The total investment necessary to begin operation of a single new GNC franchise store ranges from approximately $180,504 to $347,270. To convert a single company-owned store to a franchise store ranges from$145,050 to $855,550. You will need to have at least $130,000 in liquid assets to qualify for your own GNC.
Royalty is 6% of gross sales, ad fee is 3% of gross sales. Once your contract is up with GNC you have options for renewal by paying an amount equal to 37 1/2% of the original franchise fee. You will possibly be awarded a protected territory which will vary depending on if you are situated in a mall or standalone location.
If you are off put by lawsuits GNC may not be your best choice for a franchise. Class action lawsuits against GNC include complaints of “Unlawful Business Practices” and “Consumer Fraud” relating to how GNC offers discounts on alleged “regular priced” items. The plaintiffs claiming the regular prices are illusory and overstated and this led buyers to believe they were receiving a substantial discount when they were in fact not. There are several lawsuits related to this pricing scheme.
There were also a lawsuits seeking class action certification relating to their Gold Card program which was discontinued and members allegedly were not compensated. Lawsuits relating to deceptive advertising and allegedly misleading benefit claims of products, lawsuits concerning GNC’s policy of calculating minimum wage and overtime. There have been of course many lawsuits related to negative health effects allegedly caused by products sold at GNC stores. In fact the GNC franchise FDD reveals almost 30 pages of lawsuits both ongoing and concluded.
So how much does an average GNC store make? In their 2017 FDD GNC includes a financial representation that included revenues from 1021 stores that had been in business the entire 1 year reporting period of 2016. Average gross sales for that period were $487,358 with 421 stores exceeding that amount, and of course many stores not making that amount. Now what you should know when we go back to the 2014 FDD we have on file, average earnings back then were $535,901 for the year 2013, and $513,260 for 2014. We see a very clear trend of year over year declining revenues
Now if you are thinking $480,000 in gross revenue is still not that bad let’s explore that thought. Don’t forget you have to pay almost 10% right off the top to corporate for royalties and ad fees. Then back out your rent, payroll, taxes, cost of goods sold, insurance, licensing, etc what are you left with? Well that number will be highly variable based on the size of your store, number of employees, what state you are in etc. Fortunately we did find an approximation in the GNC FDD of what your rent and maintenance might be based on what other stores have experienced and I’ll post that chart on the screen, pause the video if you want to take a closer look.
Now to give you all a point of reference, and this really is an apples to oranges comparison so take it for what its worth, but the 2nd lowest earnings franchise on the QSR50, which is a list of the top 50 fast food stores, shows Subway stores earning $422,000. Thats the second lowest amount you can earn out of all 50 franchises with only Baskin-Robbins lower and they are often seasonal. If we reverse the sort from highest to lowest we see Chick-fil-A franchises earning 10 times that amount at 4.4 million per store. But Chick-Fil-A is a different story altogether and I’ll put a link at the end of this piece to our Chick-fil-A video for anyone that is interested.
So to wrap up there has been a definite decline in overall store revenue which GNC holdings attributes to decline in sales, pressure to slash prices on expiring products, and challenges within the sector. Most analysts and we would wholeheartedly agree, suggest the market is over saturated with brick and mortar options, and competing with online retailers with much lower expenses will become increasingly difficult. How many people will drive to a store when they can get same or similar products online for a lower cost delivered right to their door? And we all know the trend of people making purchases online.
If you didn’t already know GNC has plans to divest themselves of over 1000 company owned stores over the next few years that they will sell to franchisees. Can I ask you a question, when you have highly profitable stores with an amazing future is your first thought to sell them? You can make your own decision. #franchisecity