FITNESS FRANCHISE GROWTH in Asia and the Middle East is all about NUMBERS!

We recognize that the fitness industry is a valuable part of our personal and community well-being.

Whilst legislators, bureaucrats, and (possibly even certain) property developers and landlords may still be a little behind the curve in recognizing the significant benefit of the physical fitness, health, and wellness industries in their communities as an ‘essential service’ no different than health care, pharmacies, medical clinics, public transportation, corner convenience and grocery stores, and the like, it is also incumbent on the fitness brands themselves to grow their own businesses to a more noticeable, impactful, and forceful level and not simply expect relief handouts when times get tough. If any industry understands ‘tough’, it is our own beloved fitness industry.

Unfortunately, too many good fitness brands are growing far too slowly to move that needle.

This is also reflected in the very low overall average market penetration rate in Asia-Pacific of approx. 4-5%, whereas the Australia and New Zealand markets have penetration rates of about 15% and 13%, respectively. In China and India, even lower market penetration rates exist, estimated at 0.4% and 0.12%, respectively. In comparison, there is a solid 21-22% market penetration rate in the USA.

We also know that certain small local private homegrown brands will inevitably almost always stay, well - small, local, private, and homegrown - for various reasons due to a lack of budget, experience, expertise, also entry/expansion barriers, desire to stay local, poor access to resources, and so forth. They will enthusiastically remain small ‘one-offs’ or operating a handful of well-meaning gyms in communities and in smaller geographical areas. And they are probably still profitable too. But hey, that’s what the spirit of local entrepreneurialism is all about anyway, right? And that’s fine too.

However, the key fitness players – whether larger corporates or aspiring franchisors/licensors – are simply growing far too slowly, in my opinion, to be seen as ‘significant enough’ towards society’s functional well-being to be granted ‘essential service’ status or designation. That sounds unfortunate given the healthy personal rewards and enhanced social benefits within these communities which these leading fitness companies serve and the brand value opportunities which they may be missing.

But why?

Franchising (and licensing too!) in Asia and the Middle East are typically fast-growth business models.

By design, franchisor structures and systems are flat, overhead-tidy, highly competent, competitive, productive, efficient, entrepreneurial, oriented towards enterprise sales and 3rd party investor relations, and generally, very scalable, and fast-moving in terms of planning, decision-making, executing, and delivering results within their franchise models and revenue streams.

Similarly, corporate-owned fitness and gym companies can also grow quickly if their internal teams can be led, aligned, resourced, and synergized towards the necessary purpose and pace of play to be recognized as influential, essential, and critical community services.

Thirdly, larger corporate organizations breaking into the fitness franchising space only now will shoulder the additional (but oftentimes competing) challenges of coupling, prioritizing, resourcing, or combining their established legacy model (corporate) vs. the faster growth model (franchising) and the goals/complexities/processes of each model form, which McDonald’s Corp. and others have done exceptionally well in managing parallel models in their respective industries.

Now, mind you, the fitness industry has also shot itself in the foot more than once in its relatively short history as a movement. There have been a few rare but memorable periods when unregulated, disreputable, and sometimes bullish business drivers were allowed to run rampant in certain global markets and unfortunately have created a reputation that the then-fitness industry was almost solely alpha male, iron pumping, supplement pushing, muscle bulging, and arguably even restrictive, or non-inclusive, against those who didn’t adequately “fit the macho profile”.

This rogue approach naturally created a sort of cultural or community schism of what fitness centers should be, or were perceived to be, and dissuaded large segments of the population from becoming club members and, importantly, to be associated with as significant investors or franchisees.

Thankfully, in this more enlightened age of equality, diversity, and inclusion (EDI), that image of a male-dominated fitness industry is swiftly changing but, yet, that profile still seems seared into the minds of certain investors, equity groups, traditionalists, patriarchal families, or even conservative (arguably older) legislators or bureaucrats who are empowered with the brave decision of defining what ‘essential services’ should be. Franchising also helps to forge through such perceptions and offer brands/programs geared towards a more balanced representation of society’s demographics.

In franchising, there are a lot of visionaries and forward-thinking business modelers, and the questions “what if?” or “imagine if” are almost always at the forefront of our conversations (or sales pitches!).

What if … fitness centers had stayed open regularly throughout the COVID-19 period and served as examples of how high-level cleanliness and health standards, social distancing, responsible ownership, and community-minded businesses should look like? Would we be in a better place now?

