5 Fitness Franchises Getting Buff

NEW YORK (TheStreet) -- Franchisees are always looking for the next "big thing" opportunity, and following consumer trends is a good way to keep tabs on the services and products that could do well as business investments.

The increasing public awareness of leading a healthy lifestyle, Americans living much longer and wanting to stay fit and the fight against a national obesity epidemic are all pumping up the $25 billion gym, health and fitness club industry. Gym memberships have increased considerably over the past 10 years to more than 43.6 million in 2012, according to a report by IBISWorld.

"This trend is the result of soaring demand for fitness activities and industry operators have capitalized on this growth by expanding establishments in both size and number. In addition, the industry has diversified some with the rise of small-scale gyms and female-oriented gyms, which have expanded [their] customer base," IBISWorld reports.

To be sure, the industry was not immune to the recession. Fitness clubs are reliant on consumer discretionary spending. With unemployment spiking and consumers closing the purse strings as the recession settled in, growth in the fitness club industry slowed to just 0.9% between 2007 and 2012. However, IBISWorld analysts expect industry annual growth over the next five years to rise 2.8%.

Analysts expect revenue to increase 2.5% in 2013 alone as disposable income rises and the job market gradually improves. More importantly, IBIS forecasts profitability to rise 8.7% as "improved demand allows gyms and fitness clubs to reduce promotional discounts and increase rates."

Like any industry, fitness franchises come in different shapes and sizes, split between full-service fitness clubs and smaller, convenience fitness clubs. Major players include 24 Hour Fitness, Town Sports International (TOWN) -- owner of the New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs and Washington D.C. Sports Clubs brands, Gold's Gym and Life Time Fitness (LTM).

"Over the past five years, because of the recession, the large-scale nationwide chains have really suffered, but they have been replaced by the more budget gyms like ones with low membership fees and fewer amenities," says Dale Schmidt, an industry analyst at IBISWorld. "There is opportunity still on the low end of the price and quality scale."

"Now that people have gotten used to the low-cost, low-amenity gyms, even though the economy is improving, we haven't seen a large scale return to the big budget national chains. Any new entry that could offer a low price point and offer services beyond cardio and weight lifting machines, like yoga classes, while still keeping a low fee, would be the ones most poised to gain market share," Schmidt says.

For franchisees that also means a lower investment to get in to the industry.

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