Fitness Industry Trends | Consumers Go Crazy for No-Frills Fitness Franchise Concept

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As millions of consumers continue to swap over-priced SUV’s for wallet-friendly compact cars, the same trend is taking shape in the fitness industry. No-frills concepts like Snap Fitness are rapidly dominating the $16 billion fitness category, as workout enthusiasts trade in their memberships at big-box facilities for the convenience and affordability offered by 24/7 compact fitness clubs.

The world’s fastest growing franchise featuring compact, state-of-the-art fitness centers, Snap Fitness has defied recession conservatism and continued to expand its “no frills” concept worldwide, having already opened approximately 300 clubs in 2009. Today, Snap Fitness has nearly 1,000 locations open and operating throughout the United States, Canada, Mexico and India, with more planned in Australia and New Zealand.

The burgeoning brand consistently opens 300-400 new clubs each year and plans to have a total of 2,500-3,000 centers worldwide in the next few years.

After spending more than 20 years in the fitness industry owning and operating various big-box clubs, Snap Fitness Founder and CEO Peter Taunton realized that many of the costly amenities offered in his facilities such as swimming pools, racquetball courts and childcare sat idle most of the day. Knowing most people are on the go, constantly seeking balance between work and family, he designed a model that incorporated the most readily used health club equipment into a smaller, more efficient, passcard-secure facility.

Snap Fitness gyms are small – only 2,500 square feet – and frills free. There are typically five treadmills, two stationary bikes, five eliptical machines and weight equipment. The gyms typically attract married folks, aged 35 to 55, with kids. Most don’t have the time to linger over a cappuccino or leer at the young man or woman on the next bike. Many live within two miles of the gym.

“Our more than 400,000 satisfied members, combined with our triple-digit revenue growth, proves we've honed in to what consumers want and expect from their fitness program,” said Taunton.

Shop wise for a gym membership

Given the tough economy, you are probably still looking for ways to trim unnecessary expenses and save money wherever possible. The real challenge is finding ways to cut costs without cutting quality of life.

Take your health, for example. A recent survey by Money magazine shows that about half of all consumers are unwilling to part with their gym membership despite the uncertain economy. But even if fitness is a staple in your life, there are ways to save or get more value without compromising the quality of the workout experience.

Here are some tips to consider, according to Snap Fitness

Ask about freeze and cancellation policies

“Some gyms advertise a great enrollment offer but don’t tell you about the long-term contract that goes with it,” said Peter Taunton, Snap Fitness Founder. “Ask the salesperson if you can pay month-to-month, if you are able to freeze your membership and how much notice you need to give in order to cancel your membership. Otherwise, you might find yourself paying a lot more money over a long period of time.” Snap Fitness offers the option of paying as you go, allows you to freeze up to three months per calendar year and requires 30 days’ cancellation notice.

Inquire how the club will help you reach your fitness goals

“Anyone can open a gym, buy some equipment and sell you a membership, but that doesn’t mean you’re getting your money’s worth or able to achieve noticeable improvement in your health,” said Taunton. “At our club, we offer new members a free $100 Fitness Assessment with a personal trainer to test your strength, endurance and flexibility, and give you a sense of the types of workouts you should do to improve. We also include a free session to show how to use the equipment and put you on a workout plan. It’s just another way we give our members more for their money.”

Ask about convenient, value-added services that may come free with the membership

Snap Fitness recommends looking for add-ons that “coach” you towards better results. Snap Fitness, for example, offers members a host of online tools for little to no cost, including meal planning, workout tracking and health and wellness coaching.

“We know times are tough but that doesn’t mean you should have to sacrifice your health,” continued Taunton. “Avoid paying for amenities you don’t need. Make a list of what’s really important for you in a health club and let that list be your guide. Look for the club that can give you everything you need and nothing you don’t.”

Survival of the Fittest | Forbes Magazine Feature

Lean times may help Peter Taunton bulk up his bare-bones Snap Fitness club chain.

At 11 p.m. on a recent Wednesday a dozen men in their 30s and 40s bobbed on stationary bikes and pumped iron in a Snap Fitness club on a busy freeway in Pine Brook, N.J. Members, already in their workout togs, pulled up, parked within feet of the club and headed for the cardio equipment or the weights. After spending 50 minutes, on average, working out, they left--without showering. "There are no lines, it's cheap," says Richard Prochov, one of the members. "I'm in and out."

Snap Fitness may be a rarity: a gym chain that can thrive during a recession. Bally's Total Fitness recently filed for Chapter 11 bankruptcy protection for the second time in 17 months. But 24-hour Snap Fitness clubs are cheap and convenient. Membership fees for the 910 clubs--60 opened in December--with 400,000 members in 46 states are only $35 per month and are easily canceled or put on hold without penalty.

