Link To Business Plan Example - Fitness Center

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BUSINESS PLAN

Your Name Example Founder Your Email Address P: Your Number

Last Updated Insert Date

TABLE OF CONTENTS

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EXECUTIVE SUMMARY COMPANY VALUES COMPANY SERVICES` COMPANY OPERATIONS TARGET MARKET/MARKET ANALYSIS MARKET SEGMENTATION MARKETING STRATEGY MANAGEMENT PLAN PERSONNEL PLAN COMPETITORS PROJECTED LOCATIONS PROJECT START UP EXPENSES/FINANCIAL NEEDS SWOT ANALYSIS PRICING STRATEGY SHORT/LONG TERM GOALS ASSUMPTIONS FINANCIAL PROJECTIONS MARKET RESEARCH

Box1 Sports Center

3 4 5 8 10 12 13 14 15 16 18 22 22 23 23 24 25 28

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EXECUTIVE SUMMARY Organized recently as a start-up company by founder , Box1 Sports Center was established with the vision of becoming a full-service, state-of-the-art, multi-sport complex. Situated in the Killeen/Harker Heights area near Fort Hood, the Box1 Sports Center is uniquely positioned to capture an underserved marketplace for athletic facilities in the central Texas region. Once established, the Box1 Sports Center will be recognized as a pillar that promotes social and economic development within the city and surrounding communities.

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According to research obtained from IBIS World, over the next five years, the Gym, Health and Fitness Clubs industry will lift itself to success, benefiting from the revitalization in consumers’ discretionary spending. As consumers’ disposable income rises, more individuals will purchase gym memberships that include a plethora of amenities, compared with low-cost memberships with few amenities that have fared well over the previous period. Moreover, while many individuals will be time-strapped over the period, which may constrain demand for gym memberships, this trend will be offset by growing demand for results-driven gyms that can help individuals achieve fitness goals in shorter time increments.

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For example, personal and group trainers, as well as fitness classes, will be popular. In the five years to 2019, revenue is forecast to grow at an annualized rate of 2.8% to $30.5 billion due to more consumers purchasing high-cost industry services, such as cohesive, individualized health plans that include trainers and nutritional guidance. Profit is also expected to slightly rise from 8.6% of industry revenue in 2014 to 8.9% in 2019, as many gyms offer more high-margin services, such as group personal training sessions, to strengthen their product portfolio and bolster member retention rates.

MISSION STATEMENT

VISION STATEMENT

Our Mission Is To Provide A

Our Vision Is To Be

Fun, Safe, and Family-

Recognized As The Premier

Friendly Environment To

Athletic Facility of Choice For

Patrons Located Within The

Patrons In The Central Texas

Central Texas Area.

Region.

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COMPANY VALUES Below is an overview of the company’s values that guide the way we conduct our business operations:

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CORE VALUES

 Professionalism: Providing services and support that are in line with acceptable standards and metrics  Quality: Maintaining facilities, equipment and ammenities in such a way that exceeds our customer’s expectations  Integrity: Conducting business in an ethical manner that is above reproach  Customer-Oriented: Going above and beyond to satisfy our customer’s requests.

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COMPANY SERVICES Overview The vision is for the Box1 Sports Center to be a multisport complex that provides its clients with various services. A first class fitness and lifestyle center, one full-size basketball court that can also accommodate many other sports (i.e. volleyball, indoor soccer, etc.), a nutritional food and beverage/lounge area, a lobby, and other amenities such as an administrative office, male/female restrooms, and a childcare center will all be available in the facility. Along with these amenities, Box1 Sports Center will provide its clients with qualified and knowledgeable staff to make sure all of their sport and fitness needs are met satisfactory. Interior

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The interior of the Box1 Sports Center shall include the following:

1 Full-Sized Basketball Court/Indoor Volleyball Court with multiple baskets (Approximately 5k sq ft.)

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Supervised childcare for members and non-members while working out; providing a wealth of activities for children under ten.

State-of-the-Art equipment, free-weights, machines, and cardio equipment with satellite-linked TVs helping to reach your goals in style.

