Finding Success as a Small-market Health Club

Everyone should have access to a health club. But some areas of the country in small and medium-sized markets are underserved with limited options in choice of fitness facilities.

Everyone should have access to a health club. But some areas of the country in small and medium-sized markets are underserved with limited options in choice of fitness facilities.

The economics of opening a club in a community with a low-density population just don’t make sense for many fitness entrepreneurs. The business is challenging enough without the added pressure of recruiting from a limited pool of prospects.

Research-based analysis from the IHRSA Health Club Business Handbook says that four factors stand out when it comes to attracting new members to your club.

  1. Population density: preferable are markets of 60,000-100,000 plus people.
  2. Travel time: Competitive markets do best with no more than eight minutes of travel time for the primary market, 12 minutes for the secondary market to get to the club.
  3. Household income: When household income falls below $25,000, only 1 out of every 14 (7.2%) people is a health club member.
  4. Educational attainment: In general, the higher the educational attainment level of people in the community, the higher the overall market penetration rates of the clubs serving that market.

Attracting more members in every community may become easier in the near future. The U.S. House of Representatives passed the PHIT (Personal Health Investment Today) Act on July 25, bringing this new tax initiative one step closer to becoming law. The PHIT act allows citizens to use pre-tax savings accounts to pay for gym memberships. This will be a definite boost to clubs in smaller markets or any economically challenged areas. It will also help during those inevitable market slowdowns.

But with or without the PHIT incentive, how do health clubs find success in smaller communities?

Bringing Fitness to Small Town America

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Health clubs had a great year in 2017, and mid-market and boutique clubs paved the way. In fact, the proliferation of studio clubs prove that niche concepts and smaller markets can be lucrative. One fast growing chain, Workout Anytime, is finding success far away from busy urban areas.

“Our bread and butter is small communities,” says Greg Maurer, vice president of fitness at Workout Anytime. “We're smaller, so we go into areas where big boxes can't go. Our model fits small-town America.”

Workout Anytime has more than 170 locations, mostly in the Southeast region. The clubs average about 7,000 square feet in size (the largest is about 9,000 square feet), which gives them a more intimate, boutique feel.

“We're a results-based value provider,” says Maurer. “That allows us to deliver a more personal touch. We like to think we have a ‘Cheers’-type atmosphere in our clubs, where everybody knows your name.”

Workout Anytime also appeals to many first-time exercisers who may be intimidated by larger clubs. But after these new members get through the door, it’s Maurer’s job to make sure they stay. That means delivering a workout experience that gets results.

Even in small and mid-sized markets, exercise trends are similar to more populated areas. According to the IHRSA Fitness Training Report, about 26.6% of health club consumers, which include member and non-member users, reported engaging in small group training (SGT) in 2016. Approximately 1 in 8 health club consumers used a personal trainer during the same year.

Workout Anytime is expected to deliver similar types of SGT and fitness programming that’s in great demand in larger clubs in high-population areas. This presents unique challenges for smaller clubs with slimmer margins.

“What's happening is that there's less capital expense and more open space,” says Maurer. “There's more functional training equipment, and that equipment is program driven. As the vice president of fitness, it’s important to me that equipment and programming are designed to work together.”

The Importance of Matching Equipment with Programming

If you have equipment that doesn’t match your programming, you’re going to have a mismatch that’s going to limit your ability to deliver personal training and SGT options.

Says Maurer: “You need a seamless solution for your members, your coaches, and your personal trainers. That's what allows us to produce member results. And getting results is the business that we're in.”

According to the IHRSA Health Club Business Handbook, equipment costs for a new club averages $17-$24 per square feet. That can add up to anywhere between $100,000-$200,000 for a club the size of a Workout Anytime. And that’s not taking programming into account.

“It used to be that equipment companies didn't stick their nose into programming. That was somebody else's problem,” says Maurer. “But quite frankly, that’s changed. Today, equipment and programming, go hand-in-hand.”

To stock their clubs, Workout Anytime turned to Matrix Fitness, one of the world’s premiere fitness brands. Matrix supplies some of the largest chains in the industry, and there comprehensive approach and dedication to service make them a perfect fit for Workout Anytime, says Maurer.

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“Our facilities are almost 100 percent Matrix equipment,” he says. “They’ve become much more than an equipment company. They’ve really become involved in the programming side of the business.”

The ability of Matrix to scale to any size with a comprehensive equipment and training package make them an ideal solution for smaller budget clubs that want the quality of a global brand with the dedicated service of a local supplier.

“They can offer smaller clubs a real turnkey operation with their programs and equipment ready to go,” explains Maurer. “They have a huge range of products. They can come in and outfit an entire gym. And they've been superb with their after-sale services. I think it's unparalleled in the industry.”

With so many first-time exercisers in gyms, Maurer says that the ease of use of Matrix equipment is another reason they’re a great fit for his clubs.

“They've got a lot of tools for our members to use to make exercise easier,” says Maurer. “And if something goes wrong, they quickly get the product up and working again for you.”

To learn more about Matrix, visit their website or email them at info@matrixfitness.com. To learn more about their programming options, check out the IHRSA webinar “Maximizing Your Health Club’s Programming Mix,” presented by Matrix Fitness.

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Jim Schmaltz

Jim Schmaltz is a contributor to IHRSA.org