What to Know About Operating a Fitness Franchise

Rick Bisio.jpgIf you are someone who is currently in the process of evaluating franchise ownership options and are considering a fitness center concept, this is a good time to be in the market. There are several basic factors about this field that are working in your favor as you weigh your franchise opportunities.

According to the most recent report by the International Health, Racquet & Sportsclub Association (IHRSA), the trade association for health clubs, 57.3 million people were members of a health club in 2016. The study also found there are more than 36,000 health clubs around the country and the industry generated $27.6 billion in revenue in 2016.

Fitness centers have traditionally been a fairly popular segment.  As the numbers indicate, the market is there for people who want to go to a place and exercise.  Although there has been some growth in that area in recent years, the demand for such a service has been very consistent for decades.  Regardless of what the economy is at that time, people will continue to seek establishments to improve their health and fitness.  That is great news for business owners in this market.

Furthermore, there has been a recent trend of private-equity firms purchasing franchises, and that has certainly been the case with fitness concepts.  Last year, the private-equity firm TPG Growth purchased Club Pilates, one of the largest chains of Pilates studios in the country, while Bain Capital Double Impact made an investment in Planet Fitness. TPG already owns a stake in Life Time Fitness, which it took private with Leonard Green & Partners in an estimated deal of more than $4 million in 2015.  In recent years, several other private-equity companies have targeted various fitness franchises as attractive investment opportunities.

In general, private-equity firms view franchises and their proven operating systems quite favorably.  Franchises have a fairly high level of consistency and predictability with their revenue streams, which is an important feature for these companies.  Many private-equity firms also operate other franchise brands.  As a result, they are able to take the success they have achieved with one brand and apply it to another.  This is generally a positive for franchise owners, as there is often little change in structure that takes place after an acquisition, while the private-equity firm can provide the capital to grow and add value to the system.

Regardless if a fitness center is owned by a private-equity company or a traditional franchisor, it can be a popular and attractive option for entrepreneur.  To start with, most health and fitness brands are less expensive than some other franchises concepts such as a restaurant or hotel.  Investment in small, boutique fitness centers specializing in one type of a workout may start at $100,000.  On the high-end, “big-box gyms” such as Planet Fitness or Youfit may cost over $1 million due to the space, infrastructure and expense of running the business.  The range of investments in the fitness space still remains considerably less than other franchise options, and because of that, they seem to be in high demand.

When run properly, a quality fitness franchise has a good chance to be profitable. There has always been quite a bit of consumer interest in fitness facilities, and people today are more comfortable in storefront-type franchises. There is a good operating system and it draws from a market in which there is a strong demand for the service.

As a franchise coach, I have worked with many people who want to become owners of fitness centers and I have given them the same advice I have shared with people in other fields.  Don’t fall in love with the product.  In this case, don’t become a business owner because there is a cool new way of working out.  That’s not why you should purchase a fitness franchise.  Instead, you get into a fitness concept because it has good operational systems, good marketing systems, and that it has the predictably get you from Point A to Point B in regard to running a business.  Instead of being captivated by the product, you need to understand what it takes to be successful in the fitness concept and the type of work required to make it successful.

To that end, one does not need to be experienced in health and fitness to run a successful business in that field. Fitness center owners will need to understand marketing systems and be able to drive sales. They will have to be detail-oriented when it comes to things such as overseeing payroll and managing monthly membership dues.  The ironic part about owning a fitness center is that if you like to exercise, you will most likely not do so at that facility.  An owner’s time there will be spent answering phones, interacting with the customers and managing the business operations.

Another aspect about ownership of a fitness center concept is that many are run with a semi-absentee business model.  In this setup, the owner is not required to put in the typical 40-hour work week, but instead dedicate 10 to 15 hours per week in running the business.  This model is particularly appealing to people who already have existing jobs and are looking to add to their professional responsibilities and income streams.

The key to this structure, which is in place in many other service industries, is being able to oversee others and place a great deal of trust and confidence in them managing the business.  Although the semi-absentee model requires fewer hours spent on-site than other professions, it does require an owner to be very meticulous in monitoring the business and be very skilled in managing others.

Health and fitness clubs exist in a popular and crowded space, with more than 36,000 currently operating throughout the United States.  If you believe you have the necessary skills to run the business and market the product to a given customer base, owning a fitness franchise can be a very appealing opportunity.

Rick Bisio is a leading franchise coach with FranChoice, the creator of the FDD Exchange and the Franchise Glossary and the co-host of Rick Bisio’s Franchise Focus.  

www.afranchisecoach.com