The Little Gym franchise unit economics — a fixed-cost business where the bottom quartile loses money.

The Little Gym publishes one of the most complete Item 19 disclosures in franchising: a full quartile profit-and-loss including EBITDA, broken out across cost of goods, occupancy, advertising, payroll, insurance, and other costs. The highest-grossing gym did $1,900,457 in gross sales. The lowest did $99,608. And the bottom quartile, on average, lost money.

The Little Gym quartile profit and loss.

Averages across all 166 reporting gyms. Note the EBITDA line crossing zero between the third and fourth quartile.

Medians tell a similar story: $345,956 EBITDA on $980,161 in the top quartile, $233,537 on $758,371 in the second, $117,059 on $525,883 in the third, and negative $3,411 on $334,756 in the fourth.

Where the money goes.

Occupancy and payroll together are the whole model. Read as a share of sales, the pattern is stark.

Cost of goods, by contrast, runs between roughly 3% and 5% of sales across every quartile. On a $1M gym that is about $31,000 — the smallest line on the statement.

What separates the top Little Gym performers.

This filing discloses a full quartile profit-and-loss including EBITDA, which makes the drivers unusually legible — and the conclusion unusually blunt. The spread is not a cost-control story. It is an enrollment story that reads as a cost-control story because every ratio on the page has revenue in the denominator.

The finding that reframes everything else

Bottom-quartile gyms spend less than top-quartile gyms on every single disclosed expense line. Less on occupancy ($112,279 against $157,219). Less on payroll ($134,073 against $309,372). Less on advertising, insurance, and other costs. And they still lose money, while the top quartile earns a 35.7% margin.

Read down any column and the dollars fall. Read across any row and the percentages climb. That divergence is the entire model: a gym in the fourth quartile has already cut what there is to cut, and it is still carrying 76.7% of sales in occupancy and payroll alone.

Decided before you open

• The lease, and the ratio it implies at realistic revenue. Occupancy runs 15.1% of sales at the top and 35.0% at the bottom — but the bottom-quartile operator did not sign a worse lease in dollar terms. They signed a similar lease and did not fill the gym. Occupancy here includes rent, utilities, CAM, and landlord pass-throughs, so the figure to underwrite is materially larger than base rent. Model it against the revenue you expect in year two, not year five: at 35% of sales the model does not work, and at 15% it does.
• Trade area and catchment density. This is a business selling class enrollments to families with children in a narrow age band who continuously age out. That makes the addressable population a function of local birth rates and household density, and it refreshes slowly. Total estimated initial investment runs $420,324 to $722,773 for a single unit — committed before you know whether the catchment supports a $1M gym or a $400K one.
• Floor plan and class capacity. These gyms need clear-height open-floor space. Capacity is classes per week multiplied by children per class, and both are bounded by the physical room and by instructor coverage. You cannot add a Saturday slot that does not exist.

Live operating levers

• Class utilization, which is the metric under every other line. Payroll runs 29.6% of sales at the top and 41.8% at the bottom — but top-quartile gyms pay $309,372 against $134,073, more than double in absolute dollars. They are not paying instructors less. A gym needs a minimum instructor and front-desk floor whether it runs twenty classes a week or forty-five, and the top quartile is filling the classes those instructors already teach. Nothing in the filing reports utilization directly, but it is the variable that makes every disclosed ratio behave the way it does.
• Retention across the age-band transition. Also undisclosed, also structural. A family that moves from parent-child classes to independent gymnastics stays; one that does not, churns. Retention is what turns a rotating enrollment base into a compounding one, and it is cheaper than acquisition by a wide margin.
• Advertising, where the compounding trap lives. Top-quartile gyms spent $46,028 on local marketing; bottom-quartile spent $18,931. As a share of revenue the bottom quartile actually spends more — 5.9% against 4.4% — but in absolute dollars it is less than half. In a business that must continuously replace families aging out of the program, under-spending on lead generation is self-reinforcing: fewer leads, lower enrollment, less revenue, a smaller ad budget next year. The combined obligation across the national fund, Local Marketing Expenditure, and any advertising cooperative is capped at 6% of Gross Sales, so the ceiling is not the constraint. The floor is.
• Ignore cost of goods. COGS runs 2.6% to 5.2% of sales across all four quartiles — roughly $31,000 on a $1M gym, the smallest line on the statement. If management attention is going to product cost while class utilization sits at 60%, it is going to the wrong problem entirely.

