October 6, 2008

Small Gyms Proliferate Here

By Gustafson, Jeanne

Small new gyms are popping up here like coffee huts, as health club owners scramble to capture members who want to work out closer to home. Meanwhile, larger, more traditional clubs are expanding or tapping new areas of town to hold their own in an increasingly competitive fray.

"We're all neck-and-neck here on the North Side," Michael Lee, president of Global Fitness, says of the competition. "I think it's true in any of the businesses you're in. It can kill you, or make you excited and work harder."

Owners of new health-club locations say their membership numbers are on target with their goals, but they opened their doors with fewer initial members than they had hoped.

Snap Fitness franchisee Jeff Spencer recently opened his second Spokane-area Snap Fitness location in the Indian Trail neighborhood and plans another outlet in Spokane Valley next year. Spencer says that while adding new members at the North Side gym initially was slow going because of a late spring opening, business since has picked up. At the South Hill location he opened last fall, memberships are nearing 750, which he says is within his target range for that gym.

Two franchisees of Anytime Fitness, another chain of small gyms, have opened four clubs here, one each on the North Side and in Liberty Lake, Post Falls, and Deer Park. Snap Fitness and Anytime Fitness both are Minnesota-based franchises that allow members key- card access to their facilities 24 hours a day.

In addition to new gyms, others are remodeling, moving to larger spaces, or disappearing. Oz Fitness is completing a large-scale expansion of its South Hill club. Meanwhile, Renaissance Fitness, a small women-only club on the South Hill that opened in 2004, recently closed.

In Coeur d'Alene, a company called 360 Fitness has bought a former Oz Fitness outlet there and moved it to a new location. A franchisee of Gold's Gym also plans to open a gym in Coeur d'Alene.

Mark Whiting, managing partner in a two-location Gold's Gym franchise here, says whenever a new gym opens, it dilutes market share, but that's part of the business.

"It used to be you drew members from a 10-mile radius," Whiting says. Not now." Now, the proliferation of small gyms has shrunk that radius, he says.

Membership at Suncrest Fitness Center, near Long Lake, has risen about 0 percent every month since it opened seven months ago, says owner Joel San Nicolas. San Nicolas invested about $1 million in the 9,700-square foot building that houses both the fitness center and the physical therapy practice he operates. He estimates that about 15 percent of the residents in that area are members.

Global Fitness' Lee says that since M R Fitness Inc. bought the assets of that distressed facility in North Spokane in the fall of 2006, its membership rolls have grown to about 15,000, from 4,000, but. that mostly indicates it has regained ground it had lost. Now, he says, the gym's growth is on par with national industry annual growth rates of 5 percent to 8 percent, with Global Fitness adding about 1,700 contracts over the last year.

Lee says that although people historically drop. optional expenses like gym memberships when the economy gets tight, that's not a trend he's seeing here.

"This time we've seen the growth despite the downturn," he says.

Finding a niche

"I think what you're seeing is a change in ideas about the way gyms are run," says Spencer, of Snap Fitness. That chain's franchisees seek locations in residential areas to appeal to consumers who want to be close to their gym, he says.

He says Snap doesn't aspire to be an Oz Fitness or Gold's Gym, and location is key in its business model.

"You don't want to put a Snap Fitness on a Sprague Avenue or in a big mall area where it would get completely lost," he says. "What Snap would say to look for is a (location a) Starbucks or a favorite little restaurant or grocery store," would have.

Some new gyms still operate more conventionally, hoping to net a larger cross-section of customers.

West Plains Fitness, which Todd Mathison opened with his wife, Beth, last January near Airway Heights, seeks to attract commuters to and from the West Plains, as well as people who live within 10 to 15 minutes of the club.

Mathison says he anticipated a strong start because he opened at a traditionally strong time for gyms, when people are trying to fulfill New Year's resolutions to exercise. and lose weight, but didn't immediately attract some of the groups he had imagined. He had hoped to get airmen from Fairchild Air Force Base and employees of Ambassadors Group, which is located just south of the gym. With workout facilities available to both those groups onsite, however, neither netted many members for West Plains Fitness.

Mathison says he's been disappointed so far with membership numbers, but hopes business will improve this fall and winter. The fledgling club is not quite breaking even yet, he says.

San Nicolas says that in a more rural setting like Suncrest, the appeal of working out near home is even greater. He says Suncrest Fitness has been helped, in large part, by high gas prices over the last year.

"In our market, as fuel costs go up people are going to continue to stay local. It's an advantage for us. People who live out here save a lot of money by staying out here," San Nicolas says.

Snap Fitness' Spencer says gas-price concerns affect gym-goers in town, too.

"Within a community, people come to us and say they don't want to drive five miles down the road" to work out at a larger gym, he says.

Global Fitness tries to cover all the bases with a multi-tier, multi-location approach. It has a 35,000-square-foot North Side fitness center, a 54,000-square-foot Spokane Valley gym, a. smaller circuit training center, and a small women-only fitness center. It also plans to open a 50,000- to 60,000-square-foot facility on the West Plains, possibly next year. Lee says those plans will depend largely on available financing, because in a tight lending market new large single-use facilities aren't appealing to bankers.

Global Fitness opened a gym in Spokane Valley, in March and Lee says the timing was a mistake he won't repeat. "It's been a struggle," he says, but he anticipates a bump this month, when gym membership usually begins rising.

Snap Fitness' Spencer also says June wasn't the ideal time to open the chain's Indian Trail location, which had 250 members when it was still the Indian Trail Fitness Center, but he expects to reach his goal of between 500 and 1,000 members there within the next year. He bought the club's assets and expanded the location, increasing the floor space to about 4,000 square feet and adding additional equipment, all at a cost of about $250,000.

It will be at least a year before he opens a Snap Fitness in Spokane Valley, and other Snap Fitness franchisees also plan to set up shop here, too, Spencer says.

Seeking more members

Spencer says that despite the competition, there are plenty of customers to go around.

"We're not looking for the masses. If we get 500 people, we're happy," he says, adding that some people will always want the big- gym feel.

Gold's Gym's Whiting says it remains to be seen whether the small- size franchise gym model will last, or fade like aerobics studios did years ago.

Lee also says that while the smaller clubs are definitely competition, they at-tract different customers.

The little ones like Anytime and Snap only hit a certain percentage of the niche market," Lee says.

Mathison says he hopes that as more homes are built on the West Plains, the membership base for West Plains Fitness will grow, and he recognizes a need to capture the loyalty of members before Global Fitness opens in Airway Heights.

"We took a big chance out here," Mathison says. He thinks the risk ultimately will pay off. He says loyalty is a big factor in the fitness industry, as is force of habit.

"I hope to get established with my clientele over next six months," Mathison says. "If they get used to a club, they aren't going to change" when a new one opens up down the road, he says.

Copyright Northwest Business Press Inc. Sep 11, 2008

(c) 2008 Journal of Business; Spokane. Provided by ProQuest LLC. All rights Reserved.