Health And Fitness Industry Profile

Demographics

One of the main reasons health and fitness franchises succeed is that the majority of U.S. adults deal with a weight problem. In 2015, the Centers for Disease Control and Prevention (CDC) reported that 37.9 percent of U.S. adults age 20 and over were obese based on a standard weight-for-height measurement called body mass index (BMI). The BMI formula divides a person's weight in kilograms by height in meters squared. Using this index, obesity is defined as a BMI greater than or equal to 30; overweight is a BMI greater than or equal to 25 but less than 30. When the number of overweight adults was added, the CDC data showed that 70.7 percent of U.S. adults age 20 and over were either obese or overweight.

The epidemic of unhealthy weight levels also affects children and adolescents. In 2015, the CDC also reported that 17 percent of U.S. children between the ages of 2 and 19 suffered with obesity. An additional 16.2 percent of that age group was considered overweight. When the statistics were combined, they showed that one-third of U.S. children are either overweight or obese. With medical evidence supporting the fact that childhood obesity lays the groundwork for weight problems and long-term physical ailments into adulthood, the need for physical fitness programs spans all age groups.

While many factors, including genetics, medical conditions and economic status can increase a person's risk for being overweight, geographic location also may be a contributor. Regional lifestyles and the availability of fitness programs can help or hinder a healthy lifestyle. The CDC found evidence of this in its identification of the prevalence of obesity by state. While all U.S. states had a prevalence of at least 20 percent obesity, and the majority measured between 25 percent and 35 percent, some trends were notable:

• The lowest rates of obesity were in California, Colorado, Hawaii, Massachusetts, Montana, Utah and the District of Columbia, all of which reported a prevalence that ranged between 20 and 25 percent.
• Alabama, Louisiana, Mississippi and West Virginia reported the highest prevalence of obesity, with rates from 35 percent and above.
• Regional trends showed that the South had the highest prevalence of obesity at 31 percent, while the West had the lowest prevalence at 25 percent.

Though the number of overweight and obese adults and children increases annually, there also is a growing trend toward individuals taking a more active role in managing their conditions. Every year, more people join gyms and health clubs in efforts to lose weight, change eating habits and establish long-term healthy lifestyles. In 2015, 55.3 million Americans held health club memberships versus 54.1 million in 2014. It's a tally that has grown each year since 2012, according to the International Health, Racquet & Sportsclub Association (IHRSA). In fact, health clubs also attracted 6 million non-members. More than 64 million people used a fitness facility in 2015, for a total of over 5 billion health club, gym and studio visits, according to the IHRSA.

Growth Potential

The impact of the baby boomer generation on the health and fitness industry also is notable in the growth potential of related franchises. Though the majority of health club members tend to be between the ages of 18 and 44 years, members over the age of 35 are the most active users, says the IHRSA. On average, members age 35 and older visited their clubs 20 to 50 percent more often than those under 35. Adults over age 55 visited more often than all other generations.

Adults over age 55 comprise 25 percent of U.S. health-club members, according to fitness industry analysts at American Sports Data. It's a market the firm labeled as the fastest growing segment of the health-club membership since 1998. During that period, the number of members age 55 and over who visit the gym at least 100 times per year increased 33 percent, while the number of adults ages 18 and 34 who did so increased only 13 percent. There was no increase for those under age 34.

Industry Characteristics

The health and fitness franchise industry continues to grow as Americans become more aware of the benefits of achieving and maintaining a healthy lifestyle. As health care costs increase, consumers realize it's more economical to invest their time and money in achieving good health rather than paying for the treatment of the conditions attributed to unhealthy habits. Franchises in this industry meet consumers' demands to maintain wellness. Within that broad purpose, health and fitness franchises offer a wide range of services that help people achieve well-being both inside and out.