Context you underwrite around

• The minimum royalty is regressive, and it binds exactly where it hurts. Royalty is 8% of Gross Sales or $2,500 per month, whichever is greater. At top, second, and third-quartile revenue, 8% exceeds the $30,000 annual minimum and the percentage applies. At fourth-quartile revenue of $321,067, 8% is $25,685 — so the minimum binds, and the effective royalty rate rises to 9.3%. Add the Technology Fee of up to $399 a month and the fee load lands hardest on precisely the gyms least able to carry it. This is a structural reason the fourth quartile runs negative rather than merely thin.
• A third of the system is not in these numbers. Of 255 US franchised units open at year end, only 166 appear in Table 1. Thirty-nine were not open the full year, and 50 reported incomplete data — which the filing notes included closures. Roughly 35% of the system is absent, and an excluded group containing closures almost certainly skews weaker than those reporting. The disclosed quartiles describe surviving, fully-reporting gyms.
• Ramp. The system opened 43 new units in 2025 against a base of 218, and units not open a full year were excluded. A new gym is not comparable to these figures.

The private-equity subset.

The filing separates five private-equity-backed gyms from the rest, and the difference appears in the lower quartiles rather than the top. Non-PE gyms in the third quartile averaged $87,306 in EBITDA at 17.4%; PE-backed gyms in their third quartile averaged $238,521 at 31.3%. In the fourth quartile, non-PE averaged negative $8,097 while PE-backed averaged positive $93,120.

With only five gyms in the subset this is a small sample and should be read carefully — five observations will not survive much scrutiny. But the direction is at least consistent with capitalization and professional management practice showing up in the profit line before they show up in revenue, which is what the fixed-cost structure would predict.

Questions worth putting to The Little Gym.

• What is average class utilization across the system, and what do top-quartile gyms run?
• Of the 50 units that reported incomplete data, how many were closures, and what were their trailing sales?
• What is the typical ramp to stabilized enrollment, and what proportion of gyms reach the second quartile by year three?
• What distinguishes third-quartile gyms clearing 20% margin from those near break-even at similar revenue?
• What local marketing spend and channel mix do the strongest gyms use, and what is cost per new enrollment?
• How many gyms currently pay the minimum royalty rather than the 8% rate?

What this means for your finance function.

Read the reporting population before the numbers. Of 255 US franchised units open at year end, only 166 appear in Table 1. Thirty-nine were not open the full year and 50 reported incomplete data — which the filing notes included closures. Roughly 35% of the system is absent from these figures, and the excluded group almost certainly skews weaker. The disclosed quartiles describe surviving, fully-reporting gyms.

The royalty has a floor, and the floor is the problem. Royalty is 8% of gross sales or $2,500 per month, whichever is greater, beginning 180 days after opening. At bottom-quartile revenue that minimum behaves as a fixed cost. Add the national fund, local marketing requirement, and technology fees, and the fee load lands hardest on precisely the gyms least able to carry it. This is a structural reason the fourth quartile runs negative rather than merely thin.

Underwrite occupancy against realistic stabilized revenue. Total estimated initial investment runs $420,324 to $722,773 for a single unit. Occupancy is fixed for the lease term and includes utilities, CAM, and pass-throughs. Model it as a percentage of the revenue you actually expect in year two, not year five — at 35% of sales the model does not work, and at 15% it does.

EBITDA is not owner take-home. The franchisor’s payroll definition excludes bonuses, paid time off, severance, fringe benefits, training costs, and any disbursements to franchisee owners. So the disclosed EBITDA sits above owner compensation as well as above debt service, taxes, and depreciation. A gym at third-quartile EBITDA of $105,011 is not producing a six-figure owner income after those items.

Track the number that predicts the others. Enrollment and class utilization move revenue; revenue moves every ratio on the statement. A weekly enrollment number beats a monthly profit-and-loss for this model, because by the time the P&L shows the problem the term has already been sold.

Bookkeeping for a Little Gym franchise.

The quartile disclosure gives you an unusually precise benchmark — but only if your books produce the same seven lines the franchisor reports. Most children’s fitness bookkeeping is not structured that way.

• Deferred revenue on prepaid enrollment. Class terms, camps, and memberships are typically paid in advance and earned across the session. Booked as income on receipt, an enrollment week looks like a performance week and the obligation to deliver those classes disappears from the books.
• Chart of accounts mapped to the franchisor’s categories. The Little Gym defines its P&L across cost of goods, occupancy, advertising, payroll, insurance, and other costs — with occupancy including utilities, CAM, and pass-throughs, and other costs including royalty. If your books do not roll up the same way, you cannot benchmark against Item 19 without rebuilding the numbers by hand.
• Payroll cut by function. Instructor wages, front-desk staff, and management salary behave differently against enrollment. A single payroll total tells you the ratio is 41.8% but not which part is drifting.
• Enrollment and class utilization tracked alongside the financials. The metric that drives every ratio on the statement does not appear on the statement.

Capital Advisors provides bookkeeping, controller support, and fractional CFO services for franchise owners. As an Intuit Elite-tier QuickBooks ProAdvisor firm, we build the QuickBooks structure this depends on — deferred enrollment revenue that reconciles, a chart of accounts aligned to the franchisor’s reporting, and class or location tracking across multiple gyms. For multi-unit owners that carries into multi-unit reporting.