities<\/td>\nAs part of the back to basics experience, no air conditioning is used significantly reducing utility expenses<\/td>\n<\/tr>\n
Instructors<\/td>\nInstructors are paid an hourly rate. Most instructors have other full time employment.<\/td>\n<\/tr>\n
Marketing<\/td>\nAmenZone primarily relies on earned media including local news stories and word of mouth. Additionally, the gym has affiliation with Arizona State University (\u201cASU\u201d) athletics. Frequently Division 1 ASU student and alumni athletes attend classes.<\/td>\n<\/tr>\n
Equipment<\/td>\nJust kidding! No equipment, no excuses.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

While the corporate owned locations are profitable, they are difficult to scale due to the limited hours that members are interested in taking classes.<\/p>\n

Personal Trainer Certifications and Franchises<\/u><\/em><\/p>\n

The certification and franchise scheme is the element of the operational feature that is most misaligned with the business model. The primary issue is that it is not evidently clear what any franchisee would receive from a franchise agreement with AmenZone.<\/p>\n

Generally, franchisors provide franchisees with a recognized brand and marketing, access to required startup capital and training.<\/p>\n

AmenZone is a new brand that does not actively spend on marketing. AmenZone\u2019s most effective marketing tool is its Arizona based network with local media and athletes that franchisees would not benefit from.<\/p>\n

Access to to affordable capital is generally one of the most critical elements to attract franchisees. The no equipment philosophy and low upfront required capital investment eliminates a huge value component and makes the franchising model particularly ill-suited.<\/p>\n

Finally, while an AmenZone work out classes are great and effective workouts, they are not difficult to emulate without training.<\/p>\n

Merchandising <\/u><\/em><\/p>\n

Merchandising is the most coherent element of the business and operating model. That said, selling workout equipment introduces a certain amount of tension with the no equipment philosophy.<\/p>\n","protected":false},"excerpt":{"rendered":"

Why doing more with less is hurting AmenZone and its growth through franchise strategy. <\/p>\n","protected":false},"author":1060,"featured_media":3783,"comment_status":"open","ping_status":"closed","template":"","categories":[209,665],"class_list":["post-3751","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-fitness","category-franchise"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nAmenZone \u2013 Training for Life - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/amenzone-training-for-life\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"AmenZone \u2013 Training for Life - 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