Rising per capita income and declining unemployment rates have helped this industry grow, according to analyses by the research firm IBISWORLD. In a November 2015 industry review, IBISWORLD reported that the U.S. gym and fitness franchise industry had annual revenue of $3 billion. The report forecast that U.S. gym and fitness franchises were positioned to increase at an annualized rate of 5.1 percent between 2010 and 2020. During the same period, the gross domestic product (GDP) was set to increase at an average annual rate of 2.2 percent. The analysis put gym and fitness franchises growing at a faster pace than the overall economy.

Specialization is a significant trend in the industry. New and novel fitness regimes and personal care treatments are more likely to attract attention in markets that may be saturated with competition. However, it's not enough to stand out from the crowd. A successful health and fitness franchise has to produce results to maintain members and build client loyalty. Even among all-purpose gyms, the most successful franchises have a unique identity and concentrate on a specific type of experience for a defined clientele. For example, both Gold's Gym and Planet Fitness have successful franchises though they provide very different types of experiences. Gold's Gym caters to serious bodybuilding and weightlifting enthusiasts. Its programs emphasize helping members succeed by getting stronger. In contrast, Planet Fitness gyms promote their locations as, "Home of the Judgment Free Zone." By creating a friendly, fun atmosphere with perks like Pizza Mondays and Bagel Tuesdays, they appeal to first-time or casual fitness enthusiasts who might feel uncomfortable in a more intense environment.

You can find a health & fitness franchise that may work for you by searching Franchise Opportunities' Health and Fitness Franchises category.

Gyms and Fitness Centers

In an industry report on weight management, The Hartman Group, a food industry marketing and research firm, reported that weight management is the most common health concern among U.S. consumers. According to a report on U.S. health and wellness, the firm's analysts found that 58 percent of consumers were taking active measures related to weight management. While 26 percent of consumers were treating a weight management condition, another 32 percent were involved in preventing one. Of those trying to prevent becoming overweight, 56 percent relied on exercise, according the report.

In a 2015 report on health club consumers, the IHRSA said total U.S. health club revenue reach $25.8 billion in 2015, a 6.1 percent increase over 2014. While weight management is a primary reason for attendance, people also join gyms to increase activity, maintain wellness or achieve athletic goals. Where "big-box gyms" like LA Fitness were once the norm among franchises in this industry, smaller gyms and studios with unique and specialized regimes are more on-trend. This newer approach offers a more personal experience and allows trainers to establish a closer connection with clients.

According to Entrepreneur magazine, some of the most successful fitness franchises are part of the "boutique fitness franchise" trend. The trend includes franchises that offer workouts based on a wide range of special-interest programs such as pole dancing, Bikram yoga, trampolines or boot camps. Other novel approaches in fitness franchises include:

• Group training at Fitness Revolution and GymMatrix, in which a certified personal trainer works with more than one person at a time to offer value-based group workouts
• Kickboxing-themed workouts at iLoveKickboxing.com and 9Round
• High-intensity interval training (HIIT) at Orangetheory Fitness
• Workouts for new moms and their babies at Stroller Strides
• 24/7 gym access at Workout Anytime and Snap Fitness
• Automated personal training at Koko Fit Club

Gyms that offer age-based services also are gaining popularity and profits. A May 2016 report by IBISWorld reported annual revenue of $550 million for U.S. children's fitness center franchises. Children's fitness center franchises reached annual growth of 2 percent between 2011 and 2016, according to the report. These franchises offer activities such as sports leagues, martial arts and swimming for children.

The same growth opportunities exist for gyms that serve the other end of the age spectrum as well. Though millennials surpassed baby boomers as the largest generation in 2015, the population of 74.9 million baby boomers remains a significant source of potential fitness clients. With longer lifespans and an anti-aging attitude, empty nest baby boomers are willing to invest their larger discretionary incomes in keeping themselves as healthy as possible for the long-term. Taking advantage of this lucrative opportunity, gyms like Welcyon's Fitness After 50 franchise offer "non-intimidating" settings geared to make baby boomers feel comfortable while working out to a personalized program.