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Optional assistance of nutritionists, dieticians, personal fitness trainers, sports-specific workout and ability trainers to maximize the effectiveness of your hard work.

Food and beverage snack area for patrons to refuel and re-energize before and after their intense workout sessions. Open from 8:00am to 8:00pm

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Hours of Operation Box1 Sports Center will remain open 24 – 7 except for federally recognized holidays. Other Key Items

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Company Operations

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Box1 Sports Center will also provide the following:  Facilities and amenities that are ADA& Veteran Accessible.  Open Gym time for sports specific recreation.  Specialized Training for athletes who want to improve their skill level.  Snack Bar/Nutrition Area: 8am – 8pm  Temporary Daycare accommodations for members and non-members.  Complimentary Self-Parking and Valet Parking for Special Events.  Complimentary Wi-Fi. & Utilities  Marketing & Sponsorship Opportunities.

One full-sized basketball/Indoor Volleyball courts will highlight the main floor of Box1 Sports Center. Along with these two sports, the floors will be able to accommodate badminton, indoor soccer, dodgeball, touch football, gymnastics, dance, aerobics, and more. These hardwood courts will be manufactured and installed by the industry leader, Robbins Sport Surfaces, and will be the premier sports floors in all of Central Texas. With the added attraction of world class portable basketball systems from JustBasketballGoals or Schelde North America, Box1 Sports Center will quickly become known as the place to be for leagues, camps, or pick-up games. With his/her education and vast experience in this area, the scheduling of events and activities on these floors will be conducted by one of the fitness center managers of Box1 Sports Center. The development of sports leagues, camps, and clinics, along with other various day-to-day operations of the facility will also be the manager’s responsibility. Box1 Sports Center will house a large fitness and lifestyle center that will match or exceed any other in the city. This fitness and lifestyle center will include top-of-the-line equipment in free weights, machine weights, and aerobic machines. This aspect of the facility will be run by a certified strength and conditioning specialist (CSCS) who will hire and train his/her staff to meet the demands of the members. This person will report to and work directly with the general partner of Box1 Sports Center and his/her duties will include, but will not

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be limited to, general supervision, personalized training for members, program development for camps and clinics, and aiding in the marketing and promotional aspects of the facility. On the lower level surrounding the courts there will be a food and beverage area where clients of the facility can replenish their bodies. This area has been placed on the lower level so the clients may have an up-andclose view of the activities on the courts while enjoying their favorite nutritional beverage and/or snack. Included in this area will be various big screen TVs that will show either sporting events, sports news, or realtime on-court activities that clients can enjoy. This aspect of the facility will be crucial in providing the desired atmosphere Box1 Sports Center hopes to create.

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A qualified, experienced person will be hired to run this aspect of the facility. He/she will have the responsibility to meet necessary standards and to report to, and work directly with the general partners of Box1 Sports Center to make sure the needs of the clients in this area are met satisfactory. If additional staff are required, this person will hire and train those people in accordance with Box1 Sports Center policies. Other features and services Box1 Sports Center will have include: 1. Full-service restrooms for both men and women. Large benches and sinks facilities will all be included as well. 2. A childcare area that will allow members and non-members to access the facility at their convenience. The childcare will be on the first level of the complex and have a large play area that will be continuously monitored by our certified childcare staff. The staff will be responsible for the care and well-being of the children they are watching, along with providing a fun and interesting environment for the children. This service will be offered facility members and non-members for a very minimal fee. 3. An administrative area housing various offices and a conference room will be located on the main floor of the facility. 4. A pro shop will be strategically placed in Box1 Sports Center to attract impulsive buyers. Clients will pass through the pro shop upon entering and exiting the facility. The pro shop will sell our own line of products and eventually sports shoes and apparel that will be available exclusively at Box1 Sports Center. The manager will be in charge of inventory for the pro shop, and general staff will be involved in the daily sales and service. Box1 Sports Center

