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Running Fitness Program For New Gym

Business Law discussions

Running Fitness Program For New Gym

Postby Skene » Tue Jun 28, 2016 9:12 pm

I have a personal training business in New Jersey.  I work from a small gym as well as client's homes and do all the training myself.  I have loyal people who have followed me from a previous gym.  I presently pay the owner of the gym $500 per month.  After 7 years of doing business I had an offer from a larger facility.  They have pursued me for two years now and I am thinking it might be a good move now.  The company is much bigger and draws many more customers.  I need a little help on the way to negotiate a deal and how I would do business from this new location.  I want to keep it as simple as possible but it seems there is allot more to it that "simple".  

I would be running their fitness program with other trainers working for me.  They are asking for 25% of my gross sales.  I would basically be running my business out of their gym; I can bring my existing customers with me who will obviously join the gym, hire and develop new trainers,  and manage classes.  Can I pay the trainers as subcontractors so I will not have to concern myself with payroll?  Should I ask the gym to pay the trainers a minimum wage per hour?  I am not sure what pay percent I should get out of each session or package sold.  When I sign on new memberships should I get something from that also?  Finally these decisions would all have to be part of the contract, right?  I know I am asking many questions but any that you could answer would be great.   

Mark
Skene
 
Posts: 46
Joined: Sun Apr 06, 2014 3:28 am

Running Fitness Program For New Gym

Postby Cord » Wed Jun 29, 2016 5:34 am

I will try to answer your questions, but I also have my own questions that may affect my answers. Do they already have a fitness program that you will be taking over or are you building one starting from just you own base? I am going to assume the latter.  When they say 25% of your gross sales, does that mean that you pay all the trainers out of the other 75%(even if they handle the payroll)?  Do they handle the billing or do you have to do that?  Do you have to handle all the scheduling for all of the trainers?  If someone asks at the front desk for a trainer, does everyone get your name?  If you leave this new gym for yet a fourth gym, are you going to be allowed to take all of the clients, only your own clients, or none?  Do they get a cut of the revenues you get from clients who ask to be trained in their own homes?  When you "manage classes" but are not the instructor, how do you get compensated?

You definitely need a contract and need to think through these and many other issues.

Now to try to answer your questions:

1. Can I pay the trainers as subcontractors so I will not have to concern myself with payroll?  

The IRS has rules to help determine who is an independent contractor and who is an employee.  If the other trainers set their own work schedule, accept or decline clients, and develop their own training regimens with little or no supervision, it is possible that you might be able to treat them as contractors.  If you set the schedule and supervise them closely, it is likely that they are employees.  The answer is based upon weighing the facts and circumstances in each individual case.  If you treat them as contractors and are wrong, it can be a very expensive mistake.  As an employer, you are responsible for paying over to the IRS the employee's portion of employment taxes, even if you did not withhold them.  And there are significant penalties.  Once you have settled on the details of the arrangement between you and the gym, you should review the issue with a tax attorney or accountant.

2.  Should I ask the gym to pay the trainers a minimum wage per hour?

If the trainers are employees(either of you or the gym), they must receive at least minimum wages.  Generally, if they are contractors for IRS purposes, they are usually not employees for minimum wage purposes.  However, the tests are not exactly the same and some states have their own minimum wage laws that are more expansive than the federal definition of employee.  Again, you need to figure out how everything is going to work before you can answer that question.  If they are employees, it would be wise to try to get the gym to be the employer so that you avoid the accounting issues.

3.  I am not sure what pay percent I should get out of each session or package sold. When I sign on new memberships should I get something from that also?  

There is no right answer.  If you are paying them 25% of your gross revenues, that sounds like a good starting point for what you should ask for from the business you bring in.  However, they may have something entirely different in mind, like zero.  They may think that the 25% they are getting from you is only part of what they are getting, and that the new memberships are just another part of the package.  The way I see it, you should get compensated for everything you do.  That doesn't necessarily mean that the gym writes you a check for everything.  If you are taking a cut of the take from the other trainers, that cut may represent payment for hiring, training, scheduling and supervising, just as your profit would if you were running your own free standing business with employees.  Selling new memberships seems to me as if it is not otherwise covered by your gross receipts and should be covered some other way.  Remember, a membership is a monthly recurring revenue stream for the gym.  They will probably not want to permanently track who brought in which clients, so you will need to get a fair sized chuck of the first payments to  reflect the real value of the membership to the gym.

I hope this helps.  If you have other questions, feel free to post again.
Cord
 
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Joined: Sun Jan 05, 2014 3:11 pm

Running Fitness Program For New Gym

Postby Hrytherford » Mon Jul 04, 2016 2:25 pm

I have a personal training business in New Jersey.  I work from a small gym as well as client's homes and do all the training myself.  I have loyal people who have followed me from a previous gym.  I presently pay the owner of the gym $500 per month.  After 7 years of doing business I had an offer from a larger facility.  They have pursued me for two years now and I am thinking it might be a good move now.  The company is much bigger and draws many more customers.  I need a little help on the way to negotiate a deal and how I would do business from this new location.  I want to keep it as simple as possible but it seems there is allot more to it that "simple".  

I would be running their fitness program with other trainers working for me.  They are asking for 25% of my gross sales.  I would basically be running my business out of their gym; I can bring my existing customers with me who will obviously join the gym, hire and develop new trainers,  and manage classes.  Can I pay the trainers as subcontractors so I will not have to concern myself with payroll?  Should I ask the gym to pay the trainers a minimum wage per hour?  I am not sure what pay percent I should get out of each session or package sold.  When I sign on new memberships should I get something from that also?  Finally these decisions would all have to be part of the contract, right?  I know I am asking many questions but any that you could answer would be great.   

Mark
Hrytherford
 
Posts: 42
Joined: Wed Jan 15, 2014 11:51 pm


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