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Fitness Franchises: Small Business Trends in the Fitness Industry

An apple a day just doesn’t cut it anymore. Greater awareness about the benefits of physical activity is sending Americans to the gym in droves, making fitness franchises a growing industry among small business trends. With rates of obesity, diabetes and high blood pressure continuing to rise — not to mention the skyrocketing health care costs related to those conditions — consumers are starting to view gym fees less as leisure spending and more as a vital expense.

According to Guidant Financial’s State of Small Business report, the health/beauty/fitness industry is the third most popular business industry, and a recent IBISWorld report stated that gym and fitness franchise revenue grew at 4.9 percent annually over the last five years to an estimated $2.9 billion for 9,427 total businesses. Leading into 2020, revenue is projected to rise even faster at an annualized rate of 5.4 percent, to $3.7 billion. As the population of potential gym-goers rises — particularly baby boomers and their adult children — demand should increase for products ranging from club memberships to Pilates classes to personalized health monitoring services. Since entrepreneurs can take advantage of current low interest rates on small business loans, franchisor support programs and modest barriers to entry, new applicants may be well positioned to access this growing market.

According to Mark Daly, National Media Director for the Anytime Fitness franchise brand, owning a gym offers not only financial independence, but also high levels of fulfillment for business owners. “In the past 10 years, an increasing number of potential franchisees have been attracted to the fitness industry, specifically because, in addition to a recession-resilient industry, it also gives them a level of personal satisfaction.”

An Overview of the Fitness Franchise Industry

The primary service that gym and fitness franchises provide is access to facilities with fitness equipment, including weights and mats, and exercise machinery such as treadmills, elliptical machines and stationary bikes. Of the current $2.9 billion in revenue that the fitness industry brings in, 55 percent came from fitness centers, mainly in the form of annual membership contracts with monthly fees.

Also adding to regular revenue are the instructor-led classes many health clubs offer, including yoga, spinning and kickboxing, on a fee basis or as part of membership. These classes account for 15 percent of revenue. Larger centers may also entice consumers with specialized facilities such as ice rinks or indoor sports courts (12 percent of revenue), swimming pools with spa services (10 percent) and dance studios for classes or private rentals for performers (8 percent), although these amenities might come with steeper membership fees.

The Top Fitness Franchise Brands

The companies that currently dominate the fitness industry, however, tend to draw in customers with cheaper memberships, often at smaller, less robust centers: Planet Fitness with 36.7 percent of market share, Anytime Fitness with 20.9 percent and Snap Fitness with 13.4 percent.

All three made the top Entrepreneur’s Franchise 500 List, and Anytime Fitness and Planet Fitness even held Entrepreneur’s spots No. 17 and 21, respectively. Both Anytime Fitness and Snap Fitness gained rapid ground in the early 2000’s by offering inexpensive, convenient 24-7 gym access to basic facilities.

On the flip side, Curves, an international franchise founded in 1992 that caters to women, saw its market share fall to 3.1 percent, well down from its 2005 peak when it had 8,000 businesses in the U.S. and 4.5 million members. The company, with its specialized training approach, has lost out to competitors with leaner operations and longer hours. Because Curves is specific to woman, it can also negatively impact a franchisee’s ability to get a business loan through the Small Business Administration because they don’t fund gender-specific businesses.

Fitness Industry Consumer Demographics: Who’s going to the gym?

Today, almost one in five adults in the U.S. have an active gym membership. The key gym-going demographic encompasses both the baby boomers and their adult children (adults between the ages of 20 and 64). Due to their enormous spending power, the boomers can afford more gym memberships, and in response, health clubs cater to the needs of their aging clientele, offering new products such as personalized nutrition plans and monitoring of blood sugar, blood pressure and bone density.

Adults aged 18 – 34 frequent gyms the most, at 35 percent, followed by those aged 35 – 54 (33 percent) and those older than 55 (20 percent). However, IBISWorld notes, although kids aged 12 – 17 account for only 8 percent of gym attendees, and those aged 6 – 11 another 4 percent, these segments have outpaced many of the others, prompting clubs to focus on building youth membership. Health-conscious parents willingly foot the gym bill as schools cut physical education classes and childhood obesity rates rise.

Location: The Most Popular Places to Open a Gym

Since consumers prefer not to travel long distances just to exercise, it’s no surprise that the majority of fitness franchises are centered in densely populated urban areas, typically near major work centers. California and New York are the most popular states for fitness franchises, at 10.8 percent and 7.1 percent of market share, respectively, followed by Texas (6.0 percent), Florida (5.5 percent) and Pennsylvania (4.7 percent).

The largest concentration of industry businesses lies in the Southeast (23.1 percent), followed by the Mid-Atlantic region (18.9 percent), the West (16.1 percent) and the Great Lakes area (15.2 percent).

