The fitness industry in the United States has shown healthy growth for many years. The number of fitness centers increased 6.4% year over year, and revenue grew 7.4% to $24.2 billion in 2014. Memberships have risen 18.6% in just six years, and over 54 billion Americans paid on gym memberships.
While the industry is healthy, the general population is not. According to the CDC, over 70% of Americans over age 20 are overweight, and close to 40% are obese. At the same time, rising awareness and education has led to a higher societal awareness of the importance of exercise to a healthy life. Based upon research about how weight impacts your overall health, many health insurance companies such as Blue Cross Blue Shield are now offering incentives to insured members who visit the gym.
All industry fundamentals point to growth and opportunity, but where should you invest?
Franchises are still going strong. They offer built-in name recognition and take the guesswork out of which equipment to purchase or classes to offer. Options include franchises with pre-designed routines, such as boot camps and kickboxing, or traditional small gyms with treadmills and elliptical machines. Buying a franchise can cost anywhere from $56,000 to $723,000, with the average cost being $319,688. The more expensive franchises are those which require a large upfront equipment purchase.
There are more costs to consider when owning a franchise, however. You will pay royalty fees, which can be a percentage like 6% or a flat fee of $500 and up. Many have contracts of six to ten years, which are difficult to exit even if your business isn’t doing well.
The average revenues for fitness studios in 2014 were around $297,000, but revenues were strongly influenced by size. Fitness centers under 2,000 square feet had an average EBITDA of $57,000, facilities between 2,000 to 5,000 square feet made $88,000, and above 5,000 square feet $109,000. Size matters, and can greatly impact your final profit.
Opening a yoga studio or smaller studio may sound like a simpler and easy proposition, but it’s not without its own expenses. You will need proper flooring, either wood or sprung flooring, to prevent joint damage to practitioners. Mirrors, if you choose to have them, and lighting. Utility bills, particularly if your clientele take showers after class or you offer heated yoga, can get quite high. Do not forget that you will also need to buy blocks, straps, extra mats for drop-in students, and pay your teachers.
Despite the costs involved, yoga is still a profitable business. Americans spend over $16 billion a year on yoga. In just four years, the number of Americans practicing yoga doubled. While you can make a healthy 20% profit margin, you will need to bring in a large number of students per day.
Opening or growing a profitable business takes more than luck, however. A strong business plan and access to capital to support all your initiatives help ensure success.
Existing fitness center or studio owners looking to grow should put some thought into how and why they are seeking growth. Is it because they want to build a chain that they can eventually sell? Do they need to make more money to cover the bills? Or have your existing clientele expressed a desire for other class offerings or more perks?
The reasons behind why you desire growth often drive your plan to get there.
