Franchise Chatter’s Top Fitness Franchises of 2012

Fitness is one of the most popular franchise categories on Franchise Chatter — second only to frozen yogurt.  Unlike the frozen yogurt industry, the competitors in this space have carved out distinct niches for themselves, so each one stands for something a little different.  Although I’ve chosen to stick my neck out by ranking these five top fitness franchises, finding the right fit between the concept and the location is far more important.  All of these franchises have something special to offer, but only one or two of them will be the right choice for a given neighborhood.

The basis of my ranking is my perception of each franchise’s potential return on investment, based on publicly available information.  As with all my previous lists, I don’t have any insider information on any of these opportunities.  But you can rest assured that these rankings are based on my honest opinions, untainted by any considerations other than to shine a spotlight on the best options for prospective franchisees, at least from my perspective.

1.  Retro Fitness

• Retro Fitness offers discount fitness programs in retro-themed gyms, featuring 80’s music and movies.  Its business model is based on offering exercise/fitness training programs and related services to members for just $19.99 a month.

• A typical Retro Fitness outlet has 60-75 pieces of cardio equipment (with personal LCD TV screens), a Retro Movie Theatre, three different types of circuit training equipment, free weights, locker rooms, personal training, tanning, Retro Blends Smoothie Bar, on-demand group fitness, supplements, chiropractic services, and more.

• The company has created a streamlined set of operations, so a franchisee can be an investor instead of an operator in the club. They’ve set up Retro University to train the in-club Manager so that he or she can oversee the day-to-day operations of the business.

• A typical Retro Fitness outlet is operated from a retail strip mall or light industrial/office park type location of approximately 11,000 square feet. All new sites must be a minimum of 8,000 square feet.

• The average EBITDA reported by over 50% of its franchisees in 2009 is $475,660, which is way above the norm in franchising.  The average EBITDA reported by all its franchisees in 2009 is just shy of $300,000, which is still an outstanding number, especially when compared with other popular fitness franchises like Anytime Fitness and Snap Fitness (where average EBITDA tops off in the $100,000 to $150,000 range with 800-900 members).

• The difference lies in the vastly different business models. While you can open an Anytime Fitness or Snap Fitness center for less than $360,000, a Retro Fitness outlet can cost as much as $1,499,999.  So, unfortunately, Retro Fitness is an opportunity that is reserved for investors with very deep pockets.

• FDD Talk:  Average Sales, Expenses, and Operating Profits of Retro Fitness Outlets

2.  Anytime Fitness

• Anytime Fitness is a leading fitness club franchise that pioneered the 24/7/365 fitness club concept with global reciprocity — giving members access to any of its clubs worldwide, day or night, even when the clubs are not staffed.

• What distinguishes Anytime Fitness from its competitors is the integration of proprietary software, security, and surveillance technology, which allows the clubs to be open 24/7 without additional staffing. The remote monitoring of the club via a closed circuit television system, coupled with personal security devices, makes members feel safe and secure even when the club is not staffed.

• Its proprietary technology helps reduce payroll costs substantially for Anytime Fitness franchisees.   Payroll typically comprises only 10% of the operating costs for Anytime Fitness clubs, versus up to 45% with other franchise concepts.

• An Anytime Fitness club ranges in size from 2,500 to 5,000 square feet, with an average club size of 4,000 square feet. The more compact Anytime Fitness Express concept ranges in size from 1,200 to 2,500 square feet.  These neighborhood-style fitness clubs are ideally located  in strip centers anchored by big box retailers and national grocery chains.

• The unique business model of Anytime Fitness makes it possible for its franchisees to succeed in smaller population centers typically ignored by larger clubs. Most Anytime Fitness members live or work within a 3-mile radius of their clubs.

• The total initial investment ranges from $46,300 to $321,900.

• For Anytime Fitness clubs with 500 members: annual total revenues ($212,300) less operating expenses ($181,796) produces earnings before salaries, interest, taxes, depreciation, and amortization of $30,504.

• For Anytime Fitness clubs with 737 members: annual total revenues ($312,900) less operating expenses ($194,996) and manager’s salaries and payroll ($30,000) produces earnings before interest, taxes, depreciation, and amortization of $87,904.

• For Anytime Fitness clubs with 900 members: annual total revenues ($382,100) less operating expenses ($204,296) and manager’s salaries and payroll ($35,000) produces earnings before interest, taxes, depreciation, and amortization of $142,804.

• What You Need to Know Before Investing in an Anytime Fitness Franchise

• FDD Talk:  Curious About the Average Member Numbers, Projected Revenues, and Projected Earnings of Anytime Fitness Clubs?

3.  Planet Fitness

• Planet Fitness bills itself as the place for a clean, simple, no-pressure, and no-hassle workout. Planet Fitness gyms don’t employ any salespeople, and they don’t offer any of the special services common in upscale gyms.  Instead, they offer what they think most members really want in a club –  clean, stylish, hassle-free facilities that are filled with tons of brand-name cardio and strength equipment in a friendly, non-intimidating environment.

• Planet Fitness is a cheaper, bare bones alternative to the big box gyms such as 24 Hour Fitness, Crunch, and ClubOne.  Mike Grondahl, one of the founders, describes Planet Fitness as the Wal-Mart of the fitness industry. Members pay $10 to $20 a month, and membership is month-to-month with no contract required.

• Planet Fitness is not the place for hardcore bodybuilders. Their niche market includes women and first-time or occasional gym-goers.  Their gyms are designed to be a place where people with normal body shapes can feel comfortable while getting in better shape.  They are “judgement-free zones” where macho behavior common at “muscle gyms” is discouraged. They don’t allow people to throw or drop weights. There is no cussing and no gym attitude that you find elsewhere.

