Fitness franchising, the next wave of development for the global fitness industry
By Liz Terry, editor, HCM magazine
The fitness market is now in its fifth wave of growth in terms of its economic lifecyle and we expect this stage to be characterised by rapid development of the fitness franchising sector.
Looking back, we can see that in the early days of the industry the first operators secured the best locations and neighbourhoods to take ownership of the most lucrative opportunities. This was the first development wave. Once these gold star locations had been developed, the second wave of development was chains of high-end clubs. The third wave was the mid-market clubs which ramped up the volume to get the value. They were disrupted by the fourth wave, the budget and low-cost gyms, which took advantage of mass market locations and pricing to unlock new consumer demand: these operators report up to 35 per cent of joiners are first time gym members. Now we’re heading into the fifth wave – that of infilling much smaller locations and meeting the needs of niche demographics.
Perfect for franchising
This stage of the market lifecycle is perfect for franchises and boutiques, who can identify local markets and build business around these opportunities. These types of operations suit entrepreneurs, who invest their own money and passion and are committed to delivering personalised service and really driving the growth of their businesses. It’s challenging for corporate operators to work at this scale, so this new wave of development is most suited to entrepreneurs.
An opportunity for PTs
It’s also a great opportunity for ambitious PTs who want to develop their careers.
Many ambitous PTs who started their careers during the rapid growth of the industry in the 2000s are now highly experienced and at a life stage where they need to support a family. For them, the opportunity to own their own business is very attractive and the more ambitious and entrepreneurial of them will be drawn to the many franchise packages which are coming on-stream, creating a strong potential source of customers for companies selling franchises.
Great source of real estate
This trend towards franchising coincides with changes on the high street in some countries where some retailers’ profits are being undermined by online sales. This can force them to reduce the size of their estates and shed some prime locations.
This is opening up a source of vacant real estate to be repurposed for fitness, creating a good supply of sites which suit the needs of smaller franchised fitness businesses and enable them to grow rapidly.
The state of retailing is also persuading landlords to accept covenants which they might not have done in more buoyant times – opening up opportunities for entrepreneurs who would not previously have been able to secure these kinds of locations.
There’s a growing interest among retailers in being more experiential in their approach – to increase the dwell time of customers within their stores.
Some are starting to strike partnerships with health and fitness operators to bring gyms into their stores to increase dwell time and footfall. This also opens up a wide range of cross-marketing opportunities between the fitness operator and the retailer.
How will the market develop?
Once these franchise businesses have been built, we will see a wave of consolidation, as the more successful are acquired, to become part of bigger organisations.
In addition, we believe established big box operators will respond to the infilling of smaller locations and the trend towards niche and hyper-local offerings by creating their own small box concepts, in a bid to compete.
However, access to capital will be a potential weak point in this competitive move, giving the upper hand to franchises, which can tap in to sources of capital from thousands of potential franchisees.
How fast is it growing?
To give an indication of the acceleration of this trend, we can look at numbers from HCM magazine, which has been tracking franchise activity in the fitness sector for the last fifteen years.
HCM has found that up to four years ago, there were only 20 significant fitness franchise businesses worldwide. As we head into 2019, HCM is tracking nearly 100 fitness franchise businesses which are either active in the market, launching soon or making strong statements about entering the market at the first opportunity.
Liz Terry MBE Editor HCM magazine FIBO Global Media Partner healthclubmanagement.co.uk