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TARGET MARKET/MARKET ANALYSIS The proposed location for the Box1 Sports Center is the city of Killeen TX, a municipality consisting of a dense population of past and present military members due to the presence of the Ft. Hood installation. Our facility intends to serve patrons residing within Bell County and surrounding communities. Our target customer profile consists of residents with a combined household income of a minimum of $50,000 or more. Based on the demographic of Bell County, our target customer profile is well represented in this market. Below is a market analysis of our target customer area (research obtained from City of US CENSUS) Bell County Demographic Analysis People QuickFacts

Bell County

Texas

NA 326,843 310,235 NA 5.4% 310,235 8.8% 27.8% 9.5% 50.0%

26,956,958 26,505,637 25,146,104 7.2% 5.4% 25,145,561 7.3% 26.6% 11.2% 50.3%

White alone, percent, 2013 (a) Black or African American alone, percent, 2013 (a) American Indian and Alaska Native alone, percent, 2013 (a) Asian alone, percent, 2013 (a) Native Hawaiian and Other Pacific Islander alone, percent, 2013 (a) Two or More Races, percent, 2013 Hispanic or Latino, percent, 2013 (b) White alone, not Hispanic or Latino, percent, 2013

68.2% 22.4% 1.1% 3.2% 0.8%

80.3% 12.4% 1.0% 4.3% 0.1%

4.3% 23.2% 48.9%

1.8% 38.4% 44.0%

Living in same house 1 year & over, percent, 2009-2013 Foreign born persons, percent, 2009-2013 Language other than English spoken at home, pct age 5+, 2009-2013 High school graduate or higher, percent of persons age 25+, 2009-2013 Bachelor's degree or higher, percent of persons age 25+, 20092013 Veterans, 2009-2013

76.9% 7.7% 17.4%

82.8% 16.3% 34.7%

89.5%

81.2%

21.7%

26.7%

43,424

1,583,272

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Population, 2014 estimate Population, 2013 estimate Population, 2010 (April 1) estimates base Population, percent change - April 1, 2010 to July 1, 2014 Population, percent change - April 1, 2010 to July 1, 2013 Population, 2010 Persons under 5 years, percent, 2013 Persons under 18 years, percent, 2013 Persons 65 years and over, percent, 2013 Female persons, percent, 2013

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Mean travel time to work (minutes), workers age 16+, 20092013 Housing units, 2013 Homeownership rate, 2009-2013 Housing units in multi-unit structures, percent, 2009-2013 Median value of owner-occupied housing units, 2009-2013 Households, 2009-2013 Persons per household, 2009-2013 Per capita money income in past 12 months (2013 dollars), 2009-2013 Median household income, 2009-2013

18.9

25.0

131,394 56.7% 25.9% $122,600 104,049 2.95 $22,857

10,255,642 63.3% 24.2% $128,900 8,886,471 2.82 $26,019

$50,060

$51,900

15.3%

17.6%

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Persons below poverty level, percent, 2009-2013

Our target customer consisting of households with a median income of over $50,000 is wellrepresented in Bell County.

Additionally, our target customer consisting of individuals between the ages of 18 and 65 represents approximately 62% of the population, which adds up to 202,642 target customers!

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MARKET SEGMENTATION

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Over the past decade, the industry has experienced substantial growth in demand, and as a result, the breakdown of the industry’s markets have also changed. The aging population has encouraged health and fitness clubs to widen their target demographic beyond the traditional market of 18- to 35-year-olds. Industry operators are increasingly expanding their target market to include 35- to 54-year-olds and individuals aged under 18. The majority of gym and health club members are female, which account for about 57.0% of all gym, health and fitness club memberships and have increased in recent years.

Consumers aged 35 and older The central characteristic of the Gym, Health and Fitness Clubs industry has been the growth in the population of older members who are joining health clubs. In 2014, IBISWorld estimates that there will be 54.1 million health club members in the United States. Additionally, about 20.0% of these members will be older than 55, which signifies the trend of older individuals increasingly implementing active lifestyles. The industry has also grown significantly within the 35-to-54 age group, with an estimated 13.4 million health club members (24.8% of the market). The two segments identified can be generally grouped within baby boomers and generation X profiles. There are about 120.0 million people within these age categories, accounting for more than 35.0% of the total US population. These segments continue to drive growth in membership numbers and participation in sport and fitness activities. During the next five years, demand for industry services from this major market will increase due to a greater proportion of individuals comprising this age demographic.