• The total initial investment to open a Planet Fitness gym ranges from $530,100 to $1,433,000.

• The average Planet Fitness has about 6,000 members.  A typical facility is 16,000 square feet and can be built new or fit into redesigned space likes an old grocery store or big box retailer. Each gym has 10-12 employees.

•  The median (i.e. 50th percentile) Annual Membership Revenue for Planet Fitness is $1.7 million (versus the industry average of $1.2 million). Their median Annual Operating Revenue is $928,500 (versus the industry average of $233,000).  (Ambrosio’s note:  I’m not exactly sure what Planet Fitness means by Operating Revenue in the context of a gym, and how it’s different from Annual Membership Revenue.) And their median Annual Payroll Expense Percentage is 28% (versus the industry average of 43%).

• What You Need to Know About the Planet Fitness Franchise Opportunity:  No Frills, No Judgment, and No Grunting

4.  Snap Fitness

• Snap Fitness has essentially the same concept as Anytime Fitness:  24/7 access, small footprint, remote surveillance, security devices, and a fixed royalty fee ($449 for Snap Fitness versus $499 for Anytime Fitness).   These 2 gym franchises started out at about the same time:  Anytime Fitness opened its first fitness center in 2002.  Snap Fitness was founded in 2003 and sold its first franchise in 2004.

• I get the impression that Anytime Fitness and Snap Fitness are going after the same markets with the same concept, and Snap Fitness is competing with the older gym chain by charging a slightly lower franchise fee ($15,ooo for Snap Fitness vs. $25,000 for Anytime Fitness) and royalty fees.  But despite this, the total initial investment for Snap Fitness ranges from $76,100 to $361,700, which is slightly higher than the equivalent range for Anytime Fitness.

• In terms of the number of gym franchises in 2011, Snap Fitness is the smaller of the 2 gym chains (1,151 gyms for Snap Fitness versus 1,625 for Anytime Fitness).

• A unique aspect that Snap Fitness highlights is the fact that they do not require their members to sign contracts.  Members pay on a month-to-month basis.

• For Snap Fitness clubs with 400 members: annual operating revenue ($162,200) less annual operating expenses ($148,160) produces gross annual operating cash flow before wages and taxes of $14,040. After deducting wages ($25,000) and commissions ($2,800), the remaining operating cash flow is -$13,760 (a loss).

• For Snap Fitness clubs with 600 members: annual operating revenue ($242,800) less annual operating expenses ($166,760) produces gross annual operating cash flow before wages and taxes of $76,040. After deducting wages ($25,000) and commissions ($4,200), the remaining operating cash flow is $46,840.

• For Snap Fitness clubs with 800 members: annual operating revenue ($323,600) less annual operating expenses ($184,260) produces gross annual operating cash flow before wages and taxes of $139,340. After deducting wages ($25,000) and commissions ($5,600), the remaining operating cash flow is $108,760.

• FDD Talk:  Let’s Take a Closer Look at the Average Average Member Numbers, Projected Revenues and Projected Earnings for Snap Fitness Clubs

• The Top 3 Fitness Franchises in the US Today: Jazzercise, Anytime Fitness and Snap Fitness

5.  Victory MMA & Fitness

• “Victory MMA and Fitness is the first fitness franchise dedicated to Mixed Martial Arts and related fitness platforms. The model is unique in the industry, offering average people the opportunity to enjoy exciting group exercise classes in boxing, kickboxing, Gracie Humaita Jiu Jitsu, and MMA, as well as typical health club amenities. This allows people of all ages to actually participate in aspects of the fastest growing sport on the planet, instead of watching it on TV. It is also an alternative to old school boring workouts.” (Joe Mannino, CEO)

• Victory MMA & Fitness offers prospective franchisees a choice of 5 different business models, with the initial investment ranging from $55,000 to $2,491,880.

• “All of the franchise models bring in revenue via monthly membership dues, retail products, and nutritional foods and supplements.

1. Mobile Training Vehicle – Ideal for personal trainers, the Mobile Training Unit allows a franchise owner to build a business of clients that prefer to have private or small group personal training at their locations. The truck is equipped with a proprietary training package. The franchise owner can bring the mobile gym to homes, businesses, community centers or public parks.
2. Health Club Drop In – This option is designed to be installed into a portion of an existing health club. This gives existing health club owners the opportunity to include our MMA programs in their facilities.
3. Fitness and Training Center – This is our smaller model, designed for small stores and/or a strip mall environment. Services provided are similar to the larger models, with separate areas for striking, Jiu Jitsu, and fitness, with either a cage or a boxing ring.
4. Premier Fitness & Training Center – This model also works in a store or a strip mall, but can also work in a small to medium free standing building. This larger model offers additional group workout rooms, as well as a regulation boxing ring and an MMA cage.
5. Elite Fitness & Training Center – The Elite Center is the largest facility ranging from 20,000 to 30,000 square feet. This option offers all of the above, plus private training rooms, a retail store, and an internet cafe.”  (Joe Mannino)

• “Our FDD reflects that memberships are currently $89 per month. The number of members is relative to the class schedules and facility size.” (Joe Mannino)

• “We plan to open 200 franchised units by 2017.”  (Joe Mannino)

• Victory MMA & Fitness:  The Country’s First Mixed Martial Arts Franchise (Exclusive Q&A with Joe Mannino, CEO)