PLEASE PROVIDE DETAILED RESPONSE AS WELL AS THE VISUALS OF THESCHEDULE 1 AND SCHEDULE 6 BUDGETS

Your consulting firm has been hired to help Triple F Health Clubevaluate its new membership plan and fee structure. Prepare apresentation for the club’s president, addressing the followingquestions:

1) What are the key factors that Triple F Health Club shouldconsider in its evaluation of the new membership plan and feestructure? Why are these factors important?

2) Develop a Schedule 1 (revenue) budget and a Schedule 6 (cashreceipts) budget based on the new membership plan and feestructure. Will Triple F Health Club’s new membership plan and feestructure improve its ability to plan its cash receipts? Why or whynot?

3) What other types of analyses, beyond the Schedule 1 and 6budgets, (both strictly financial and strategic) would you offer toperform for Triple F Health Club in order for them to make acomplete evaluation of the new membership plan and fee structure?Explain your rationale.

4) Explain how Triple F Health Club’s cash management woulddiffer from the present if the new membership plan and feestructure were adopted.

5) From a strategic perspective, what are the advantages anddisadvantages to implementing this membership plan and feestructure? Given the importance of the potentially clashing goalsof better cash management, and increased revenue, would yourecommend Triple F Health Club go forward? *Note: Please use THESEquestions and not the questions in the book to prepare youranalysis.

Using Budgets to Evaluate BusinessDecisions

Triple-F Health Club (Family, Fitness, and Fun) offers tennis,swimming, and other physical fitness facilities to its members.There are four of these clubs in the metropolitan area. Each clubhas between 1,700 and 2,500 members. Revenue is derived from annualmembership fees and hourly court fees. The annual membership feesare as follows:

Individual....................$45

Student.......................$30

Family.........................$100

The hourly court fees vary from $8 to $12 depending upon theseason and the time of day (prime versus non-prime time).

The peak racquetball season is considered to run from Septemberthrough April. During this period court usage averages 90 to 100percent of capacity during prime time (5:00–9:00 p.m.) and 50 to 60percent of capacity during the remaining hours. Daily court usageduring the off-season (i.e., summer) averages only 20 to 40 percentof capacity.

Most of Triple-F's memberships have September expirations. Asubstantial amount of the cash receipts are collected during theearly part of the racquetball season due to the renewal of theannual membership fees and heavy court usage. However, cashreceipts are not as large in the spring and drop significantly inthe summer months.

Triple-F is considering changing its membership and feestructure in an attempt to change its cash receipts. Under the newmembership plan, only an annual membership fee would be charged,rather than a membership fee plus hourly court fees. There would betwo classes of membership:

Inidividual......................$300

Family............................$500

The annual fee would be collected in advance at the time themembership application is completed. Members would be allowed touse the racquetball courts as often as they wish during the yearunder the new plan. All future memberships would be sold underthese new terms. Current memberships would be honored on the oldbasis until they expire. However, a special promotional campaignwould be instituted to attract new members and to encourage currentmembers to convert to the new membership plan immediately.

The annual fees for individual and family memberships would bereduced to $250 and $450, respectively, during the two-monthpromotional campaign. In addition, all memberships sold or renewedduring this period would be for 15 months rather than the normalone-year period. Current members also would be given a credittoward the annual fee for the unexpired portion of their membershipfee, and for all prepaid hourly court fees for league play whichhave not yet been used.

Triple-F's management estimates that 60 to 70 percent of thepresent membership would continue with the club. The most activemembers (45 percent of the present membership) would convertimmediately to the new plan, while the remaining members whocontinue would wait until their current memberships expire. Thosemembers who would not continue are not considered active (i.e.,they play five or fewer times during the year). Managementestimates that the loss of members would be offset fully by newmembers within six months of instituting the new plan. Furthermore,many of the new members would be individuals who would play duringnon-prime time. Management estimates that adequate court time willbe available for all members under the new plan.

If the new membership plan is adopted, it would be instituted onFebruary 1, well before the summer season. The special promotionalcampaign would be conducted during March and April. Once the planis implemented, annual renewal of memberships and payment of feeswould take place as each individual or family membershipexpires.