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Consumers aged 18 to 34 This age category accounts for the industry’s largest market segment, with an estimated 5.0% market share. Despite its size, this segment has shown little growth over the past decade, compared with other age categories. While this demographic is expected to include 10.5 million individuals, this market segment has experienced slow growth during the past five years. Slow growth can be attributed to this market segment’s strong, yet stable, demand for fitness options. Furthermore, other fitness activities, such as team sports, have cut into this market segment’s demand for gym memberships.

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Consumers aged 17 and younger The 6-to-11 and 12-to-17 demographics are expected to account for 4.0% and 8.0% of market share, respectively. Growth within these areas (particularly the latter) has been strong over the past decade, as the echo boom generation (children of baby boomers) has increased in size. Additionally, many parents have been increasingly purchasing health club memberships for their children in response to rising child obesity rates. Youth memberships have become one of the fastest growth areas for the fitness club industry, and many clubs are shifting their focus to target this market segment. Moreover, many school programs, in response to state budgetary issues, have cut back on physical education classes, which has caused many parents to purchase alternative fitness options for their children.

MARKETING STRATEGY Below is an overview of the Box1 Sports Center’s Marketing Plan: Step 1: Our company shall develop a website to establish a presence on the internet to attract customers. Step 2: Our company shall establish a profile across various social media platforms to attract and market to potential customers (facebook, twitter, etc.) Step 3: Our company shall place ads in various publications (newspapers, magazines, print media, etc.) Step 4: Our Company will join and participate in networking events, chambers of commerce, and trade organizations in an effort to build relationships. Step 5: Our company shall advertise through the purchase of media (radio spots, TV commercials, etc.)

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MANAGEMENT PLAN The following diagram highlights the company’s proposed management structure:

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ORGANIZATIONAL STRUCTURE

CEO–Mr. Phillip Smith -Oversee day to day operations of the company -Oversee company finances/budgeting -Purchasing equipment and supplies -Human Resources: Hiring, Firing, Employee Performance Reviews -Advertising/Marketing – Business Development Bookkeeping/Payroll Firm -Assists in preparing/overseeing the company’s financial records -Prepares financial reports -Administers company’s payroll -Compiles company’s tax returns

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PERSONNEL PLAN* Below is a summary of the company’s initial projected personnel plan: Title CEO Food Service Mgr Food Service Support Staff Fitness Center Mgr Fitness Center Support Staff

# of Employees 1 1 3 1 8

Annual Salary

Total Salary

$50,000 $40,000 $20,000 $40,000 $30,000

$50,000 $40,000 $60,000 $40,000 $240,000

COMPETITORS

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*Fitness Center Based on 24 hour operations *Food Service Based on 12 hour operations (8am-8pm)

$430,000

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TOTAL ANNUAL SALARY

Below are a list of potential competitors that are currently located within 15 miles of our projected location:

COMPETITOR ANALYSIS

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Key Competitors 1) Anytime Fitness: http://www.anytimefitness.com/gyms/3424/Copperas-Cove-TX-76522 Description: Anytime Fitness of Copperas Cove , TX, is the fitness center that fits your on-the-go lifestyle. At our Copperas Cove, TX, health club, patrons you can exercise any time using their own security-access key 24 hours a day, 7 days a week, 365 days a year. Amenities include private showers, personal trainers, HD TVs, and scheduled workout classes. Address: 3010 E U.S. 190 Copperas Cove, TX 76522 United States 2) Cove Fitness: http://www.covefitnesscenter.com/

