Cvp Break Even Analysis Paper
October 12, 2011
Cost-Volume-Profit and Break-Even Analysis
Snap Fitness Owning a business is an expensive and risky venture, but buying a franchise is one way to lower the risk and build confidence in the success of that new business. As a ‘no-frills’ type of fitness center, Snap Fitness offers its customers convenient, 24-hour access, hassle-free work outs without an annual contract. The company offers assistance in site selections, the build out and design of the gym, in-house financing, franchisee training sessions, and continued training support to promote successful franchise operations (Snap Fitness, 2011).
Snap Fitness Costs The initial investment to start a Snap Fitness franchise ranges from $76,113 to $361,695, which covers the franchise fee, leasehold improvements, utility/rent deposits, grand opening marketing, and training costs (Snap Fitness, 2011) . In one month at each Snap Fitness location $4,000 is spent on fixed operating expenses, and $2,000 is spent to lease the gym equipment (Kimmel, Weygandt, & Kieso, 2009). Budgeting for the variable costs, target net income, and satisfied or dissatisfied customers is crucial when running a gym, or any kind of business. The variable costs have been split up into six categories: labor, security, electricity, water, marketing materials, and supplies, and miscellaneous expenses. Some of these budgeted expenses are high and others low in the hopes that over the year they will even out. Once this Snap Fitness location has been in busy for a few months these numbers can be adjusted accordingly if needed. The budgets are: • For this new location budgeted labor is $10,000 per month. The owner receives $30,000 per year, which comes to $2,500 per month, but is expecting a steady increase for each preceding year. Seven full-time and part-time employees will be with wages ranging from $10 to $15 per hour. Only one to two
References: Kimmel, P., Weygandt, J., & Keiso, D. (2009). Accounting: Tools for business decision making (3rd ed.). Hoboken, NJ: John Wiley & Sons. SnapFitness. (2011). SnapFitness 24/7. Retrieved from http://www.snapfitness.com/corporate/franchise-opportunities