When you begin your journey as an entrepreneur starting a new business, you have to consider a number of variables. These include industry, concept, location, financing and a whole host of other decisions.

However, one of the most important aspects of operations is the revenue model. In many cases, the source of your revenue will depend on the product or service that you provide to customers and clients. For instance, retailers like Starbucks ask consumers to pay for the product with each transaction. On the other hand, a service like Spotify or Netflix operate on a subscription-based model where you pay a fixed amount at certain times until the contract ends. Then you have retailers like Costco that combine the exclusivity of a membership with access to wholesale prices and discounts.

One of the most efficient and successful revenue drivers is a membership-based business model. Yet, not all membership models operate the exact same way.

Going Beyond Gym Membership Models

When you think about the various business concepts that operate on a membership model, the first thing that likely comes to mind are gyms and fitness centers. They typically ask members to sign up for a minimum of a year and require monthly payments.

According to CNBC, the average gym membership cost is between $40 and $50 per month. At the same time, there are frequently fees when a customer signs up and then an additional cost if he or she wants to end the membership. This has contributed to the growth in membership models that are less rigid and move away from a business-centric focus.

How Membership Models Are Evolving

If you look at Romp n’ Roll, the membership model that franchisees implement at their kids’ gym is designed with the parent and child in mind. It’s a huge differentiator that is mutually beneficial for the franchise owner and members. For example, the monthly tuition provides parents multiple visits to any classes they wish to attend – allowing members to create a schedule that’s most convenient for them.

At the same time, the membership cost is automatically renewed on a monthly basis until the member decides to stop payment. Parents and caretakers can start and end their membership at any time. With an online portal that enables members to sign up from their smartphone or desktop, the entire experience is built around efficiency and ease.

Advantages of Membership Models

As businesses compete for a larger share of the market, it’s increasingly important to incorporate a revenue model that works. The Membership model provides business owners benefits that many other transaction-based companies can’t achieve.

• Recurring revenue: Because members pay on a monthly basis, your business will see money coming in on a consistent basis.
• Increased loyalty: Consumers respond to the fact that they’re paying for a service at your business on a monthly basis, meaning they’re more likely to be frequent visitors.
• Strong potential for referrals: With a network loyal members, these individuals can act as a proxy marketing team and get the word out about your brand.

A key point to keep in mind with membership-based businesses is that you have to consistently provide an exceptional experience for your members in order to make the ongoing payment worthwhile. The right business concept, leadership, resources and staff will help make it happen.

What’s Next?

When you become a Romp n’ Roll franchisee, you take advantage of a number of revenue streams – including birthday parties, retail items and summer camps – that allow you to generate a strong return on investment. Romp n’ Roll’s membership model is a best-in-class system that both positions franchisees for success and is a customer-centric setup.

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Michael Barnett is the Co-Founder and CEO of Romp n' Roll. In addition to leading the Romp n' Roll management team, Michael is an active member of the International Franchise Association, the National Association for the Education of Young Children, and serves on the Board of Directors for Connor's Heroes and Juniata College Center for Entrepreneurial Leadership. He and his wife, Babz, were featured on the first season of ABC-TV's Shark Tank.