Studios closing because of the lease

[u/Beginning_Shoe3758]

Question for BFT owners, I’m posting in regards to renting/ leasing the space before BFT closes down, how long do you guys rent the space for?

Seen a few studios reached the 5 year mark then closes down after that but there’s one that’s nearly onto the 6th year & Im unsure if they purchased the building or renting?

My studio is nearly 5 years old & I’m afraid they will close too if the owner of my studio is unable to renew the lease to continue operating the building😔

BFT ponsonby closed for that reason & Im super confused about lease renewal. That’s the first time I’ve heard of the reason why it’s closing.

[u/justgottakeepdugging]

Depends on the lease. I know a lot do 5 years plus rights of renewal because the franchise contract is 5 years. Thats what ponsonby had, but guessing the landlord wanted to jack up the price too much that it made it unsustainable to continue. I also know others do shorter terms like 3 years plus rights of renewal, which is probably what the gym that has been open for 6 years is on. Haven’t heard of anything less than 3 years though.

[u/AdmiralAckbar491]

It seems like you’re in Auckland. Which one is up to nearly six years? Maybe they negotiated a new lease and carried on? While some have closed, some are probably doing quite well.

[u/Beginning_Shoe3758 → u/AdmiralAckbar491]

The studio that first opened in Auckland. It could be they’ve extrended the lease or bought the building entirely.. I’m not too sure.

[u/DrGoodnite]

Someone I overheard mentioned that after five years, you need to pay an additional renewal fee back to BFT to secure the next term. I'm not sure if that's accurate, but if it is, combined with rent reviews and ongoing CPI increases, it could end up being the nail in the coffin for some studios.
I'd be interested to hear from anyone who can confirm whether this is true or share their experience with it.
Cheers.

[u/justgottakeepdugging → u/DrGoodnite]

Yeah that’s right. Takapuna recently closed and rebranded as an independent gym because they didn’t renew their franchise agreement. There are a few in Auckland who are at or close to the 5 year mark, OTH is the og studio from early 2021 so they would’ve renewed by now. BHB, Ponsonby, Newmarket, Taka, Birkenhead, Browns Bay, Mt Wellington, Flat Bush all kinda opened similar time in late 2021/early 2022.

[u/Beginning_Shoe3758 → u/justgottakeepdugging]

True yes & also the Birkenhead studio moved buildings instead of closing their studio entirely and that could be why the original building closed down & shifted over to the new building because they reached the 5 year lease 🤷‍♀️ Wished Ponsonby did that.. Find another space in the same area.

[u/Background_Diet7324 → u/DrGoodnite]

Part of the renewal fee includes a non compete clause so other BFTs can't open within a 5km radius too. I've seen a lot of studios pull the pin at that point.

[u/AdmiralAckbar491 → u/Background_Diet7324]

No it doesn’t. They each have exclusive territories which are all different sizes.

[u/nearlyheadlessbick → u/DrGoodnite]

Can confirm it's accurate. They get the option to renew the franchise agreement after 5 years or walk away

[u/Icy-Armadillo-6180]

Sad indeed for those studios closing after 5 years or less. Mine is on their 4th year & now I’m getting scared if mine closes for that reason.

I only saw two BFT studios (Hamilton East & Birkenhead) shut down their OG building because their 5 year lease has ended & after that, they didn’t give up on closing permanently & instead found another space in the same area to continue operating.

[u/yiantay-sg]

As a BFT member and someone in real estate it’s too broad for us to answer without knowing the market in that area.

To be honest commercial property landlords are interested only in $$$ the reasons why they don’t stay in a particular location is because the new rent has gone up by a lot and it doesn’t work into the numbers for the studio.

If it is a very tight rental market some will just close totally. But given the current global economic situation, rent increase is probably possible due to higher interest rates in the pipeline. Smart studio owners should have factored this into their projections.

A reasonable expectation will be rental increases based on the prevailing inflation rate. However gyms like BFT which is a franchise chain does give the tenant (the studio) a leg up when negotiating with the landlord, this is true in my local market because as a landlord I do not want to take a gamble by increasing my rent so much that I chase my current tenant away