The gym industry in 2017 (and beyond...)

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KyleSchuant
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The gym industry in 2017 (and beyond...)

#1

Post by KyleSchuant » Thu Nov 30, 2017 8:00 pm

I wrote this for another forum, some of you may be interested, since most serious lifters at some point think about becoming a trainer or coach, and if they think about that, they think about opening a gym. So here's an overview of the gym industry.

Fire away any questions. I don't know if we have other gym owners here (if you can call a double garage a "gym" to own), if we do they can tell us more.

In Australia, with similar patterns elsewhere in the developed world, big box gyms have not grown overall since 2007. More money is being spent on fitness, and more people are using fitness services - but they're not all going to big box gyms any more.

Fitness industry growth has come from, in order,

1. 24hr unstaffed (most of the time) gyms - Anytime, Jetts, etc
2. women's gyms - Fernwood, Curves, etc
3. training gyms - Crossfit, a bunch of black iron gyms, etc

With #3 being a very distant 3rd.

In the old days of nothing but big box gyms, the membership consisted of on average 2,400 members

1/6 cheaparses who never came ~400 people
2/3 ordinary people who sometimes came ~ 1,600 people
1/6 hardcore people who came 3+ times a week, went to multiple group fitness classes, signed up for bootcamps and personal training, etc ~400 people

The 24hr unstaffed gyms have taken the 1/6 lazy cheaparses. These places can be run pretty badly and still make money, since the people signed up expecting no service and paying $13 a fortnight (vs $40-$60/ftnt at a big box gym). Some big box gyms have dropped prices to try to hold onto the lazy cheaparses, particularly in the USA. This "race to the bottom" is destructive to business, since someone is crazy enough to offer people a $1 a month gym membership. They go bust. Thus, some individual big box gyms have actually seen growth as one place closes down and some of its 2,400 members spread out to surrounding big box gyms.

The training gyms have taken the 1/6 hardcore people. Many of these training gyms are run badly, so they don't tend to hold onto their members. For example, when you have a 35yo overweight sedentary housewife do box jumps in her first session and rupture her achilles, she may not sue you, but she's not coming back. Some big box gyms have tried to hold onto the 1/6 hardarses by putting in racks and bumpers and doing circuit classes with barbells, but their crossfit clone class never gets it quite right, since people do crossfit for the instruction and the community; the big box gyms can't get good instructors, and can't hold onto them if they do, and you can't have much community in a place with 2,400 members. Plus the 2/3 ordinary members bitch and moan about all the plates clanging, the loud music, and the chalk going everywhere.

This has left the big box gyms with just the ordinary 2/3. Looked after well, they can be grateful and loyal and will spend money in your place, and with a good personal training system you can hold onto a small number of the 1/6 hardarses to boost your income by 10% or so. But this is a pretty difficult thing for a new entrant to get into.

A Fitness First franchise, for example, averages $1.5 million to open - compared to $250k for a 24hr gym, or $50-100k for a training gym (more than a garage).

A big box gym will also need 30-50 employees, compared to 3-12 for a 24hr place, and 3-6 for a training gym. The 24hr gym can hire any idiot to work for them, the training gym will need people who are personable and know something about training. The big box gym's in the middle, needing at least a few personable and competent people to make up for the idiot staff.

The easiest money is in the (mostly) unstaffed 24hr gyms. The training gyms ask a lot more of members and staff both, but do offer good money if you do it right; most don't. Gyms nowadays are like cafes 10-15 years ago, every yuppie and his dog is opening one. "I'll just and drink wine with my customers" has become, "I'll get paid to keep fit!"

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Re: The gym industry in 2017

#2

Post by simonrest » Thu Nov 30, 2017 9:01 pm

question 1: should I lease nearby office space, buy $10k worth of gear, and essentially have my own private gym? I have no space/time for a home gym.
question 2: can I open above as a public gym, do no advertising, accept no members and run it at a loss for tax purposes?