Ancillary Health Services

Some franchises in this segment overlap with offerings tied to the health care industry. They include franchises that provide weight loss counseling, behavioral health programs, chiropractic care, lab testing and urgent care. Novel services range from massage treatments to lice removal. Franchises that provide medical and dental practice billing also offer lucrative opportunities, though they lack the one-to-one client interaction that characterize most health and fitness franchises.

One of the most lucrative types of franchises in this segment is outpatient physical rehabilitation services. In April 2015, IBISWorld reported that the industry generated $30 billion in revenue. The annual growth between from 2011 through 2016 was expected to remain at 2.2 percent. As the number of elderly Americans increases, there is likely to be a higher demand for physical rehabilitation due to falls, injuries and surgeries, all of which become more common with age. Franchises in this category also can provide services that include rehabilitation in the areas of speech, neurology and sports-related support.

As more medical professionals have validated and endorsed the therapeutic and health benefits of massage, this segment of franchises has experienced significant growth in recent years. While the majority of massage business owners were sole proprietors in the past, massage franchises offer strong competition for clients seeking these services. According to a June 2016 report by IBISWorld, the massage franchise industry earned average annual revenue of $1 billion. Between 2011 and 2015, U.S. massage franchises experienced an annual growth rate of 26 percent. Growth was expected to remain strong at 20 percent in 2016, proving that massage franchises remained a young industry with room for expansion. Analysts attributed part of the industry surge to changing consumer attitudes toward massage.

Medical billing franchises require some of the lowest investments in this segment, with the potential for working at home. In October 2016, Grand View Research Inc. reported that the medical billing outsourcing industry had annual revenues of $6.3 billion. Analysts predicted that the industry would increase to $16.9 billion by 2024. As medical coding becomes more complex and the health care system works to serve a larger older population, medical practices are more likely to outsource these services. Research indicated that up to 95 percent of independent physicians supported outsourcing revenue management. The introduction of a new medical coding system and the increased use of electronic medical records also is expected to fuel growth for these franchises.

Financial Matters

Start-up costs vary widely for health and fitness franchises. Businesses in this segment can be started for as low as $20,000 for some home-based franchises, while those that require a specific location and specialized equipment can involve investments of over $1 million. One cost factor is the franchise requirement for physical space. Some gym franchises require the rental or purchase of a physical location along with proprietary workout equipment. Other franchisors allow franchisees to rent training space from churches or schools on an as-needed basis, drastically reducing initial and ongoing costs. The lowest start-up fees are likely to be from services, such as medical and dental billing, that are designed to allow franchisees to work at home without the need for physical facilities.

In addition to initial franchise costs, health and fitness franchises typically pay ongoing fees and royalties for the use of the franchisor's name and programming. As a franchisee candidate, it's likely that you'll have to show proof of a specified net worth before you're approved. These requirements can include liquid assets of up to several hundred thousand dollars, depending on the size of the franchise. In addition, it's not uncommon for a health and fitness franchise to mandate that you commit to ownership of multiple franchises. If you're required to purchase more than one location, you'll have to prove you have the funds to do so before opening your first location. Ongoing fees typically include the cost of advertising, rent or mortgage payments, utilities, payroll and site and equipment maintenance.

The trend toward smaller gyms and fitness centers benefits franchisees in that they help keep franchise start-up and maintenance costs lower. In smaller gyms and studios, lower trainer-to-client ratios allow clients to develop one-on-one relationships with trainers and staff, helping them to feel more connected to the facility. The increased customer satisfaction that results can be helpful in yielding higher retention rates and membership renewals.

Benefits

Industry data show economic benefits to owning a fitness club that's part of a chain. In its 2015 State of the Industry report, the IHRSA showed that health clubs found strength in numbers. While fitness-only clubs achieved median net membership growth of 4 percent, clubs that were part of a chain achieved a median net membership growth of 9 percent, the highest among all segments.

