The Future Of The Ubiquitous Independent Gym
CrossFit is starting to look a lot like the Starbucks of the gym industry putting one on every corner. Today there are more than 10,000 CrossFit affiliates worldwide compared with the 1,500 affiliates in 2009. The highly visible brand is emblematic of the return of the independently owned and operated gym. There has been a shift in consumers gravitating away from the isolated machine driven globo-gym workout in favor of the group classes offered by CrossFit gyms, yoga studios, and boxing gyms. One needs to look no further than the posters in lululemon or Rebook’s advertising of the last few years to see this trend has hit the mainstream.
The affluent customer base underpinning this trend is just one pillar supporting the growth behind the independent gym movement. Further enabling this trend is enterprise software, training videos on YouTube, free or inexpensive remote coaching, and increased opportunity for peer learning.
Given the prevalence of these independent gyms offering group classes, questions abound about the sustainability of this model and if these gyms and the branded workouts associated with them are just a passing fad. Splash 4 Partners last year worked with a fitness instructor and his investors to construct a viable solution to differentiating a CrossFit gym to make it profitably sustainable and relevant over the long haul.
A fundamental challenge that all gyms face is the need for a sustained membership base just to cover the monthly fixed costs. The largest of these operating expenses tend to be rent. Customer utilization is critical for the success of independent gyms. High intensity workouts and specialized fitness studios often see customer churn due to either injury and/or boredom from being locked into just one mode of fitness.
The millennial consumer increasingly seeks new and varied experiences. Our primary market research has shown that the fitness enthusiast wants to train across modes. One yoga studio owner told us about his significant other that has a boot camp membership, a membership to a cycling studio, and a membership to his yoga studio. “She would be forced to spend $300 plus a month or choose between two of the three gyms if I didn’t own the (yoga) studio.”
These anecdotes and the rise of services like ClassPass futher supports Splash 4 Partners' belief that the future of the independent gym is a slightly larger square footage facility that accommodates multiple class offerings under one roof. Splash 4 Partners advised our client to scale operations and offerings over a three year basis starting off with just CrossFit. After a membership base was established the growth plan called for the addition of pilot testing additional fitness offerings with multi weekend seminars/ clinics on yoga, mobility, cycling, rowing, or kickboxing. These pay-to-play seminars help fund equipment purchases and garner additional interest in the future offerings.
By year three of operations the monetization model for the gym called for a pick two membership to be offered where the member can pick access to two of the following: CrossFit, yoga, rowing, or kickboxing all at the same price point of just over $150 a month. Unlimited access was priced at $30 a month more. This allows for the consumer to switch between training modalities, create new experiences, meet new members, and likely avoid injury from over training in a single modality.
The offerings alone are not enough. Best in breed coaches and staff are needed to help create the community needed to create a stickier customer and drive the gyms customer churn lower over time, driving the lifetime value of that customer higher.
A larger facility and more equipment increases the operating budget and the needed capital investment of the business. All of which is to say that gym operator needs to operate with a full knowledge of cash burn and the imperative nature of quickly ramping membership. By building a comprehensive financial model for the client, we were able to quantify the total capital needed, the payback period, and establish the maximum viable rent expense the business would bear.
Splash 4 Partners expects to see variations of this model to be implemented organically, as competition for the constantly varied fitness consumer rises.