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Re: The gym industry in 2017

#3

Post by Shane » Thu Nov 30, 2017 9:11 pm

Interesting stuff Kyle. Consistent with industry analysis. Speaking of, I thought this was interesting "The ageing population will likely stimulate demand for class activities in full-service gyms". I don't see anybody in the local Jetts or Snap who looks over 30. The YMCA gym I used to haunt while my kid pretended to do gymnastics didn't provide any useful assistance to the olds who wandered around in it - they just ended up looking lost on treadmills and machines, or doing some kettlebell bullshit with one of the hilariously underclued and to be honest, pretty unathletic looking trainers. Could be some opportunities for a greysteel style approach around these parts.

I've noticed a few really small format private trainer gyms (like a few bikes and mills, dumbbell rack, rower, machine station, maybe a rack/smith machine) that seem to have some older clientele. For example Vision PT.

But judging by the look of them as they clutch their small towels and trudge grimly along the bikepath in what I assume is either their warmup or warmdown, it's not a quality service (unless those people are doing rehab at the hospital nearby - lest I judge too hard). I imagine it costs an arm and a leg as well.

Anyway - if it's good enough for Emperor Palpatine - it's good enough for me
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Re: The gym industry in 2017

#4

Post by KyleSchuant » Thu Nov 30, 2017 9:20 pm

Yes, the oldies are an ignored demographic in the industry, given nonsense to do with chairs and tiny dumbbells - day one, that's great, everyone has to start somewhere - but they're doing the same thing six months later.

They've been a good part of my own business, however distance is usually an obstacle. Most people won't travel more than 15 minutes or so to a gym, and the older folk are even more reluctant to do so.

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Re: The gym industry in 2017

#5

Post by Shane » Thu Nov 30, 2017 9:24 pm

simonrest wrote: Thu Nov 30, 2017 9:01 pm question 1: should I lease nearby office space, buy $10k worth of gear, and essentially have my own private gym? I have no space/time for a home gym.
question 2: can I open above as a public gym, do no advertising, accept no members and run it at a loss for tax purposes?
question 1 - Yes. Yes you should. But first you should move to Brisbane. Somewhere South-West side.
question 2 - I hesitate to comment on tax matters, given I "forgot" to do a tax return for about the first 6 years I was employed. You should read this about offsetting current year losses. Otherwise you'll be stuck wearing the full loss, and claiming deductions in later years.

But you should still do it. In Brisbane. And for no particular reason, conveniently near where I live.

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Re: The gym industry in 2017

#6

Post by Shane » Thu Nov 30, 2017 9:33 pm

KyleSchuant wrote: Thu Nov 30, 2017 9:20 pm Yes, the oldies are an ignored demographic in the industry, given nonsense to do with chairs and tiny dumbbells - day one, that's great, everyone has to start somewhere - but they're doing the same thing six months later.

They've been a good part of my own business, however distance is usually an obstacle. Most people won't travel more than 15 minutes or so to a gym, and the older folk are even more reluctant to do so.
Good stuff. I've entertained thoughts of seeing if there'd be any interest in lifting at the local Men's Shed. But I might not be yet sufficiently and convincingly grizzled with age, wouldn't want to just limit stuff to blokes, and am horribly lazy. Maybe next year when I'm 50. Fuck that is a scary thing to type.

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Re: The gym industry in 2017

#7

Post by shaymus » Thu Nov 30, 2017 9:36 pm

Nice work, Kyle. Do you mind sharing where these observations come from (personal experience, industry data, etc.)? Not questioning the validity or if what you're saying is true, just curious how you gathered the information.

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Re: The gym industry in 2017

#8

Post by KyleSchuant » Thu Nov 30, 2017 9:55 pm

I have a couple of general industry reports that I got through gym managers I know. I also have budgets and marketing reports from 5 commercial gyms, from the same sources; these are all at least 3 years old, but still useful.

As well, until July 1st this year I still had access to the YMCA extranet, despite leaving there in November 2014; they didn't seem to understand that they idea of a Sharepoint system is not to share with everyone who has a login. But they had all the data for 4 community gyms, the minutes of the weekly meeting between the 4 centre managers, communications with Council, and the like. It was illuminating, and while I was there it was useful to be informed of when advertising and deals were going to happen, if they were planning to promote, hire or sack people, and so on.

