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the past five years, because of the recession, the large-scale nationwide chains have really suffered, but they have been replaced by the more budget gyms like ones with low membership fees and fewer amenities," says Dale Schmidt, an industry analyst at IBISWorld.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.
Initial investments for full-service fitness franchises can top $1 million compared with a convenience-type franchise initial investment that is more likely to be in the range of $250,000, says Paul Segreto, president and CEO of franchisEssentials. However, investment alone shouldn't be the reason to choose a fitness franchise. Prospective franchisees should also have a thorough grasp of the company's franchise disclosure document or FDD. Another way to establish the soundness of a franchise is by looking at data measuring loan repayments. To go directly to fitness franchise profile pages: Click
here for Planet Fitness. Click here for Retro Fitness. Click here for Snap Fitness. Click here for Title Boxing Club. Click here for Anytime Fitness. According to an analysis of Small Business Administration loans by Blue MauMau, a website for news and information related to franchise ownership, several fitness franchises ranked better than other franchise owners when it came to failure rates for SBA-backed small business loans. The data measures loans from Oct. 1, 2001 to Sept. 30, 2011. Planet Fitness franchisees with SBA loans seem to be among the best performing loans, according to the data. Of the 37 loans worth $18 million made by Planet Fitness franchisees, there has been a 0% failure rate amongst the loan repayments. The fitness franchise with next lowest loan failure rate was Anytime Fitness. The data says 7.83% of the gym's 217 SBA loans worth $39 million failed. SNAP Fitness had an 11.2% failure rate across 107 SBA loans worth $16 million. Don Sniegowski, BlueMauMau's founder, says another thing to consider when searching for a franchise is if there are company-owned units. "They need to have skin in the game," he says. If they don't, "they're removed from that end customer." Here are five fitness franchises worth checking out.
Planet Fitness was founded in 1992. It began franchising in 2003. Today, the company has 550 locations and 3.7 million members. The company offers inexpensive gym membership fees of $10 or $19.99 per month, depending on the level of service desired, and has steadily expanded operations over the past three years, IBIS reports. The combination of its low price with an accessible gym environment for gym novices is the company's sweet spot. "We're the leader in the low-price category. We sort of invented the low price category in the gym business," says John Craig, in charge of brand development for Planet Fitness. One way to instill that environment is with its "lunk alarm," Craig says. The lunk alarm is a loud siren mounted to a wall that goes off if someone slams weights on the floor too hard. "We're really not for bodybuilders," Craig says. "We're kind of for people who want to exercise and not feel like they're in a high pressure atmosphere." The approach is visible throughout the gym, from its purple and yellow colors to the selection of the equipment and the gym's "vibe." Planet Fitness gyms don't have the overhead that some full service gyms have: they don't provide group fitness classes, and there are no daycare options, swimming pools or racquet ball courts. "We focus on the things that most people really want in a gym and we try to do those really well without building swimming pools that can make it a very intense and overhead-busy business," Craig says. To be sure, its gyms are large. They tend to be anywhere from 17,000 to 25,000 square feet, so Planet Fitness needs to be sure that it's gaining the membership volume to support such large square footage. "Combine the atmosphere with the $10-price point and you've got something, and we do," Craig says. "If you have thousands of members it can be a very profitable enterprise." Planet Fitness' membership grew strongly during the recession, with some clubs signing up more than 1,000 new members each month in 2009, says IBISWorld, citing the International Health, Racquet and Sportsclub Association. Planet Fitness is slated to have 600 gyms by the end of 2012. "We started out on the East Coast, but now were sort of coast-to-coast. You can expect to see more expansion throughout the Midwest, the South and the West," Craig says. "We're clearly the fastest growing enterprise right now and I think we have the most profitable and best business model going."
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