Fitness Franchise Lease Costs: What NNN Means for Studio Operators
Fitness franchises sit at an unusual intersection in commercial leasing. F45 Training, OrangeTheory Fitness, and Anytime Fitness locations are large-footprint tenants in strip centers built around smaller inline shops. That size advantage in the studio matters. In a NNN lease, it becomes a cost disadvantage.
Bigger space means a bigger pro-rata slice of every shared cost: parking lot maintenance, landscaping, exterior lighting, and the management fee. For a fitness operator running a 4,500 to 6,000 square foot studio alongside 1,200-square-foot retailers, the absolute CAM bill is proportionally higher even when the rate per square foot is identical.
This guide covers the main NNN cost issues for fitness franchise operators and what to check before paying annual true-ups.
How Square Footage Drives Absolute CAM Exposure
A standard strip center might have a CAM pool of $140,000 per year covering parking, landscaping, exterior maintenance, and the management fee. In a 25,000-square-foot center, each tenant's share is their space divided by the denominator.
An inline tenant at 1,500 square feet pays 6% of the pool, or $8,400.
A fitness studio at 5,500 square feet pays 22% of the pool, or $30,800.
The rate per square foot is the same ($5.60 per square foot). The absolute bill is nearly four times higher. When the CAM pool increases because of a major parking lot repair or a management fee recalculation, the fitness tenant absorbs the largest single increase in the center.
That is not automatically wrong. It is how NNN works. But it means errors in the CAM pool hit you harder than they hit smaller neighbors — and it makes verifying the pool components worth the time.
Shared Parking After 9pm
Fitness studios, especially 24/7 formats like Anytime Fitness, use parking after hours that most strip center tenants vacate. This creates a recurring debate: do the fitness tenant's unusual hours justify a different parking cost allocation?
The answer is no, and your lease is the authority. Parking lot maintenance is pooled and divided by formula. There is no usage-based allocation mechanism in standard NNN leases. Operating hours do not change your pro-rata percentage.
What can go wrong: landlords who separately invoice for parking lot sweeping passes during late-night hours and bill those directly to the fitness tenant as operating expenses rather than running them through the shared CAM pool. If you see a line item on your reconciliation for services billed directly rather than as a pro-rata share of the pool, check whether your lease authorizes direct billing for that category or whether it should flow through CAM.
Security Cameras and Lighting as Common Area Items
Exterior lighting and security cameras in parking lots and common walkways are standard CAM items. Electricity for common area lighting is a legitimate pool expense. Routine maintenance and replacement of light fixtures is as well.
What to watch for: billing for security camera installation, monitoring service contracts, or security staffing through the CAM pool. Installation of a new camera system or a monitoring service contract that benefits the entire center is a capital improvement (excluded from most CAM definitions) or an operating service that should be scrutinized.
If your lease excludes capital expenditures from CAM and the landlord installs a new surveillance system across the property, that system's cost should not appear in your CAM reconciliation. The landlord may amortize it as an operating expense, but your lease's exclusion language controls whether amortized capital costs are permissible.
Security staffing — guards, patrol services — is common in larger centers and usually is a CAM pool item, but verify that the allocation is pro-rata and that the cost is for the whole center, not just the portion adjacent to your studio.
HVAC: In-Unit vs. Common Area
This is one of the most contentious line items for fitness tenants. Strip centers typically have rooftop HVAC units that serve individual tenant spaces. Your unit is your responsibility. Common area HVAC — if the center has any shared HVAC serving lobbies, corridors, or restrooms — may appear in CAM.
Fitness studios often have separate, upgraded HVAC systems installed at buildout because standard commercial HVAC cannot handle the load of a boutique fitness space with 25 to 35 people exercising simultaneously. Those upgraded units serve your space.
The problem: reconciliations sometimes include HVAC maintenance and repair line items without specifying whether they serve common areas or individual tenant units. If the landlord's HVAC maintenance contractor bills a single invoice for the whole property and it gets allocated through CAM, some of that cost may relate to work on tenant-specific units.
Ask for the underlying invoices when HVAC appears as a significant CAM line item. Confirm the work was to common area systems, not your rooftop unit or any other tenant's dedicated equipment.
Management Fee Cap: The 24/7 Complexity Argument
Some property management firms argue that 24/7 fitness tenants create management overhead that justifies higher fees. The argument is not unreasonable from a property manager's perspective. It has no bearing on your lease.
Your management fee is capped by the lease as a percentage of a defined base. The most common structure is a percentage of controllable CAM expenses. If that cap is 4% of controllable expenses, it is 4%. The management company's argument that your operating hours increase their workload does not override the contractual cap.
Common management fee overcharge patterns at fitness locations:
- Fee calculated as a percentage of gross building revenues rather than controllable CAM expenses (the more frequent base error)
- Fee that exceeds the percentage cap stated in the lease
- Management fee embedded in another line item (administrative costs, oversight fee) in addition to the stated management fee, producing effective double-billing
To verify, you need three numbers: the management fee billed in the reconciliation, the cap percentage from your lease, and the base to which it applies. Run the math. If the billed fee exceeds the allowed maximum, the difference is a disputable overcharge.
Gross-Up Provisions and How They Affect Fitness Operators
Some NNN leases include gross-up provisions that allow landlords to inflate variable CAM expenses (like utilities) to a level that assumes full occupancy. For a fitness tenant who occupies a large share of the building, gross-up calculations can compound errors.
If your center has high vacancy and the landlord gross-ups variable expenses to 90% or 95% occupancy, your absolute share of that inflated pool is larger than it would be in a center that is actually occupied. The gross-up itself may be permitted by your lease. What matters is whether the gross-up applies only to variable expenses (utilities, janitorial), as most leases specify, or whether it is applied to all expenses including fixed items like management fees.
Run a gross-up verification: what were the actual occupancy-adjusted expenses versus what was billed? CAMAudit flags gross-up violations automatically when it detects the provision in the lease.
Before Your Next True-Up
The practical step is to pull your lease and last reconciliation side by side. For a fitness studio, focus on:
- Management fee: verify the cap percentage and the base
- HVAC line items: request invoices to confirm they cover common area, not your unit
- Security: confirm capital installations are excluded, ongoing service is pro-rata
- Parking: confirm direct billings are not being added on top of your pro-rata share
- Gross-up: if your center has vacancy, confirm the gross-up applies only to variable expenses
Upload both documents to CAMAudit and the tool flags the issues without requiring you to manually cross-reference 40 pages of lease language.