While I still worked there, I dove into the Links system which was made in I think 1998, and extracted retention, payment and default data - which none of the managers had bothered doing. To be fair, I had to do it manually, which was quite a slog with (at that time) 4,322 members.

More recently, I have also enquired about a 24hr gym franchise, and buying up several training gyms that were closing. I didn't actually want to buy them, but once you enquire you can get their numbers, such as they are - the failed businesses were usually very sloppy with their book-keeping, which is of course part of why they failed.

That plus personal experience, informal conversations with gym staff and managers at several gyms, and watching carefully the rise and fall of local training gyms.

People understand that if you want to do a professional job you need to spend 3-5 years getting a university degree, then another 2-4 years doing some low-paid graduate work to get solidly into an industry. Thus, 5-9 years in all to have a solid career somewhere. And they listen to people who are successful in that industry.

Yet when it comes to starting a business, you're lucky if people will spend 5-9 months learning about the industry, researching and working on it first. And they refuse to listen to people who are successful in that industry.

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Re: The gym industry in 2017

#9

Post by OCG » Thu Nov 30, 2017 10:42 pm

Speaking only of the serious training gyms, because that's what I'm familiar with, I've seen a few of the small hole in the wall places simply fold because of too much risk, trying to do everything too soon without a client base. Sloppy book keeping and not having a thorough understanding of your costs and how many members you need just to break even probably contributed as well.

@KyleSchuant, @simonrest I'm sure you're both familiar with my gym. For those who aren't:
http://www.ptcperth.com.au/

I'm not going to name member figures, but at $120 a month they don't need a huge amount. Plus, there are classes and training and other revenue streams. Currently the gym is in a ~1000 square meter warehouse and there is something like +$300,000 in equipment alone. Not to mention rent (not a small amount renting a commercial warehouse) and all the other things money gets spent on. We have 7 platforms, 4 monlifts (+10,000 each), 4 combo racks, 7 bench press', 6 racks, 15 Eleiko Competiton bars, the largest collection of calibrated weight in the country, a full set of dumbbells up to 70kg, a decent amount of machines...

But, building all this up took a shitload of time and would not have happened without member growth to support it. I think it's been about 10 years since the owners first started training out of a garage. Building up connections and getting a sense for the community. Then, they moved to a small commercial space about, uhh, in 2012? 300 squares, like 4 racks, 3 platforms, like 5 or 6 shitty bars, one comp set worth of calibrated plates. Minimal outlay, minimal risk. This whole venture could have folded and they wouldn't be much out of pocket. And then, over time, they get more members, they start running meets and more people start hearing about them. They get more clients and outgrow the space they're in. They move to a bigger place, around 600 squares. Buy a little more equipment. They buy their first mono, get a bigger platform for hosting comps. And so on and so forth, until they're making enough money the gym is actually supporting itself and them and they can afford to quite their day jobs.

My whole point here is, they expanded as their member base did, took on minimal risk and debit and over years spent money and accrued the impressive list of equipment they now have. They didn't go down the bank, take out a loan they couldn't afford and buy their dream list of equipment right off the bat.

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Re: The gym industry in 2017

#10

Post by KyleSchuant » Thu Nov 30, 2017 10:51 pm

Good points, Dale. I remember watching Thomas Plummer (fitness biz guy) talking about people opening gyms, and how you should write a business plan for the bank, but that most people get money from family, friends and... clients. I thought: "Seriously? Clients? You hit up a client for $10k?" Apparently they do.

I started with a pair of squat stands, a barbell and some bumper plates. And a few kettlebells. As more people came along I could both afford and needed more gear. Still in the double garage and will be for a few years until my youngest goes to school, or I'd be moving on by now. I don't expect to reach the Rucci's level of success, but I'd take things in a different direction anyway. My ultimate dream is a teaching gym, like a hairdressing college but for trainers. They come and lift and learn and members get cheap training. Do I have much to teach? Well, much less than people like Rip, but somewhat more than personal training schools, I think.

