PT on the Net Research

Contract for Hiring a Trainer


Question:

Do you have any suggestions about how I can attain a contract for hiring personal trainers? How much is a reasonable percentage to ask for, or what is the going rate?

Answer:

There are a number of challenges for a business owner when starting the process of recruiting personal trainers. The first decision that needs to be made is the type of relationship that suits your environment. This will then determine the type of contract. There are a number of options, the most popular being Employee, Contractor or Franchisee. Each relationship carries different challenges.

Employee

While this does carry a heavy management burden and seems to be very labor intensive, you do retain effective controls through the process. As the studio owner, you determine and manage many of the day to day processes, such as the receipting process, salaries, pricing and marketing. The costs involved with running this model will vary depending on your club size and member base, but typically the profit margins are not particularly high due to a high set-up cost, daily management, percentage split or hourly rate. In many cases, with an employee model, an incentive structure is also in play, which also decreases the profit margin. Another point to note is that the income from this type of relationship is dependant on the sessions sold and completed and in turn will vary radically from month to month.

Contractor/Tenant

This model is very different to the employee model in that trainers pay a monthly rental for access to the facility and member base, and in return, they can set their own fees, handle receipting and cash themselves. Depending on the number of trainers and the appropriateness of the fee, this will bring in a solid, consistent income to your business with less management time involved. The challenge here is to get the tenant to feel part of the team, conform to the uniform requirements and interact with the clients in the manner prescribed by the club. Due to the nature of the relationship, the club owner dictates the terms and conditions, and the trainer must conform to them. On a small scale, I have found this model to work effectively. Once a mass of trainers is reached, you can run into a bit of resistance and challenges from the base, especially around compliance issues like tardiness and uniform. Loyalty to the club is also a challenge. Again, this is dependant on the level of interaction from owners and number of trainers.

Franchisee

In this model, the studio owner sets the requirements and the franchisee (trainer) conforms. Trainers pay a monthly franchise fee, which allows them access to the facility and the member base. They set their own fees with guidelines from the club, and they have support from the club in terms of marketing and promotions. In many cases, the trainer feels more connected with the club, and due to the franchise relationship, he or she believes more in the facility and the brand associated. This model can be a challenge to institute in certain parts due to legalities, but it marries the best of both Employee and Contractor.

Now that you have the basic relationships available, you can make an informed decision as to which model will work best for you. The next step would be to consult with an attorney to determine the terms and conditions required. I would also suggest networking with other fitness professionals and studio owners to determine non-negotiables.

Once you have finalized the contractual arrangement, you can then determine the fees/percentage splits. In terms of an employee relationship, it is my experience that many studios have a percentage split of 60/40 in favor of the studio due to the additional costs involved in running the model. As the trainer "earns his wings," adds greater value to the studio and generates a broader client base, you can then incentivize to a 50/50 split. I have worked with employee models before where the split went as high as 70/30 in favor of the trainer, with an additional annual incentive scheme, which was very top heavy, but this was clearly a low profit model with a margin between seven to 19 percent. (Remember, the primary driver for the survival of this specific chain was sales, so PT was not required to deliver a big profit. In smaller studios, there is more of a reliance on the PT model to contribute to the bottom line.) One of the benefits of running with an Employee model is that you are able to pay varying percentage splits depending on trainer qualification and experience and therefore incentivize your top trainers.

The rates for Franchisee and Contract can be determined in a number of manners. I have detailed one such way below.

  1. Determine the one session price point. To do this, take into account the facility, demographic, member base, culture of personal training and disposable income in your area.
  2. Multiply this number by 12 to get a 12 session price.
  3. Multiply your 12 session package rate by two.
  4. The final amount should be between 70 to 90 percent of your rental/franchise fee, the premise being that if your trainer sold 2 x 12 session packages, this covers the main portion of the fee for the month. I have found this is both affordable and realistic.