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Description: Cove Fitness is a full service health club that combines a full range of fitness and exercise equipment and facilities with professional trainers, personally tailored programs, and group exercise classes. Open from 5:00am to 10:00pm, Cove Fitness has a 20,000 square foot facility and offers the following amenities top of the line equipment, saunas, whirlpools, tanning beds, and a juice bar. Address: 1013 W Hwy 190 Copperas Cove, TX 76522 United States 3) Gold’s Gym: http://www.goldsgym.com/killeentx/ Descrption: Gold’s Gym Killeen in Killeen, TX stocks the very latest cardio equipment, such as elliptical machines, stair climbers, rowers, treadmills and stationary bikes as well as a full sets of free weights and high tech strength training equipment. They offer options for every fitness level, from beginning exercisers to elite athletes looking to sharpen their speed, agility, power and endurance. They offer a number of workout classes and group training sessions for patrons on a daily basis. Address: 902 W Central Texas Expy Killeen, TX 76541 United States 4) Family Recreation Center - Lions Club Park: http://www.killeentexas.gov/index.php?section=64 Descrption: City owned and operated community center featuring a fitness center, fitness classes, family activities, etc (not 24 hours operated). Address: 1700 E Stan Schlueter Loop, Killeen, TX 76542

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PROJECTED LOCATIONS Below are a list of possible locations for our facility in the Killeen TX area consisting of approximately 2-3 acres of available land:

1110 Old FM 440 1110 Old FM 440, Killeen, TX 76549

$195,000

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1.20 AC | Land

Description Great location for retail, automotive, or special use. Concrete parking lot on the front. Located West of Hwy 195, Ft. Hood St., between the South access road and Pershing Dr. The lot is behind the Vet Clinic on Pershing Dr. Box1 Sports Center

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1.46 Acres on Stan Schlueter Loop Stan Schlueter Loop & Bridgewood Dr, Killeen, TX 76542

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$254,390 1.46 AC | Land

Description Property is on the corner of Stan Schlueter Loop and Bridgewood Drive. The site has been filled. Cross access across the corner lot-planned Dollar General on the corner.

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The site is located on the corner of Stan Schlueter Loop and Bridgewood Drive in Killeen, Texas.

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4701 Trimmier Rd., Killeen, TX 76542 Price Not Disclosed 1.50 - 7.93 AC | Land

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PROJECT START UP EXPENSES/FINANCIAL NEEDS Below is stated estimation of our projected financial needs for the startup of this company:

Projected Need

Projected Start Up Expense

Land Acquisition:1-2 acres Design & Building Construction To Specifications (10,000 sq ft at $105/sq ft) Furniture/Fixtures/Equipment/Amenities Signage 3 Months of Payroll Initial Food Inventory/Beverages Professional Services (bookkeeping/payroll/consultants) Advertising/Marketing (website, print material, Media Spots etc.) 6 Months of Insurance ($500/month) Supplies Office Expenses Phones/Internet Uniforms SUBTOTAL Working Capital/Unplanned Expenses (5% of subtotal) TOTAL START UP EXPENSES

$250,000 $1,050,000

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$450,000 $10,000 $107,500 $7,000 $20,000 $20,000 $3,000 $3,000 $5,000 $5,000 $1,500 $1,932,000 $96,600 $2,028,600

SWOT ANALYSIS

STRENGHTS  Premier Fitness Center Amenities  State of the Art Equipment/Facilities  Multiple Activities Housed Under One Roof OPPORTUNITIES    

Capitalizing on an Underserved Market In Killeen Offering Discounts To Attract Military Customers Hosting Athletic Leagues, Birthday Parties, Events Increasing Population Trend In Central Texas

Box1 Sports Center

WEAKNESSES  Lack of Brand Recognition  Limited Capital  Limited Market Share THREATS  Increased Competition From Cheaper Alternatives

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PRICING STRATEGY Below is a proposed listing of our company’s pricing: Annual Membership Fee Family

$1,440 ($120/month)

Adult

$840 ($70/month)

Senior (55&up)

$600 ($50/month)

Youth

$300 ($25/month)

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$130 $80 $60 $35

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Family Adult Senior (55&up) Youth