That's a long way off, though. Working at the globogym was novice phase. The double garage is early intermediate. That dream... would be very much advanced phase.

Again, if people will spend some years on a degree and establishing themselves in a professional career, why would they not take some years with a small business?

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Re: The gym industry in 2017

#11

Post by Les » Thu Nov 30, 2017 11:24 pm

simonrest wrote: Thu Nov 30, 2017 9:01 pm question 1: should I lease nearby office space, buy $10k worth of gear, and essentially have my own private gym? I have no space/time for a home gym.
question 2: can I open above as a public gym, do no advertising, accept no members and run it at a loss for tax purposes?
Question 1: Skip the lease, use the $10k worth of gear, and get super hodge! :-)

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Re: The gym industry in 2017

#12

Post by OCG » Thu Nov 30, 2017 11:45 pm

@KyleSchuant Another thing that helps is both of the brothers have a lot of experience running other businesses. So they understand risks and costs and all those things. Which, it's fine to start a business without knowing these things, some business has to be your first. But, if you don't know what you're doing, hire someone who does to teach you.

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Re: The gym industry in 2017

#13

Post by unruhschuh » Fri Dec 01, 2017 1:03 am

KyleSchuant wrote: Thu Nov 30, 2017 9:20 pm They've been a good part of my own business, however distance is usually an obstacle. Most people won't travel more than 15 minutes or so to a gym, and the older folk are even more reluctant to do so.
Gym on wheels? Well, seriously, wasn't there a guy on StSt who had a squat stand plus weights and barbell in his truck and would go to people to coach them?

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Re: The gym industry in 2017

#14

Post by SeanHerbison » Fri Dec 01, 2017 2:18 am

unruhschuh wrote: Fri Dec 01, 2017 1:03 amGym on wheels? Well, seriously, wasn't there a guy on StSt who had a squat stand plus weights and barbell in his truck and would go to people to coach them?
Huh. I don't think I've heard of that before. That's something to think about.

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Re: The gym industry in 2017

#15

Post by Murelli » Fri Dec 01, 2017 3:11 am

Great write up @KyleSchuant, even if in this country the guvmint does not allow:

1) Trainers without a formal college education on Physical Education (our version of exfizz) (or something similar like PT or Sports Medicine);
2) Gyms with less than the regulated trainer:member ratio.

That basically turns out to:

1) No 24h gyms (even though there's something called Smart Fit that has something like 5000 members where only maybe 1000 attend the gym regularly);
2) No black iron gyms (people who are smart about both business and training usually don't have a PE degree).

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Re: The gym industry in 2017

#16

Post by KyleSchuant » Fri Dec 01, 2017 3:15 am

I don't know of that guy.

"Mobile PT" is a thing in Australia, too. Normal one-on-one personal training is on the order of $100ph. If you factor in travel, you have to increase that. Normally mobile PTs will have a skipping rope, couple of kettlebells and a medicine ball, maybe some cones, not much trouble to unload from a car boot - would you like to unload and then load a pair of squat stands, a barbell and bunch of plates a few times each day? Do it in the back of the truck? Yeah, is there a perfectly level parking space available?

Mobile PT is strictly amateur stuff here. You get people straight out of PT school do it, and they're part of the (another statistic coming!) 80% of new PTs who don't last 12 months.

But maybe the guy is a humanitarian who does it out of the kindness of his heart. I do that each Sunday at noon - the first two hours of Sunday gym hours, anyone can come once for free and we'll teach them to squat, press and deadlift.

Commuting sucks, I get it. That's why my business is in my garage. I've had people take a 1hr30' trip each way, and other people 20' away say it was too far. I don't argue. There was one woman, 65yo with bad arthritis. I wanted to say, "If you think Box Hill is a long way, wait ten years and see how far it is to the mailbox."

Selling training's a tricky thing, because often people don't fully realise the value of it until they've had it for a few months.

Murelli, I didn't know your country was communist. My condolences.