As with any franchise industry, a significant benefit of owning a franchise in the health and fitness industry is that your business will have name recognition from the start. You'll be ready to roll with a proven service that's backed by a successful business plan. You'll also have the advice and expertise of your franchisor to assist in selecting a business location, securing financing and hiring staff. Given the nature of health and fitness services, you'll also benefit from expert advice in ensuring safety and choosing liability insurance.

If you pursue a fitness franchise such as a gym or health club, you'll appreciate the fact that these business models have a consistent source of income. Memberships typically are paid at the beginning of the month via automatic bank transfers. That means you'll have a set guaranteed income from membership dues even if clients aren't using your facilities. On average, members visited their health club for 102 days annually, according to the IHRSA.

With a successful health or fitness franchise, you'll gain the satisfaction of helping people improve their bodies and feel better about themselves. Physical changes, whether through weight loss or rehabilitation, can help clients feel more confident and comfortable. By guiding your clients toward healthy lifestyles, you can help reduce their risk of cardiovascular disease, diabetes and other ailments. Facilitating these types of changes in your business can be very rewarding.

Important Considerations

One of the most significant challenges in the health and fitness franchise industry is customer retention. On average, members who stayed with a fitness club past the first year did so for an average of 4.9 years in 2014, according to the IHRSA. However, this varied across club segments. Members of multipurpose clubs stay longer than those who attend smaller studios. While members of multipurpose clubs remain for an average of 6.3 years, studio members stay between 4.4 and 5.1 years. In all, the majority of fitness clubs have an attrition rate between 30 and 50 percent. They lose up to 50 percent of their members every year, so the challenge to keep new clients coming in is constant.

Some of the success of your health or fitness franchise may be out of your hands. Much of your reputation will be based on clients' experiences. Since your employees will be interacting with your clients one-on-one, your trainers or therapists will play pivotal roles in ensuring clients are satisfied. Employees whose attitudes or practices don't align with your philosophy or the franchise program will undermine the success of a formula you're paying to use. However, having the best employees may also present some challenges. With the high rate of employee turnover in the fitness industry, it's common for personal trainers to change jobs within two years of hiring. In doing so, they may take their loyal and satisfied clients with them to their next facility.

Many health and fitness franchisors require that you maintain your franchise as an owner-operator. As such, you'll be expected to be onsite to manage the day-to-day operations of your business. Depending on the services offered by your franchise, you may be required to obtain related education and experience before you open your doors. If you'll be interacting with clients, you may have to apply for specific licenses before you do so.

Characteristics for Success: Who Should Consider a Health or Fitness Franchise?

If you're enthusiastic about the health and fitness industry, you can find a franchise that matches your interests and fuels your passion. You'll make the most of your franchise if you're suited to handle the demands and challenges of the industry. Having specific strengths and skills can help you enjoy what you do and grow a profitable business in this rewarding industry.

You should consider a health or fitness franchise if:

• You have a background in health or fitness. You'll have a better understanding of proper techniques and applications if you're familiar with best practices in the types of services you offer.
• You can identify the best job candidates. Your trainers or therapists will define your clients' experiences and play a major role in determining whether you get repeat business or membership renewals.
• You have an education or experience in business management or marketing. If you're an absentee owner, you'll be better equipped to monitor from afar if you know what to look for.
• You're organized or are willing to hire someone who is able to handle administrative tasks related to business and employee licenses, continuing education requirements and insurance claims for eligible health services. Otherwise, expired licenses can increase your liability and result in fines or even closure.
• You're a high-energy individual. If you're an owner-operator, you'll play a major part in setting the tone of your facility. You'll have to be "on" from the time you open your doors through the last class of the day or the last client's appointment.
• You can motivate others. If you're a hands-on operator in the fitness industry, you'll succeed by encouraging people to meet their goals and ultimately achieve results. Your franchise will grow by word-of-mouth.

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