Imagine if … the fitness leaders properly and persistently lobbied their local or national governmental representatives to support their cause? A vast majority of fitness leaders still talk the talk but don’t really walk the walk. Cordial alliances were relatively ineffective. Again, in large part, numbers matter!

As many of you know, franchising is close to my heart.

In one form or another, whether as an operator, joint venture partner, investor, franchisor, franchisee, or senior executive, franchising has always been at the center of my career. It’s such an exciting and demanding entrepreneurial multi-disciplined craft that it took more than a couple of decades to specialize in, or I dare say, to try and master.

Why decades? Because to learn the full cycle of disciplines within franchising – such as strategic planning, organizational structure, governance, legal, finance/audit, real estate, process design, compliance, vendors/supply, operations, IT systems, data analytics, advisory councils, regulator relations, marketing, social media, and particularly enterprise sales - even within industries such as QSR, fitness, hospitality, education, or even industrial services franchising will take years of experience and success (and failure too at times!) coupled with specialized training to contribute fully to a franchisor’s ambitious expansion goals across multiple markets in Asia or the Middle East.

Unfortunately, too many want-to-be franchisors take the complexities of a full-fledged franchising program far too lightly, too superficially, or unguided, with no market or global expansion strategy or game plan, or they cut corners or skimp on human and physical resources, and end up opening only a club or two over the course of a year since brand inception, or peddle franchises but can’t guide their franchisees towards timely openings, or worse, have numerous franchisees resent the growing disconnection or lack of support, or communication, or guidance within their franchise network.

So how does the fitness industry win?

It must grow. Grow and grow fast in a balanced way. The franchising model provides that fast track.

And whilst many will cite COVID-19 as an excuse for delayed expansion and growth, this pandemic is also providing (and has done so in the past year or more) innumerable game-changing opportunities:

·??????Prime real estate and leased spaces abound at very favorable financial terms

·??????Motivated operational talent is readily available now more than ever

·??????Investment funds are abundant from investors, family wealth, equity groups, etc.

·??????OEMs (original equipment manufacturers), distributors, vendors, and service providers are more ambitious than ever to promote, provide, and service their new creations, digital handshakes, and partnership deliverables

·??????An unprecedented desire by all age sectors to ‘get out, exercise, and socialize’

·??????A very low market penetration rate by fitness companies in Asia and the Middle East

·??????A new awareness of non-traditional exercise & franchise offerings (such as boxing, yoga, meditation, etc.).

The name of the growth game is “FOOTPRINT”.

Dozens, hundreds, and even thousands of new fitness, health, and wellness facilities need to be physically built and operating within the local communities and urban centers in the months and few years ahead to significantly impress and influence legislators, bureaucrats, and the population in general on the need and positive impact of exercise centers on society and its citizens and residents.

The general Rule of Thumb is that fitness franchisors or master franchisees in Asia or similar regions should sell (“award”) about 150-180+ franchises within their first 4-5 years of their brand inception with approx. 120-125+ operating clubs. Additionally, fitness franchisors should double these numbers in the subsequent 2-3 years of franchising and maintain a pace of play (ratio of opened clubs-to-sold franchises) of approx. 70-75%+ due to the lag time between the franchise sale and the opened club.

Meanwhile, the franchise agreement renewal rate should also be at the 95% or higher rate after the initial five- or six-year term. On the flip side, a closure or default rate during that 1st term should only be in the 0-2% range. These are only a couple of the basic analytics that a fitness franchisor or licensor should try to achieve in its evolution to create a balanced franchise system growth model. There are more checkpoints, metrics, and process goals which ensure efficiencies within your franchise system.

Such numbers have been achieved before in Asia’s fitness space and now, more than ever, with the opportunistic environment of a post-COVID world, it can surely be done again! Perhaps the timing of the Summer Olympics in Japan and the upcoming Winter Olympics in Beijing China in February 2022 will further give the global exposure needed to strengthen both the cause and the method.

The great inflection point, or thrust of fitness franchising, is now upon us. Don’t miss it!

If you need any assistance or consultation in helping you achieve these targets, or implementing or streamlining your existing franchise processes, and striving to become a fitness franchising influencer, I am available 24/7/365 for a chat.

Happy Franchising and stay safe, healthy, and active!

Buddy Morin

www.dhirubhai.net/in/buddymorin

[email protected]