Snap Fitness gyms are small--only 2,500 square feet--and frills free. There are typically five treadmills, two stationary bikes, five elliptical machines and weight equipment. Missing from its outlets: classes, spa rooms, on-site child care and a juice bar. Few clubs have showers. Most clubs are staffed only 25 to 40 hours a week. "We offer a fitness product that screams value," says Snap Fitness Chief Executive Peter Taunton.

It's a franchise operation. Most of the 820 owners paid $175,000 to open a Snap Fitness club, and many are in rented space. The capital outlay includes $120,000 for equipment, tvs, a card key system, a surveillance camera and a one-time $15,000 license fee. After that franchisees pay Snap a royalty fee of $400 a month plus 50 cents for each membership. Snap, the parent, also collects a one-time $5 fee for each security card issued; it gets another $5 for "billing setup." (Curves, the women's chain, charges a $30,000 license fee and a monthly royalty fee of up to $800.)

Franchisees can break even on 275 members in as little as three months. Once a lease is signed, a club can be outfitted and opened in ten days. "We pull up with our 18-wheeler that's basically a store ready to be unpacked," says Taunton, 46.

Some franchisees run the gyms as a side business; 60% of them are absentee owners with other full-time jobs. Franchisees have online access to revenue reports and visit counts. They can view live footage of their clubs remotely. "Running these gyms is a breeze," Taunton tells prospective franchisees in a weekly conference call. "All you need is an Internet browser."

These clubs typically attract married folks, aged 35 to 55, with kids. Most don't have time to linger over a cappuccino or leer at the young man or woman on the next bike. Many live within 2 miles of the gym. Often, admits Taunton, women and prospective franchisees want to know if the gyms are safe. Taunton insists they are. Members enter gyms with access cards. Two gym walls have panic buttons. Security necklaces are available at the gym entrance, which members can use to alert police. To date, Taunton says, the only trouble has come from a teenager who broke into a Minneapolis Snap to steal tvs. Franchisees must pay Snap $255 a month for insurance.

The club concept, hatched in 2003, seems to be working for Taunton. Snap in 2008 had operating income (Ebitda) of $10 million, almost double what it did the year before, on $30 million in revenue, up 67%. The company sold 483 franchises in the first 11 months of the year. Taunton owns 60% of the company.

There are already clubs in Canada, Mexico and India. More are planned in Australia and New Zealand. To help fund the $5 million-plus cost of expanding overseas, last May Taunton sold an undisclosed minority stake in Snap to Summit Partners, a private equity group in Boston. Taunton hopes to have 6,000 Snap gyms around the world in five years.

Taunton isn't a pioneer in the bare-bones 24-hour-gym world. A privately held company called 24 Hour Fitness, with $1.3 billion in sales in 2007 (a forbes estimate) has been around for 25 years, but the San Ramon, Calif. company's gyms are 25 times the size of Snap's. Across town from Snap's offices in Minneapolis, rivals Chuck L. Runyon and Jeff A. Klinger have been running Anytime Fitness since 2001. Runyon gripes that Taunton "has done a good job copying us." Taunton is adding a few features his rivals don't offer. Snap now allows members to track their gym visits, get health assessments and build fitness and meal plans online.

Taunton dropped out of college when he was 20 to play professional racquetball along with his twin brother. A short time later Taunton was back home and out of work in Willmar, Minn. The owners of his hometown gym offered him $16,000 a year to manage the moneylosing club, then named Kandi Kourts. The first year he ran it, Taunton says, the club lost $40,000 on revenue of $340,000. The club's six owners agreed to give him a stake in the club every year it was profitable. "I rolled up my sleeves and worked that club from ding to dong," he recalls. Six years later, in 1982, Taunton bought out the other owners for $450,000. In 1990 he renamed the club America's Fitness, borrowed against it and opened several more big health clubs (one was in a space with 40,000 square feet) around Minneapolis.

He ran America's Fitness for 20 years, but he says he was ultimately overwhelmed by the responsibilities and overhead expenses, which totaled more than $1.5 million. He pocketed $3 million when he sold the five gyms in 2002. In plotting a follow-up, Taunton made a list of essentials for a more basic gym, the beginning of Snap Fitness.

Taunton believes Snap will attract more franchisees with so many people looking for work. He's also betting Snap will attract 300,000 new members this year as fitness buffs ditch costlier gyms. "Let's just say the dogs are eating the dog food," Taunton says. "The people keep coming."