The fitness industry has witnessed consistent growth in recent years, with fitness franchises a key growth driver. In this article, we explore the development of this segment, business models and the key factors influencing franchisees to opt for a fitness franchise. With membership fees central to most operating models, successful collection and disbursement of royalties and fees to franchisors and franchisees is essential.
According to The LeisureDB 2019 State of the UK Fitness Industry Report, growth in the private fitness industry has been driven by the boom in the franchise sector, as well as growth in the low cost category. The four largest franchise operators (Anytime Fitness, énergie Fitness, Snap Fitness & Fitness Space) have over 330 clubs – an increase of 14% on 2018.
The growth of fitness franchises is a worldwide trend, the IBISWorld 2018 Gym & Fitness Franchises Report showed 5.2% annual growth for the category between 2013 and 2018. This growth trajectory is expected to continue through to 2023.
Fitness Franchises: A Growing Segment
While franchising as a business model has been prevalent in the UK since the 1950s when Wimpy arrived, it is relatively new for the fitness industry. The first fitness franchise in the UK, énergie Fitness, launched in 2003. Since then the fitness industry has more than caught up with big players like Anytime Fitness to niche operators with a small number of sites.
Health Club Management reported that the pace of growth accelerated in the 5 years to 2018 with budget and mid-market operators entering with ambitious growth plans. Australia-based franchised operator, F45, recently announced its UK expansion with 2 new studios in Manchester. F45 is planning further UK and Ireland openings for 2020, including sites in Southampton, Dublin and Cheltenham. Similarly, Snap Fitness has made international expansion a priority for 2020, the brand recently opened its 100th European club.
What’s Driving The Boom In Fitness Franchises?
Undoubtedly the continued growth of the global fitness industry has created an attractive opportunity for prospective franchisees. Point Franchise highlights 5 key factors driving the growth in fitness franchises:
- Increasing focus on ‘wellness’ – the fitness industry has positioned itself as a key component to a healthy lifestyle and achieving ‘wellness’.
- Social media – with the rise of health-conscious influencers, the fitness industry is benefiting from increased interest in exercise and the desire to try new workouts and physical challenges. Social media has also positively impacted the success of individual franchisees who use the tool effectively.
- New, accessible business models – consumers are increasingly looking for a good value, flexible and effective route to fitness that complements a busy lifestyle. Fitness franchises are catering to this with affordable flexible membership options, clever incorporation of technology and alternative exercise programmes to suit all tastes.
- Decline of high street retail businesses – Traditional retailers have been impacted by the growth of ecommerce. As these businesses close, a surplus of affordable real estate has become available for fitness franchisees to take on.
- Growth potential – The UK fitness industry is healthier than ever with more than 10 million members, over 7,200 sites and a market value of over £5 billion according to LeisureDB. With a penetration rate of 15.6%, there’s still plenty of room for growth, creating an attractive opportunity for franchisees.
Typical Fitness Franchise Operating Models
Fitness franchises typically rely on regular memberships for revenue. Membership fees are typically decided by the franchisor and will reflect the brand value, local demand, facilities offered and physical location.
An initial investment from the franchisee is usually required – this can range from £40,000 to £170,000 (according to franchise4u.co.uk). Some will also require a regular franchise or royalty fee to be paid by the franchisee.
In terms of support provided to the franchisee this can include:
- Monthly revenue
- Financial assistance
Successful Management Of Fitness Franchise Royalties
Effective management of royalties is vital for both franchisors and franchisees. Poor management can lead to lost revenue for both parties and will ultimately negatively impact the franchise brand value for franchisees.
The way membership fees are collected is central to successful royalty management. If franchisees are tasked with collecting membership payments, non- or delayed payment of royalties due to the franchisor can be a significant issue.
Choosing to work with a third-party membership payments specialist at a franchise level will alleviate the issue of non- or delayed payment, while ensuring both the franchisor and franchisee receive the correct revenue due in a timely manner.
For the franchisor, owed fees can be ring-fenced before the franchisee is paid. A multi-tiered approach is possible with revenue split into multiple groups according to business hierarchy. The provider will calculate all payments due, including royalty or franchise fees, and split these between the franchisor and franchisee. Relevant financial reports will be provided directly to both partners.
This approach removes time-consuming administration work for both parties. Franchisors can better focus on supporting existing franchisees and recruiting new franchisees. Meanwhile, franchisees can concentrate on growing their membership base and improving member engagement and experience to drive retention.