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Fitness First’s shrinking figures a warning for franchisees

Monday, 29 August 2011 | By Michelle Hammond
Fitness franchises are starting to feel the effects of slow consumer spending, new reports claim, suggesting prospective franchisees should do their research before investing in the sector.

 

It’s been revealed that industry heavyweight Fitness First Australia, a global health club chain with more than 90 clubs in Australia alone, is losing members at an unprecedented rate.

 

Reports show Fitness First lost 16,000 local members in the year to October 2010, while net profit fell by a third to $28.5 million as a result of asset write-downs for “non performing clubs”.

 

The earnings drop came as revenue slipped 1% to $339.6 million, interrupting almost a decade of stellar growth since the company entered Australia in 2000.

 

The chain is now seeking to lure new members with fitness crazes like Latin dance workout Zumba, and an overhaul of its offering.

 

Fitness First is majority-owned by London private equity group BC Partners, which is reportedly seeking to list the group as early as next month on the Singapore exchange.

 

Australia has been one of the strongest performers in the network, but the latest results suggest the country is not immune to global economic turmoil.

 

Manuel confirmed the global financial crisis “had an impact on how consumers chose to spend their income, and now there’s also increased competition”.

 

In addition to the emergence of budget operators such as Anytime Fitness and Fit n Fast, Manuel said the rise of specialist studios and personal trainers has also attributed to the company’s woes.

 

An IBISWorld report reveals revenue across the industry fell 1.4% during 2009-10.

 

However, demand is tipped to rebound in the next five years, boosted by new offerings, including the expansion of Richard Branson’s health club chain Virgin Active.

 

Branson has indicated that Virgin Group wants to open up to 20 new clubs in Australia over the next four years, with as many as 30 sites believed to be under consideration across the country.

 

David Ciantar, Australian general manager for Anytime Fitness, says while Virgin Active has a “fantastic” offering, it doesn’t see the company as a direct competitor.

 

“We’re a franchise business so we work with franchisees... We’re dealing with franchisees who are very entrepreneurial; they want to make their club a success in their local market,” Ciantar says.

 

“We focus on being member-centric, so ensuring that they become the focus of the club.”

 

Earlier this year, Anytime Fitness was listed among the top 10 franchises in the 2011 Topfranchise Awards, announced by Topfranchise.com.au, for its franchisee support.

 

Ciantar also points out that Anytime Fitness is – as the name suggests – open at anytime, operating on a 24-hour basis.

 

“I could think of a couple of different brands that might suffer as a result of Virgin’s offering… and while we acknowledge that they’re in the market, our business model is somewhat different,” he says.