By Jackie Crosby, Star Tribune, Minneapolis
Jul. 20–Minnesota has long been a hub of fitness innovation and businesses. It’s the birthplace of Rollerblades and waterskiing, the headquarters of Life Time Fitness and consistently ranks at the top of polls for its physically active populace.
It’s also the home to two of the nation’s fastest-growing fitness franchise companies — Anytime Fitness and Snap Fitness. After years of blockbuster growth in the United States and Canada, both are ready to take their no-frills, 24-hour fitness club concept overseas.
Anytime Fitness recently signed a revenue-sharing agreement to launch up to 350 franchised clubs in Australia and New Zealand, with five centers expected to open in the next year.
The Hastings-based company also recently hired a director of international development, who’ll explore markets in Western Europe. But as a recent press release also trumpeted, the company envisions its members someday visiting clubs in Tokyo, Berlin or Dubai.
“We’re not even close to saturating the domestic market … but we just think that most international countries are underserved when it comes to fitness facilities,” said Chuck Runyon, president of Anytime Fitness, who started the company with Jeff Klinger in 2002.
Anytime Fitness expects to open its 1,000th store this year, with corporate revenue growing to $21 million.
Snap Fitness, based in Chanhassen, launched its first outlet in 2004. These days it has about 1,500 franchise agreements and 750 clubs currently open. Last month, Snap announced it had taken on an undisclosed minority investment from Summit Partners, a Boston-based private equity firm, which Snap said will help it move swiftly into international markets.
“We wanted to deepen our bullpen a bit with some of the resources they have available,” said Snap Fitness founder and CEO Peter Taunton. Snap has its eye on Europe, India, Mexico, Australia and the Middle East.
Chances are, you’ve passed one or both of the fitness clubs on your way to work, the grocery store or to pick up your kids. Located mostly in busy strip malls and office centers, the concepts offer a low-cost, no-frills workout space with 24-hour access, and nothing but weights and cardio machines in the compact locations. No swimming pools, no racquetball courts, no climbing walls, no expansive locker rooms with saunas and towel service.
The motto: Get in, work out and get on with your life.
“I don’t need the frills; I just want to work out,” said Holly Tischer, 27, of St. Paul, an Anytime member who hits the treadmill, weight machines and elliptical trainers about five afternoons a week.
The average cost is about $35 a month, with no signup fees.
A club a day
Though Curves, which offers female-friendly 30-minute workouts, remains the queen of the fitness franchisors with 10,000 locations worldwide, both Anytime Fitness and Snap Fitness clubs have sprouted in about 45 states and Canada. Both companies claim to open an average of a club a day, or about 30 to 40 a month. Anytime Fitness saw revenue double between 2006 and 2007 to $13 million. Snap Fitness said it tripled its sales in the last year to about $18 million.
While the founders were complimentary of each other, the digs were there, as well.
Runyon of Anytime Fitness, who landed on the bare-bones franchise scheme first, said his company has a history of taking the lead and doing the hard work of innovation: “For lack of a better term, we wear the yellow jersey on the Tour de France,” he said. “We’re always the lead biker. They’re always drafting us.”
Said Taunton of Snap Fitness: “We gave Anytime Fitness a 2 1/2-year head start. Today we have more locations sold and we may have more locations open by the end of the year.”
Retail analysts are often cautious about overseas expansion given various real estate tax laws, franchise fees and even cultural differences. Richfield-based Best Buy has only recently made an international push, largely by acquiring stakes in existing businesses. Wal-Mart’s success has been hit or miss, and Minneapolis-based Target has yet to stick a flag outside North America.
And recent woes at Starbucks — the iconic Seattle-based barista is closing 600 U.S. stores — provide a cautionary tale to rapid expansion. And it’s yet to be seen whether Europeans will embrace the ’round-the-clock access to recumbent bikes in the same way Americans have.
But both Anytime’s Runyon and Snap’s Taunton are not dissuaded.
Taunton said international growth will make up about 10 percent of Snap Fitness’ business next year. He sees it as key to reaching the 6,000-store range in five years.
Runyon said Anytime’s approach will be measured, noting that in Australia, 85 percent of all businesses are franchised, making the concept easy to duplicate where language and cultural barriers are fairly low.
The $18.5 billion health club industry remains a healthy one, even as Americans are stung by rising costs of food, fuel and housing. Some 41.5 million of us belong to a health club of some sort, and revenues have increased 60 percent since 2000, according to IRSHA, the International Health, Racquet and Sports Club Association.
Though potential franchisees are getting stung by the credit crunch along with consumers and other businesses, Runyon notes that it’s much easier to get lender approval to launch a $150,000 Anytime Fitness than some other kinds of franchises that require $1 million-plus investments. Once a club is launched, overhead is low because there aren’t a lot of employees to pay or an expensive pool to keep warm.
A fit franchise
Franchising of all business categories has been on the rise since 2000, though growth has been relatively flat in the past three years, according to the International Franchise Association, or IFA, an industry group.
Not so with fitness centers. Since 2000, some 48 new fitness center concepts have been launched in the United States, according to the IFA. That’s more than the number of new coffeehouses, sub shops and pizza joints.
Anytime and Snap have carved out a portion of an increasingly fragmented fitness market, where options range from Curves to Gold’s Gym, to the YMCA and traditional big-box health clubs. Anytime has had just seven failed clubs in six years, according to the company, while Snap has closed “less than 10,” according to a spokesman.
They’re not going after families or those who want to be pampered. But both companies are convinced that foreign fitness buffs will fall in line with the North American marketplace, where people like Danny Jimenez consistently put convenience at the top of their reasons for joining the health clubs.
“I work nights at the railroad yard or sometimes I can’t sleep,” said Jimenez, 26, of St. Paul. “I can come down here at midnight if I want to. They have everything I need. They keep the equipment in shape and the price is right — it’s cheap.”
Jackie Crosby –612-673-7335
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