Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

  • Anytime Fitness
  • CruiseOne
  • Firehouse Subs
  • Jimmy John's
  • Massage Envy
  • Menchie's
  • Orange Leaf Frozen Yogurt
  • Planet Fitness
  • The UPS Store
  • Yogurt Land
  • And Hundreds More...

No, thanks. I'm not interested in uncovering the actual earnings of hundreds of franchises at this time.

Franchise Chatter Guide: What Investors Need to Know Before Jumping Into the Fitness Industry

by Brian Bixler on January 20, 2014

in Fitness Franchises, Franchise Chatter Guides, Industry Report



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This fitness franchise industry report was written by Brian Bixler.

Anytime Fitness Dave Mortensen with Globe

Dave Mortensen, Co-Founder of Anytime Fitness

If investors needed any further proof that the fitness industry has muscle and staying power, the ascent of Anytime Fitness to the top of Entrepreneur’s Franchise 500 list in 2014 provides weighty evidence. The 24-hour fitness franchise hit No. 1 with nearly 2,500 units and 1.9 million members. And as it expands into Europe and Southeast Asia, the company plans to add another 1,500-plus units over the next five years.

“Traditionally, fast-food companies have been at or near the top of the (Entrepreneur) rankings. The fact that a fitness club franchise is at the top of the list this year says a lot about societal trends and what franchising analysts believe consumers will be looking for in the years to come,” Tom Gilles, director of franchise sales for Anytime Fitness, told Franchise Chatter.

“We have a health crisis that is not going away anytime soon. Fitness clubs that deliver real results for their members, while providing franchisees with enough support to make a good living, will be in great demand.”



 

Not only did Entrepreneur put Anytime Fitness at the top of its annual list, the magazine also singled out the fitness franchise industry as one of the key sectors that showed gains in a sluggish economy. Twenty fitness franchises made Entrepreneur’s Franchise 500 in 2014, compared to just 13 last year.

Industry Overview

“We are obviously thrilled at how well fitness franchises are doing, both in our industry and as a comparison to other franchise businesses,” said Meredith Poppler, vice president of industry growth for the International Health, Racquet & Sportsclub Association. “The fact that Anytime Fitness hit No.1 on Entrepreneur’s franchisor list shows the power of the fitness industry.”

Based on other indicators, the next five years will bring continued robust growth:

  • Business models with low startup costs and overhead that offer members 24-hour key card access and varied fitness routines have been most popular during the last five years, but some experts see big-box concepts making a comeback as the economy improves and people look for bigger and better.
  • According to a November 2013 report by IBISWorld market research firm, the $26 billion industry will continue to benefit from health-conscious baby boomers signing up for club memberships as well as an increase in per capita disposable income. Revenues are expected to grow at a rate of 2.9 percent reaching nearly $30 billion by 2018.
  • Health club memberships increased from 47.7 million to an estimated 52.6 million during the five-year period from 2008 to 2013. Those numbers will continue to rise as consumers pursue healthier lifestyles and discretionary incomes grow, the IBISWorld report projects.
  • Twenty-five percent of the health-club members in the United States are over 55 years old and, according to analysts with American Sports Data, that age group has been the fastest-growing segment of health-club memberships since it began studying fitness gym trends in 1998.
  • The IHRSA publishes several reports each year and estimates that health clubs attract roughly 59 million consumers. Overall, nearly one out of five Americans ages 6 and older is a health club consumer.

IBISgraphic

Prominent Players

Compact, 24/7 Fitness Centers

  • Anytime Fitness – In just 12 years, the Anytime Fitness franchise operation has grown to nearly 2,500 units. In terms of growth, the company has achieved in one decade what it took Subway more than 20 years to accomplish and McDonald’s more than 30.
  • Snap FitnessSnap Fitness is one of the leading brands with approximately 2,000 clubs open or under development in 15 countries. It recently announced that investment by TZP Capital Partners II, a private equity fund, will continue to accelerate growth, which currently has the number of units globally growing at a rate of 20-25 per month. Snap’s portfolio of brands includes Snap Fitness, Kosama, 9Round Fitness and STEELE Fitness.

