Is a pickleball franchise right for you?
So you are thinking of opening a pickleball facility. You probably play pickleball yourself and are very passionate about the sport, or maybe you are an investor and know a good opportunity when you see one. With so many new pickleball franchises popping up in the last 2 years, a franchise might seem appealing.
On the other hand, those who value independent operation, creative control, and wish to avoid ongoing franchise fees might want to consider opening their own business. Here we take a good hard look at both sides.
The pros & cons of a franchise business
Opening a franchise business has its advantages in that much of the leg work figuring out processes, policies, operations procedures, and advertising have been done already by the franchisee. Other pros that come to mind include:
Lower risk - Franchises work because they have a proven business model and brand recognition.
Training and Support - You can expect sufficient help to get your new pickleball business up and running.
Turnkey - The franchisee has already done the heavy lifting when it comes to business systems you will use like your CRM, HR, and accounting software, your advertising model/methods, etc.
Operating Procedures - Franchisors will provide detailed operating manuals, guidelines and methods to simplify operations.
Established customer base - Typically a franchise will have an established customer base nationally (think McDonald’s).
Easier to finance - Franchises make real estate transactions, banking institutions and investors happier because of the lower risk factors of have an established brand and business model.
A fanchise also presents some drawbacks:
It requires adherence - As part of the contract you sign with a franchisor you must agree to adhere to the their established systems. This places restrictions on your creativity, which might deter anyone who prefers a little more freedom and autonomy with their business. What happens down the line when you decide it might be better for your particular business to pivot some of its offerings, change some color schemes, or even open a second location?
Franchisees often face ongoing fees - Franchise owners must share a percentage of their revenue forever, which can impact your profitability.
Is the franchise successful - This heavily depends on the franchisor's brand and management. Performing due diligence is critical before you buy in.
As attractive as opening a pickleball franchise may be it does come with several drawbacks. These mainly include the high royalty fees, the lack of established business models, and brand recognition (all reasons you would open a franchise in the first place).
Who might consider a pickleball franchise?
First and foremost you must have a passion for the sport, an understanding of the sport's culture, and a desire to invest in a structured business model. You should have some understanding of business operations. Individuals should also:
Be comfortable following brand guidelines and operating procedures set by the franchisor.
Have adequate financing lined up. For an indoor pickleball franchise, fees could be upward of $50,000. At least $1M in liquidity to cover startup costs for an indoor pickleball facility.
Be comfortable with rules and systems. Franchises have strict operating procedures you must follow.
Established vs. Unproven Franchises
When thinking about some of the top franchises in the US like Subway, ACE Hardware, or Anytime Fitness to name a few, it’s easy to begin to identify their strengths. These are all proven, popular brands where people know what to expect when they visit. The systems these established franchises use are exceptional—everything from staff training, to cleanliness, and customer service. This leads to reliable consistency and their success.
Unfortunately, no current pickleball franchise can demonstrate viability in these key areas:
Consistent same-store sales growth - Brands like McDonald's and Subway have sustained decades of same-store sales growth. When franchised locations continue to grow revenues year after year, it shows the concept has sticking power beyond just an initial fad.
Rapid expansion - When a franchise can open multiple locations quickly, it demonstrates the concept works well and has demand in many markets. Brands like Anytime Fitness, UPS Store, and Supercuts have expanded rapidly.
Survival through recessions - Enduring major economic downturns demonstrates resilience. Brands like Ace Hardware and Servpro have survived multiple recessions while continuing to expand.
Longevity - Simply surviving and thriving for decades is a mark of success. Franchises like RE/MAX, Jiffy Lube, and Century 21 have been around 40+ years.
Becoming a category leader - Leading a category in terms of location count, revenue, or brand awareness proves viability. Examples include Great Clips for hair salons and Orange Theory Fitness for boutique fitness.
Consistent franchise profitability - If individual franchise owners consistently achieve strong financial results over many years, it shows the model works for them as independent business owners.
Attracting investment capital - If private equity firms and other investors are eager to invest in brand expansion, it signals confidence in the strength of the concept.
Currently there is not a proven pickleball franchise in the market. As you research available franchises you will see that none of them currently tick off all of the boxes above.
Real estate companies prefer to lease to established businesses and lenders shy away from new, less established businesses. When you go to your lender or real estate broker ready to make a deal telling them you are opening a pickleball franchise one of the first things they’re going to want to see is how many locations do they have, how long have they been in business, and what does their balance sheet and year over year growth look like. That might turn into an awkward conversation fast.
So, if you are passionate about pickleball, you have some business experience, or experience in the another applicable field, and some capital, starting an independent pickleball business is a better route—especially if the idea of being answerable to a franchisor and operating under their shadow is unappealing.
Startup Costs vs. Franchise Fees
For less than the cost of a typical franchise fee, you can establish and operate your own business with all the necessary tools and systems. You’ll save money upfront, and it allows you the freedom to run your business your way. By owning your business independently, you avoid ongoing royalty payments, allowing you to keep all of your profit.
For example, many pickleball franchises charge a franchise fee of $50,000+ and take a percentage of your revenue (6-8+%). When any new business, it is very hard to make a profit in the first couple of years and that franchise fee gorilla on your back will not be going anywhere anytime.
An exceptional pickleball business (less than 5%) may be able to reach a 15-20% profit margin.
A good pickleball business (around 35%) may be able to reach 10-15% profit margin.
The rest will land somewhere between 10% and breakeven or worse.
When a franchisor takes around 7% of your profit margin right off the top you can see by looking at the margins above that around half (or in many cases more than half) of your profit margin will be gobbled up by the franchisee.
That means a good pickleball business that does $2M/year in revenue could take home somewhere between $200,000 - $300,000 in profit operating independently or $60,000 - $160,000 within a franchise. That’s around $1M in the first 10 years in franchise fees.
If your franchise isn’t crushing it you may not have any profit at all.
Working with our team of consultants will most likely cost less than the franchise fee.
Can you do it on your own?
Yes! You can do it independently, if you have a strong entrepreneurial spirit, a passion for pickleball, AND experience with at least one of the following areas:
Business Management
Operations
Human Resources
Commercial Real Estate
Investment Firms
If this is you, then our experienced team can help you bring your pickleball startup to life.
Independent business owners enjoy more freedom, while bearing the full responsibility for their venture's success or failure. If starting your own pickleball business is what you want to do, talk to us first.
Final thoughts
In conclusion, a pickleball franchise can offer a ready-made pathway to enterprising the sports industry. Yet, it is not without its challenges and may not suit everyone. Prospective franchisees must carefully consider their business goals, appetite for risk, and willingness to operate within a predetermined framework. You are not your own boss, the franchise owner is the boss. Ultimately, the decision to start a pickleball franchise or an independent business should align with one's entrepreneurial vision, resources, and passion for the sport.
But if you have a little bit of expertise in the areas mentioned above, then working with our team of consultants can get you from conception to opening, and sustained profitability. In the long term, this route will likely cost less than the franchise fee and it doesn’t come with any royalties.
At Hard Court Sports we help clients get up and running fast. We do revenue projections and feasibility studies, help you write your business plan, work with your lender and commercial real estate broker, write your operations manual, hire your staff, develop your branding, and more.
Before you set out to open your new pickleball business make sure you talk to us first.