Fitness Franchise Industry Expects Healthy Growth

With the fitness industry’s predicted growth over the next few years, an increasing number of small business owners are expected to open gyms. As the industry sees more entrants, the most competitive franchises will make the smartest use of technology, not just to streamline operations, but to offer more customized virtual services, from meal planning and goal tracking to online personal training programs and community forums.

Facilities may also increasingly target niche markets, local clientele or a specific demographic (i.e., a female-only gyms).

“Today’s fitness consumers want more than simply a place to work out,” said Mark Daly of the Anytime Fitness franchise brand. “They’re looking for guidance, advice, coaching, support and they want to be able to get it on their phone … [Anytime Fitness has] come up with two solutions: one is the mobile app that’s the personal trainer in your pocket, and two is small-group training, which is a nice balance somewhere in between personal training and large group classes.”

Recession-Resilience Fuels Steady Growth for Fitness Franchises

The industry’s rosy future outlook can largely be attributed to high projected demand — for better or for worse. Public health campaigns have bolstered health consciousness nationwide, particularly in response to one issue: obesity. The Center for Disease Control calls obesity in the U.S. “common, serious and costly” and estimates that 34.9 percent of adults and 17.0 percent of children suffer from obesity. The American Journal of Preventive Medicine has warned that by 2030, 42.0 percent of U.S. adults will become obese, representing a strain of about $550 billion in health care costs for the treatment of obesity and related conditions such as type 2 diabetes.

Consequently, Americans are striving to make healthier lifestyle choices and joining gyms in greater numbers. Furthermore, health insurers and employers encourage these healthy decisions by subsidizing or reimbursing membership fees, in hopes of curtailing medical costs down the road. All of this leads to what Mark Daly of Anytime Fitness calls a ‘recession-resilient’ industry.

“People are bombarded with information about health care costs and life expectancy and the obesity epidemic … So people do realize that they need to do something to be as healthy as they can so that they can be as active as they can and thus as happy as they can.”

Fortunately for hopeful gym owners, this high demand doesn’t necessarily mean over-saturation in the market. Daly also shared that because Anytime Fitness members have access to every gym location, their memberships actually become more valuable as more franchises are opened. Beyond brand recognition, this becomes a great marketing tool when discussing membership benefits with customers shopping for a new gym.

Benefits of Owning a Gym: High Profits, Low Barriers to Entry

Industry profits are expected to rise to 9.0 percent by 2020. The low-amenity model promoted by Anytime Fitness and Snap Fitness enables franchisees to offer promotional memberships that increase their overall client base. Companies can also leverage technology to limit costs, automate training and implement security systems and key fob entry to offer safe, around-the-clock access without requiring extra staff. Fitness centers can also improve their margins by catering to a growing segment of affluent but busy members seeking the services of personal trainers, who boost income more than enough to justify the higher salary expense.

Franchisors have also taken various steps to lower franchisees’ start-up costs. For smaller-scale facilities, franchisees benefit from modest initial investments to begin with, and franchisors have been allowing more single-unit franchise opportunities. Companies realize economies of scale for equipment purchases and advertising, but they don’t stop there: some franchisors even provide in-house design, real estate services and financing assistance through preferred lenders. Anytime Fitness has even partnered with Bookkeeping Express to smooth the accounting process for its enterprises.

Standing Out in the Fitness Industry

Gyms and fitness center franchises not only compete with one another, but also with other sources: nonprofit gyms, organized sports teams and even home fitness equipment. Rivalries can push membership prices down, particularly as new franchises try to establish themselves. Early outreach, marketing and promotions can prove pretty expensive, too, depending on how much brand recognition the franchise already commands. Despite the trend toward standard facilities and slim operating budgets, gyms may still feel the need to add recreational activities to differentiate themselves. To bolster member retention, they might also foster a strong community feel by catering to a local clientele or building online member forums for support.

How to Finance a Fitness Franchise

If you’re considering becoming a gym owner, purchasing a franchise can put you on the fast track to success. The benefits of brand recognition, established training programs, and lean operations are tough to compare with, especially in this trendy, steadily growing industry.

Purchasing a gym has benefits beyond entering a recession-proof industry. Daly of Anytime Fitness explains, “it also gives [franchisees] a level of personal satisfaction … they’re positively contributing to their community, people who are their neighbors and their friends by helping them lead healthier and happier lifestyles.” This is why, Daly says, Anytime Fitness looks for people who not only are excited about the Anytime business model, but are truly passionate about helping people to lead happier, healthier lives.

And while the cost of owning a franchise can vary significantly; franchisors are often able to recommend funding partners. Even if you’re not planning to utilize traditional funding methods such as bank loans, there are a multitude of options available to you, including 401(k) business financing, SBA loans and unsecured loans.

As the American government and insurance providers continue put a greater emphasis on health and fitness, we can expect to see the demand for easy access to fitness centers continue to grow. If you’re considering becoming a gym-owner, you can confidently continue forward knowing it’s a healthy choice for your future.

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