Big-Box Gyms

  • Crunch FitnessCrunch is a full-service fitness center model, but with an emphasis on making serious exercise fun by fusing fitness and entertainment and pioneering a philosophy of No Judgments. Co-owned by New Evolution Ventures and private-equity firm Angelo Gordon, the franchise has more than 300,000 members with 73 gyms worldwide, including 46 franchise locations in nine states and Australia.
  • Gold’s Gym – The iconic brand of the bunch, Gold’s Gym has been around since 1965 and franchising since 1980. Over the last decade, however, it refreshed its brand with a focus on becoming a unisex gym with group activities and modern machines, rather than a facility that’s strictly for serious body-builders. It launched Gold’s Gym Express to meet the no-frills trend head on. Gold’s Gym International, which franchises nearly 600 units, also owns and operates more than 100 corporate facilities and has a line of licensed apparel and equipment.
  • Planet Fitness – Also stressing great value for a low price, a Planet Fitness franchise continues to be a desirable investment for entrepreneurs. With more than 600 locations, the low-cost, no-contract gym strives to offer a comfortable environment for members at any fitness level with an emphasis on a wide selection of brand-name cardio and strength equipment, and unlimited fitness instruction. With locations in nearly every state and more than 4 million members, the company has remarkable brand recognition.
  • RetroFitnessRetroFitness bucks a trend by playing up the fact that it has something for everyone in a large facility filled with features and equipment. It has defined its brand as “more fitness for less money.” It attracts new members by stressing the value of such choices under one roof for a low, monthly membership fee of $19.99. The clubs feature cardio movie theaters, circuit training equipment, weights, personal training, group fitness, tanning booths, a RetroBlends smoothie bar, supplements, and chiropractic services.

Retro Fitness Franchise Photo by Big Ass Fans

Specialty Fitness Routines

  • JazzerciseJazzercise has transformed women’s aerobic classes of the 1980s into a total-body conditioning routine for those who want an alternative to treadmills and stair-steppers. It combines cardio, stretch and toning, set to the latest pop songs that you hear on the radio. Jazzercise began franchising in 1983 and is still going strong with classes for nearly half a million people in the U.S. and some 30 other countries annually. It landed at No. 42 on Entrepreneur’s Franchise 500, the second-highest position for a fitness operation after Anytime Fitness.
  • CurvesCurves International has listed close to 3,500 locations in the United States and has grown to about 10,000 locations worldwide, making it the largest fitness franchise in the world. Like Jazzercise, Curves has created its own niche in the fitness category by marketing strongly to women and it has achieved its success with females by offering both weight-loss and fitness services.
  • Fitness Revolution – While Curves appeals to women, Fitness Revolution is ahead of the curve in targeting clients, male and female, who want specialized group classes and personal trainer services. It’s helmed by Nick Berry and Pat Rigsby, who have years of experience as personal trainers, health club owners and business consultants. The franchise is especially appealing to franchisees who also have experience in the field and who want to convert to a franchise system, rather than operating freelance. It ranks among the top 200 companies on Entrepreneur’s Franchise 500.
  • Iron Tribe Fitness – This group training concept is poised to capitalize on one of the growing trends in fitness as it continues to roll out new units with a goal of having 300 units within five years. Winner of the 2012 Infusionsoft Ultimate Marketer award, Iron Tribe’s focus on online marketing has resulted in as much as 88 percent of its customers responding to the efforts, including email and the company’s outreach through YouTube, Google Local, Facebook and Twitter.
  • TITLE Boxing Club – This brand is perhaps best positioned to cash in on the growing interest in boxing, kickboxing and mixed martial arts. TITLE Boxing Club has grown from 10 units in 2011 to more than 100 in 2013 with very little competition in the niche. Part of its success is attributed to the TITLE brand, which is known worldwide. Professional boxer Danny Campbell has developed a workout that allows members who are interested in boxing to “get fit, not hit.” About 75 percent of its members are women interested in kickboxing and self-defense maneuvers.

TITLE Boxing Club  1

Initial Investment (Source: Entrepreneur)

Highest

  • Gold’s Gym – $1.02 million to $3.96 million
  • Total Woman Gym + Spa – $1.2 million to $1.6 million
  • RetroFitness – $861,000 to $1.51 million
  • Rock Climbing Franchising – $746,000 to $1.21 million
  • Xist Fitness – $679,000 to $1.92 million

Lowest

  • Look Good Naked – $1,720 to $14,390
  • Jazzercize – $4,280 to $76,500
  • ILoveKickboxing.com – $6,900 to $177,190
  • Fitness Revolution – $13,510 to $121,910
  • Steelhouse – $15,190 to $151,640

Estimated Market Share (Source: IBISWorld)

  • 24 Hour Fitness Worldwide Inc. – 4.9 percent
  • Life Time Fitness – 4.1 percent
  • Bally Total Fitness Holding Corporation – 3.2 percent
  • Town Sports International Holdings Inc. – 1.9 percent
  • Curves International Inc. – 1.8 percent
  • Gold’s Gym International Inc. – 1.5 percent

TITLE Boxing Club 3

Trends

Technology continues to contribute to the fitness industry’s success with new machines, communications tools and automated security that help reduce overhead for operations. Anytime Fitness is often cited for its progressive use of technology and co-founder Dave Mortensen told Franchise Chatter in an interview that the company will continue to rely on new tools and advances as the number of franchise units grows. Keeping up with technology has been key to providing franchisee training and ease to running the business.

“Information at our fingertips is most essential,” Mortensen said. “Technology is key, but with a balance of personal attention.”