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Re: The gym industry in 2017

#17

Post by mgil » Fri Dec 01, 2017 4:53 am

Here in the USA, there has been a good bit of growth in the cheap big box gyms like Planet Fitness that are mainly marketing machines and have little to no interest in fitness.

Black Iron gyms are going to fade along with powerlifting when it fades off a bit (it will) in the future. The Juggernaut gym closed for no reason. On the other hand, good black iron gyms have been around for decades and will continue but that is a function of the person running it and the lifter performance. Once powerlifting on Instagram fades, Barbell Brigade is going to have to figure some shit out.

Regular gyms like LA Fitness, Gold's, and even the YMCA basically grow and shrink with the economy. They cater to a more general crowd and have overall better facilities to do so.

I also wonder where market saturation is at for XFit. In my market, I think it's been hit and as a result, XFit lookalikes exist for a lower cost with a slightly different spin on crosstraining. Often times, this different spin involves less barbell equipment.

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Re: The gym industry in 2017

#18

Post by Allentown » Fri Dec 01, 2017 5:05 am

mgil wrote: Fri Dec 01, 2017 4:53 am I also wonder where market saturation is at for XFit. In my market, I think it's been hit and as a result, XFit lookalikes exist for a lower cost with a slightly different spin on crosstraining. Often times, this different spin involves less barbell equipment.
I wonder this too. My old Xfit gym has bought up the two buildings next door after moving to a much larger space downtown, so they seem to be doing well. And they keep jacking up prices (I think it's around $200 a month now...) indicating they either have too many members or they spent too much and need to recoup costs. I've noticed two new ones in town in addition to the three already here, bringing us up to 5!


This seems like a good thread for up top, and not shitposting- @Manveer or @mgil

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Re: The gym industry in 2017

#19

Post by KyleSchuant » Fri Dec 01, 2017 11:00 pm

mgil wrote: Fri Dec 01, 2017 4:53 amI also wonder where market saturation is at for XFit.
I think they've been at saturation for 3-4 years now.

Crossfit HQ page shows all the affiliates. Australia's been at ~580 for 3 years now (572 at time of this writing), so we're obviously saturated. This makes sense since the UK, with three times the population, only has 542. Even fucking Greenland has a Crossfit. Most new Crossfits I see in Melbourne actually equip themselves from another Crossfit that's closed. Just think about it: even if half the places last 10 years, that's 286 closing over 10 years, one each fortnight. And actually the median is more like 12 months (not picking on fitness, this is typical for small business). Just keep your ear to the ground or your eye on Gumtree (Aussie craigslist) and you save 40-60%. One place a couple had opened in a Queensland resort town lasted six months, which is pretty usual.

Looking at the map, Crossfit is essentially a Western world thing, I mean Angola and Namibia have 9 between them, but looking at their locations they're obviously expat clubs. Korea's got a heap but that's about it, the rest outside the Western world are obviously Western expats. Any further expansion would have to overcome cultural barriers - are Crossfit HQ smart enough to be able to do that? I strongly doubt it.

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Re: The gym industry in 2017

#20

Post by MattimusMaximus » Sat Dec 02, 2017 9:31 am

mgil wrote: Fri Dec 01, 2017 4:53 am Here in the USA, there has been a good bit of growth in the cheap big box gyms like Planet Fitness that are mainly marketing machines and have little to no interest in fitness.

Black Iron gyms are going to fade along with powerlifting when it fades off a bit (it will) in the future. The Juggernaut gym closed for no reason. On the other hand, good black iron gyms have been around for decades and will continue but that is a function of the person running it and the lifter performance. Once powerlifting on Instagram fades, Barbell Brigade is going to have to figure some shit out.

Regular gyms like LA Fitness, Gold's, and even the YMCA basically grow and shrink with the economy. They cater to a more general crowd and have overall better facilities to do so.

I also wonder where market saturation is at for XFit. In my market, I think it's been hit and as a result, XFit lookalikes exist for a lower cost with a slightly different spin on crosstraining. Often times, this different spin involves less barbell equipment.
Just curious why you think black iron gyms and powerlifting will fade? It is more like a cyclical fad type thing? Meaning it’ll die off like bodybuilding?

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