What’s behind the boom in gym franchises?

What’s behind the boom in gym franchises?

It’s a billion-dollar industry growing more and more every year and expanding far beyond the shores of Australia.

In 2013-14 alone, the Australian fitness business had a collective revenue total of $1.31 billion, with over 2800 businesses nationwide – most of which are franchises.

Since 2007, with the advent of the 24/7, no-contract, low-cost gyms – such as Jetts Fitness, Plus Fitness and Anytime Fitness – the market has reached a level of maturity and saturation not previously seen in Australia.

The rise in gyms

Propelled by rising obesity levels, society’s increased health consciousness, and an elevated awareness of the benefits of gyms due to TV programs like The Biggest Loser, the industry has grown substantially, but is estimated to slow, with only an estimated 3.3% growth rate over the next five years.

The IBISWorld report on Gyms and Fitness Centres in Australia for the 2013-14 financial year describes a saturated market with “little room for growth over the next five years”.

The report tells of an industry where the competition level is high, and the assistance level is low. As a result, it’s franchises – not solo gym ventures – that will keep the gym industry moving forward on the treadmill.

David Whytcross, a senior industry analyst at IBISWorld, told SmartCompany, “Over the past five years, the most successful gym franchises have been newfound budget 24-hour gym franchises.”

“Rather than focusing on gyms with all the bells and whistles, consumers have become more price-conscious and are focusing more greatly on substance rather than style in gym facilities,” Whytcross says.

IBISWorld’s research identifies a number of large and medium-sized chains as accounting for the majority of industry revenue as these sorts of gyms provide significant cost savings with lower wage costs.

Growing the business: Jetts Fitness

Brendon Levenson brought the 24/7 ‘no frills, no contract’ gym idea to Australia when he opened Jetts Fitness. The gym franchise had an estimated annual revenue of $128.5 million in the 2013-14 financial year, with growth of 13%, a market share of 9.8%, and the inclusion of 25 new clubs in its chain.

Now, with more than 250 clubs nationwide, the franchise is looking to expand overseas.

“We’re not in the business of running around just scattering and approaching different markets,” Martin Oliver, the chief executive of Jetts Fitness, told SmartCompany. “We just want to make good decisions with good markets, and develop those markets well rather than just tip toeing, having a franchise there and just leaving them alone.”

“So what we’ve been doing over the last two years is developing the quantum skill base of our domestic gyms, so they can actually support the international expansion,” he says.

Oliver was the biggest franchisee within Jetts – owning its tenth franchise in Australia – up until 2013 when he joined forces with Jetts founder Brendon Levenson to become chief executive of the business.

As the owner of 29 gyms and with 20 years’ experience in the industry, Oliver says he knows what is needed for the business.

However, despite the worldly aspirations of Jetts Fitness, he says you can’t lose sight of what is most important: getting the basics right.

Small things such as managers remembering member’s names, giving them a smile when they come through the door, and knowing every member on a personal level will creature a strong culture, and through that culture, “you’ll actually have more chance than other people in the business to actually do well.”

“You’ve got to be an honest brand. You’ve got to totally understand and listen to your members,” he says.

“You’ve got to understand that it’s a people business – you need to recognise that whichever way you go, the customer comes first and therefore all the issues associated with that customer need to be dealt with.”

“People vote with their feet, they don’t tell you, they just leave. So unless you’re listening to them, unless you’re actually dealing with those issues, you’ll lose sight of the member experience, which for us fundamentally is what pays for everybody’s wages.”

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