How gym franchises are making gains even in the face of economic uncertainty

Gym franchises have certainly been flexing their muscles of late but property prices and Brexit could present them with some serious new challenges

How gym franchises are making gains even in the face of economic uncertainty

The British gym sector is going from strength to strength. For instance, last year saw a record nine million Brits own a gym membership, according to the 2016 State of the UK Fitness Industry Report. And it’s just not the general public whose figures are improving: the fitness industry was valued at £4.4bn last year. Considering this, it’s hardly surprising that the bfa has predicted that the gym sector will be one of the fastest-growing franchising industries in 2017.

And these gains have been decades in the making. “High-end fitness clubs first emerged in the 1980s,” says Jan Spaticchia, CEO and co-founder of the énergie group, the fitness franchise. “But the sector really did itself some damage back then because it was quite elitist and expensive.” While these clubs certainly helped popularise pumping iron among some segments of society – helped in no small part by high-profile fitness fanatics like Arnold Schwarzenegger – they didn’t result in mass-adoption. It would take the introduction of Britain’s first budget gyms in the noughties for things to really kick off. “That changed the entire game,” says Spaticchia. “It really helped democratise the sector by offering fitness to those who would ordinarily not be able to afford it.” With customers not having to sacrifice an arm and a leg to lose weight, more people began to hit the gym.

A second crucial factor that has enabled the industry to reach new heights is the fact that 24-7 gyms are often located close to where people live and work. As in property, the key to success in the fitness sector can be spelled out in three words: location, location, location. “People are much more likely to go if they only have to travel for ten minutes rather than 20,” says James Garner, business and franchise development manager at Jetts Fitness UK, the fitness franchise.”

But there’s also an argument to be made that the way the gym sector has bulked up over the past few years is another reason why it’s increasingly drawing attention. “The steady and sustained growth in the sector has obviously proved attractive to new market entrants,” says Steve Ward, executive director of ukactive, the non-profit organisation devoted to promoting active lifestyles. This has helped entice new professionals who would otherwise not have dared or even considered entering the market, which has boosted the size of the sector even further.”

However, this rapid growth doesn’t explain why fitness is so well suited to franchising. Part of the answer is that franchising often provides a better service. “Traditionally, the fitness industry wasn’t about the customer,” says Spaticchia. “Because many businesses relied on disenchanted management teams, they simply didn’t offer high levels of service.” Fortunately, franchising has remedied the problem by incentivising people. “A franchisee that has put their own hard-earned money – and sometimes even their own house – at risk simply cares more,” says Spaticchia. “And if you can have a franchisee working at their own site and caring about their own members, well that makes all the difference in the world.””

Another reason why fitness and franchising go hand-in-hand is that the simplicity of the model means it’s easy to replicate, allowing budding franchisees to hit the ground running. “People are really attracted to how uncomplicated it is,” says Garner. For instance, while business owners in the food and beverage industry have to worry about things like the cost of goods and their supply chain, gym franchisees basically only have to be concerned with paying their fixed costs and servicing members. “With fewer and more simple mechanics, there’s also a lower risk of making errors,” says Garner. Given that the fitness industry offers this simplicity, it’s clear why people are jumping on the opportunity to invest in the model.”

But just because it’s easier to run a fitness franchise, it doesn’t mean that there aren’t still hurdles to overcome. “The biggest challenge for the sector right now is property prices,” says Garner. “Your growth is always going to be hampered by your ability to find suitable locations.” This is particularly severe in the nation’s capital, where property prices are famously high. For instance, the Swiss bank UBS recently named London the second most over-valued property market in the world, second only to Vancouver. But Spaticchia is not that worried. “True, there’s a real land grab going on in London,” he says. “But while you have to go that extra mile to find the right properties there, you can still find really good deals outside of the capital.”

Rising property prices aren’t the only factor that might affect the industry’s future: perhaps a bigger worry is how the sector will weather the fallout from the UK’s looming divorce from the EU. “I’m not going to be naive: Brexit is going to have an effect,” says Spaticchia. Britain’s departure from the union may affect currencies, trade and gym franchisors’ ability to source staff. But the thing the énergie group CEO is worried about the most is how EU citizens working in the UK fitness sector will be treated after the break up. “We have to be certain that they’ll be treated humanely,” Spaticchia explains. “That being said, I don’t think the effect will be as bad as the propaganda would have you think.”

But even if fitness franchises find themselves flourishing in post-Brexit Britain, they’re still going to face the challenge of ensuring that they attract new clients. “The fitness industry has been guilty of trading with the same customer base without growing the market for a long time,” says Spaticchia. “Most gyms are frequented by fit people.” In order to ensure that they encourage older folks, individuals who are anxious about their body shapes and other groups less likely to hit the gym, many franchises are currently expanding their services. “The way to do that is to offer services that our members want, not ones we think they should like,” says Spaticchia.

But while overcoming these challenges can at times seem like an almost Herculean feat, the sector’s franchisors don’t seem particularly worried about the years to come. “The fact that many large franchises have become successful here just shows what a fertile ground we have,” concludes Spaticchia. “I’ve very confident that we’ve got an extremely bright future ahead of us.””

Eric Johansson
Eric Johansson