To Sublease or Not to Sublease

Andrew posted a comment a few weeks back asking for my thoughts regarding subleasing space in his soon to open affiliate to some guys who are interested in paying a portion of the rent in exchange for using the space to train power lifting and strongman workouts.

Here is that question, followed by my thoughts:

I need your help. This is sort of off the topic, however it is regards to business. I am planning on opening up a new affiliate in the next month and have had a number of people who are excited about becoming members of CrossFit Fort Wayne.

One particular gentleman e-mailed me the other day and is very much into power lifting and strongman workouts. He mentioned that he has about 15 other guys who get together every now and then but have no place to workout in the area.

He would like to know if we would allow him to use part of our space with a power rack, platform, and bench. He’s willing to pay a portion of the rent however I’d like your opinion.

I like the idea of getting some extra money and spreading the word, however I do have some reservations. They are as followed:

1. I don’t know anything about subleasing.

2. Insurance. I am sure that our premium would go up.

3. I’m afraid it will change the environment of our box.

4. We are just starting and new to all this!

5. I’m afraid of loosing potential future clients.

6. Contracts. I’m assuming I’d have to write up a new contract.

These are all really spot-on reservations.  First, if I’ve learned anything at all in the last 7 years it is to listen to your gut on all decisions.  Yes, you need to look at numbers, etc. But if there is even the tiniest of red flags waving in the back of your mind you need to bring it forward and take a long hard look at it.  That said, here are my thoughts regarding your situation:

First, I would suspect you would need to thoroughly review your current lease agreement.  Many lease agreements have stipulations regarding whether or not the property can be subleased and you will want to check this first so you don’t jeopardize your relationship with your landlord.

If you decide to bring these guys in you absolutely need a contract or agreement of sorts.  Things like:

• Amount of rent to be paid by what date.
• What hours are they allowed to train (you need to consider that even though you may not have 100 clients out of the gate you may get there sooner than you think and you may have a conflict with these guys be taking up prime space at prime time).
• Conduct and cleaning.  What are their responsibilities regarding equipment maintenance and cleaning up after themselves.  This should be clearly defined (ie. All chalk will be cleaned up, weights returned to proper location, ie.)  Will they have any other responsibilities?  Bathroom maintenance, etc?
• A provision for ending the agreement.  Let’s say at some point, for any reason at all, you decide you don’t want to sublease to them anymore. Or they may decide they don’t want to sublease from you.  There needs to be a provision that either party can terminate the agreement at any time…or with a 30 days written notice (just throwing that out as an example).

Your concern about changing the environment of your box and losing potential new clients is also a valid consideration.  What is the demographic you are going after?  Is it young male power lifters and strong man competitors?  (Not a typically bread and butter client for most affiliates.) Or is your demo primarily 30-55 year old women who want to lose weight and have a nice fanny?  It would be easy to imagine a scenario in which you have a few middle aged women walk in to check out your gym and see a few shirtless guys chalking up in the corner and think that your gym is not for them.  Not that you need to have a flowery, pastel environment…but first impressions really do matter.

One final thing.  I know it is tempting to offset your rent when you first open your doors by subleasing to other folks, but you should be opening your doors based on what YOU can generate and produce out of your box.  And hopefully you have planned adequately and have some capital to get you started and get you through the beginning months when you don’t have a huge client base.

Target demo?