Other trends contributing to the growth of the category:

  • The rate of obesity in the United States grew steadily from 1987 to 2007 with all states except Colorado counting at least one fifth of their population obese. More than 72 million Americans, one third of the population of the United States, are considered clinically obese. These alarming statistics are expected to have a positive impact on the fitness industry as Americans and people around the world try to pursue healthier lifestyles.
  • The industry may see signs of consolidation, but there will be a growing demand for facilities that offer personal training and group classes, especially those that might combine yoga, Pilates, ballet, dance and surfing.
  • The industry will continue to face competition during the next five years. Franchises will not only compete with each other, but also with nonprofit gyms, home fitness equipment and even organized team sports. However, studies have shown that even with increased participation in the latter, many individuals find it more convenient and time efficient to purchase gym memberships compared to participating in team sports.

Marketing

  • Whereas fitness centers will continue to attract gym rats and bunnies, revenue will continue to be driven by two other demographics that are relatively new targets for the industry: the elderly and teens. The number of adults ages 20 to 64 will reach 192 million by 2018, and aging baby boomers who want to get or stay fit will purchase memberships at health clubs, as will more consumers 17 and younger.
  • Gym franchises will want to continue to appeal to the over-50 crowd with additional services such as health maintenance and blood sugar, blood pressure and bone density monitoring. RetroFitness recently improved its efforts to attract seniors and other consumers who have Blue Cross/Blue Shield insurance. The insurance companies will now reimburse a gym membership for policyholders through a new partnership with the franchise.

IBISgraphic2

  • The first few months of a new year are crucial in the fitness business. About 30 percent of all new members join gym and fitness clubs during the first quarter, with January yielding the highest proportion of new membership sales. While holding special new year’s promotions is important, a company should also pay attention to boosting memberships during other months by offering discounts and monthly memberships.
  • Good marketing is especially important in this field, and a franchise can have a distinct advantage with a wider reach of marketing and name recognition. The industry is highly fragmented: the 50 largest companies control only about 30 percent of the market, and there are only a few dozen companies that own more than 10 centers.
  • The weight-loss market is generally geared toward women. Of the 25 percent of Americans who were on a diet in 2007, two-thirds were women. But there may be growing opportunities in marketing toward men. Surveys show that, in general, dieters have higher incomes than non-dieters, live in a rural environment rather than urban, and are most often in their 40s and 50s.

Other Resources

  • The International Health, Racquet & Sportsclub Association collects and shares key operational data related to health club industry benchmarks, best practices and trends by taking annual surveys, partnerships and data collection. The association publishes the Health Club Consumer Report, annual Industry Data Survey and the IHRSA Trend Report
  • For 25 years, the American Council on Exercise has become an established resource for both fitness professionals and consumers, providing comprehensive, unbiased, scientific research impacting the fitness industry. According to ACE, national attention on childhood obesity will lead to an increase in the number of youth-focused classes.
  • Clubindustry.com dubs itself the online source for fitness business professionals. Its mission is to connect buyers and sellers through a portfolio of products that offers news, education, business solutions and strategies.
  • The Sporting Goods Manufacturers Association (SGMA) report is produced by a partnership of six of the major trade associations in U.S. sports, fitness and leisure industries. The report includes a high level of detail when it comes to sports, fitness and leisure activity participation as well as topline information from the Physical Activity Council (PAC) report.
  • The American Academy of Health and Fitness is a professional association whose overall mission is to instill quality of life as people age. This is accomplished by providing advanced training and continuing education for certified personal trainers, athletic trainers and certified nurse aides committed to conducting safe and effective programs.
  • The Sports & Fitness Industry Association, working in partnership with Sports Marketing Surveys USA, is one of the leading suppliers of research for the industry. It publishes more than 100 industry reports annually on different industry and product categories to help owner-operators understand and manage their businesses.

Potential Pitfalls

RetroFitness CEO Eric Casaburi

Eric Casaburi, Founder and CEO of RetroFitness

Fitness is on fire and there don’t seem to be many factors that will douse the flames. Still, individual fitness centers will face challenges other than competition in the coming years.

One thing that investors should remember is fitness centers must continually buy and upgrade equipment as new machines and technology come on the market and older machines deteriorate or become outdated. Equipment can be a major capital expense. However, franchise systems have an advantage by offering economies of scale in advertising and equipment purchases that many independent operations cannot offer competitively.

Eric Casaburi, founder of RetroFitness, says it’s also crucial for those in the industry to be on top of trends, which can impact the fitness industry more so than other franchise categories. One of the advantages of signing with a franchise is the company should stay apprised of developments for its franchisees and be able to distinguish between fitness fads and long-term trends.

“You have to know the trends: what’s going to happen, what’s a good trend and what’s a bad trend,” Casaburi said. “You have people jumping around on trampolines one week and the next week they are jumping around on pogo sticks. You’ve got to know what sticks. That’s why it’s good to be in a franchise.”

More Information

To see more articles from Franchise Chatter about the fitness franchise industry, including exclusive interviews with franchise executives and seasoned franchisees, click here.



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