Developing The Idea / Industry
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Figure 3In the midst of the economic downturn, the fitness industry has maintained steady growth, with membership rates growing consistently and profit remaining solid. Demand for gyms and health and fitness clubs will continue to rise over the next five years, as the general public becomes more health-conscious and the aging population places a greater emphasis on staying fit. There are three main types of fitness franchises: fitness centers, health clubs, and weight loss centers. These account for revenues of over $70 billion annually in the U.S. with fitness centers and health clubs generating over $20 billion each and the diet industry estimated at over $30 billion a year (Appendix 1). Revenues within the industry not only come from exercise-related services, but also the sale of products such as foods, supplements, weight reduction products, equipment, and clothing. By 2015 the project fitness club revenues will be $28 billion (Appendix 2).
Because many franchises cater to a specific niche in the market, the industry is very fragmented. The 50 largest fitness centers account for about 30 percent of revenue, and only a few dozen companies operate more than 10 centers. Major franchisors include 24 Hour Fitness, Bally Total Fitness, Gold's Gym and Curves. Competition for fitness franchisees comes from both for-profit and non-profit sectors, with the latter including organizations like the YMCA and community centers. With so many options in the marketplace, profitability in this industry is heavily dependent on good marketing. Franchisees have an advantage through the brand recognition and cooperative advertising efforts that franchise systems offer.
The primary revenue generator for the fitness industry is membership dues. This income is typically supplemented by various items like enrollment fees (fees collected at the time of the initial contract) in-center revenue (t-shirts to...