FORTUNE Small Business:

A road map for aspiring franchisers

Expert tips for running a fledgling fitness business that hopes to eventually franchise.

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(FORTUNE Small Business) -- Dear FSB: I opened a storefront business in my hometown this past January. We provide specialty training and diagnostics for athletes and fitness enthusiasts; I also sell apparel and gear for the type of clients we attract.

Prior to starting this venture, we had no model to follow to predict our success. We need to learn how to exploit our edge, improve our profitability, and grow the business, possibly into a franchise. Can you help?

-Richard Diaz, DHP Elite Training, Camarillo, Calif.

Dear Richard: Your timing is right: Plenty of Americans are eager to embrace a healthier lifestyle and seek out services to support that goal.

Tom Waitley has owned seven Curves International clubs and is director of field operations for the woman's fitness franchise, which has more than 10,000 locations in 57 countries. He believes that the key to starting a franchise is creating a service that is repeatable, effective, and simple to emulate.

"Once you have determined the viability of re-creating your customer experience, you need to take a look at the financial requirement to get a storefront open," Waitley says. "Weigh that against your first year's profits. What is the expected rate of return? Is that return enough to entice a savvy investor?"

Waitley also recommends considering how much support you want to provide a franchisee.

"Low franchise and royalty fees may mean you give up a little control, while higher fees may allow for a higher level of support and control," he explains. "Investigate various models and decide which is best suited to your concept."

But before you get ahead of yourself, Brian Hamilton, co-founder and CEO of Sageworks, a financial advisory firm based in Raleigh, is quick to remind that most businesses fail because of cash flow issues. Evaluate your current club before you open new locations. Hamilton suggests nine key points to consider as you move forward with your venture:

1) Finance over the long term; when possible, convert short-term debt to long-term debt (which will usually require financing from the bank.) This will relieve cash-flow pressure by lowering short-term payments.

2) Compare monthly budgets with cost-reduction goals to keep costs down. Reduce overhead and fixed costs as much as possible - small increments add up. Even office supplies count here.

3) Keep a close eye on accounts receivables. Take action on overdue accounts; this is the lifeblood for any business.

4) Avoid prepaying expenses and take full advantage of trade credit, unless there is a discount involved.

5) Monitor the impact that tax payments may have your cash supplies. Always keep aside enough money to meet future tax obligations.

6) Maintain internal reports that help you monitor key performance indicators such as customer service and satisfaction feedback. Such indicators help managers make good decisions, which will translate to higher profits.

7) Make as many connections as possible with doctors, medical health groups and other similar professionals. They'll be a strong source of potential client leads, because they work firsthand with those concerned about their health.

8) Develop a forum on your website where you can foster a sense of community among your customers. Each platform where the business features itself (Web, trade journals, etc.) should help customers quickly identify you and your offerings as distinct from others. Seek out sources to advertise your business through branded merchandise, such as CafePress.com. Consider consulting a marketing or design firm to work on your branding.

9) Display realistic achievements and testimonials when appropriate. The fitness industry has been plagued with exaggeration. Maintain integrity, as character counts when establishing a long term reputation. Always keep honest communications at the forefront of your business.  To top of page

Do your customers love you?: Keys to great service

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.