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Post-Pandemic Rate Raise Anyone?

May 21, 2020 by

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Considering the financial hit almost every single affiliate has taken in recent weeks, one of the obvious questions becomes: Should I raise my rates? Surveying affiliate owners quickly showed opinions on the topic are as varied and polarized as the question of whether gyms should be allowed to open their doors and resume business.

Three Top Trends: As gyms all across the globe face different challenges, rate increases are varied but three trends emerged after speaking with more than a dozen affiliate owners:

  1. One group of owners intend to raise rates to off-set post-COVID restrictions and regulations.
  2. A second group plans to raise rates, but also increase services and offerings.
  3. A final group does not see this as an opportune moment to increase fees.  

Raising Rates to Reflect the New Operating Landscape

Smaller class sizes and increased operation costs make raising rates necessary and easy to justify, say proponents.

  • Thomas Sampson, owner of CrossFit 235 in Menomonie, WI,  intends to increase his rates by $5-7 per person on first-time members once he re-opens. However, current members won’t see the increase until their membership term expires.
  • Sampson: “Cost of operations will increase due to precautions needed to be taken to stay in operation. Cleaning supplies, class offerings, at-home options etc.”

Another approach some affiliates are taking is to raise personal training rates only for now. DeAnna Williams, the owner of CrossFit 253 in Lakewood, WA. is taking this approach.

  • She also intends to re-adjust her regular membership rates as of September 1, she said. “(The) original plan was April 1, but because of COVID-19 we’re holding off,” she said.

While most rate increases sound palatable — between $5 and $25 a month — Chris Williams of Altamont Performance Lab in Tracy, CA is switching his business model to being strictly semi-private, semi-customized programming.

  • As a result, he’s increasing his rates by $100 a month on new members, with a “slow increase for our founding members that are at $199,” he said. Class limits will drop from eight to four clients at a times following a more individualized program, he explained.
  • Williams: “We have been communicating to (clients) that the model is changing to allow us to open soon and stay open long term, and it has been a positive response to date.”

Raise Rates while Offering New Services 

If you’re going to increase rates, you must add value, warned Tony Frezza, the owner of FitTown Jupiter in FL. If you don’t, “you might increase your way right out of business,” he said.

  • CJ Martin, the owner of the well-known CrossFit Invictus, which has multiple locations, is of a similar mind.
  • “Generally speaking, I’m all for affiliates raising their rates if the service they’re providing justifies the rate. For example, if they have decided on the backside of this thing that they’re going to be providing more individualized training options, moving to predominantly small group coaching etc., I could see the justification for increased rate,” he said.
  • Martin: “If they’re simply raising rates because they’ve incurred losses in membership or (have) increased expenses with things like cleaning supplies, I would have a tough time justifying that…I wouldn’t increase prices unless we had significant changes in the services we were providing.”

Chase Tollson, the owner of CrossFit Algonquin in IL, is doing just this. He isn’t raising rates, per se, but when he re-opens he’s only going to offer his higher value service offering, which includes some individualized program design, and will remove his former base level offering that included group classes only.  

  • “We won’t be raising rates for existing members, but we will only be taking on people that want to be part of our hybrid individual design program, which will be above $250 per month,” he said.
  • Tollson’s hybrid individual design model has clients following individual programming during the first part of the class and then they all join together at the end for a conditioning piece, he explained.
  • “So the hybrid (membership) is still a class time, but with customized work delivered via TrueCoach and written by a coach who has taken the member through at least a handful of private sessions,” he said.

Refusing to Raise Rates

Some gym owners feel strongly that now is not the time to increase your price.

  • “Raising rates at reopening is a horrible idea. Down the road when things get back (on) track, yes. But right now, no,” said Craig Stiritz, the owner of Heretic CrossFit in Gaithersburg, MD.
  • “Heck no. It has been a financial strain for so many. I would say wait until the fall or new year. Right now just be happy that your members are coming back,” said Marta Blaze, the owner of CrossFit Pickering in Ontario, Canada.
  • “Eighty five percent of our members have chosen to continue to pay their full membership rates through this. So, in my case, absolutely not. I’m actually trying to find a way to reward those people when we are able to open again,” added Caleb Ball, the owner of Pale Horse CrossFit in Charleston, SC.

Key Takeaway: Focus on the Numbers, not the Emotions

Some gym owners caution making the decision whether or not to raise rates based on emotion. Instead of it being a philosophical debate about what’s right and what’s wrong, they suggest looking at your actual business data, as opposed to being steered by fear and emotion.

  • “Make decisions based on facts, not feelings. If you’re in the red and you’ve exhausted all marketing options or need to increase average client value, then consider raising rates. You need to be paid. Your people do (too). Your expenses go up. These are real things,” said Tyler Sullivan of Badger CrossFit in Wauwatosa, WI.
  • “If you are doing it without any reason other than, ‘I need money,’ or you think you should just because, I’d suggest (you) look at the data first and evaluate your needs,” he added.

CrossFit Games champion turned gym business guru Jason Khalipa agrees. This should be a “very case-by-case” situation, he said. It should come down to economics and figuring out how you can properly service your clientele in your current square footage.

  • “Owners will need to evaluate how many members they can accommodate, specifically given the new restrictions, and what their revenue potential and expenses are,” said Khalipa, the owner of NCFIT with multiple locations.
  • “Based on that, they will need to determine if raising rates is required to remain sustainable,” he concluded.

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