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Monthly Membership Fees

ADDITIONAL SERVICES  Sports Performance Training: $200/month per person  2-3 Month Youth Sports Leagues (17 and younger): $50/child  2-3 Month Adult Sports Leagues (18 and older): $75/participant  1 Month of Personal Training Sessions: $150/person  Premium Reserved Lockers: $50/month  Food/Beverages: Price varies per menu item SHORT TERM FINANCIAL GOALS (2 YEARS – Dec 2017) Below is an overview of the company’s goals to be achieved within the next two –five years:     

Financing: Revenue: Profit: Retained Earnings: Staff:

Box1 Sports Center

Obtain approximately $2.1 mil in start up financing capital Achieve approximately $2.5 mill in gross revenue Achieve a minimum of 10% profit margin Achieve a minimum of $50,000 in retained earnings as working capital Employ a minimum of 15 employees

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LONG TERM GOALS (5 YEARS – Dec 2020)    

Revenue: Profit: Retained Earnings: Staff:

Achieve approximately $3.0 mil in gross revenue Achieve a minimum of 10% profit margin Achieve a minimum of $100,000 in retained earnings as working capital Employ a minimum of 40 employees

FINANCIAL PROJECTIONS Below is a list of our financial projections for the next three years: ASSUMPTIONS

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 The company will acquire approximately $2.1mil in start up capital

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 Employer Payroll Liabilities will represent 12% of employee salaries  The company’s revenue will steadily increase through continued marketing efforts  The company will initially employ close to 15 personnel at the onset, with staffing levels increasing as the business grows  Food/Beverage costs will represent 30% of the Food/Beverage revenue  The facility will take approximately 12-18 months to construct after land acquisition and design, with an anticipated completion date of Jan 2017 if financing is received in May of 2015.  The company’s revenue stream will be cyclical, with more revenue coming in during summer months  The company will be able to secure approximately 100 memberships through pre-enrollment prior to opening

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YEAR 1 PROJECTIONS Jan-17

Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 $27,000 $8,000 -$9,250 -$20,500 -$31,750 -$28,925 -$26,100 -$23,275 -$34,525

Nov-17 Dec-17 Total -$45,775 -$64,775

$72,000 $9,000 $5,000 $86,000

$26,000 $9,000 $5,000 $40,000

Cash on hand (beg. of month) CASH RECEIPTS Membership Dues Amenity/Training/League Sales Food/Beverage Sales Subtotal COST OF GOODS SOLD Direct Wages Food/Beverage Inventory

$40,000 $13,500 $9,750 $63,250

$40,000 $13,500 $9,750 $63,250

$40,000 $13,500 $9,750 $63,250

$30,000 $11,000 $7,500 $48,500

$30,000 $11,000 $7,500 $48,500

$26,000 $9,000 $5,000 $40,000

$35,800 $35,800 $35,800 $35,800 $35,800 $35,800 $1,500 $1,500 $2,250 $2,250 $2,250 $2,925

$35,800 $2,925

$35,800 $2,925

$35,800 $2,250

$35,800 $2,250

$35,800 $35,800 $429,600 $1,500 $1,500 $26,025

$48,700 $2,700

$4,450

$10,450 $10,450 $24,525

$24,525

$24,525

$10,450

$10,450

$2,700

$2,700

SUBTOTAL Loan/Investment principal payment

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

TOTAL CASH PAID OUT Net Income/Loss

$21,700 $21,700 $21,700 $21,700 $21,700 $21,700 $27,000 -$19,000 -$17,250 -$11,250 -$11,250 $2,825

$21,700 $2,825

$21,700 $2,825

$21,700 $21,700 -$11,250 -$11,250

$30,000 $11,000 $7,500 $48,500

$30,000 $11,000 $7,500 $48,500

$26,000 $9,000 $5,000 $40,000

$416,000 $129,500 $86,750 $632,250

$176,625

Box1 Sports Center

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

$2,000 $500 $500 $7,000 $500 $2,500 $200 $2,000 $4,296 $15,200 $6,500

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CASH PAID OUT Advertising/Marketing Insurance Office expense Rent/Lease Utilities Professional Fees Phone/Internet Miscellaneous (Repairs & Maint., etc.) Employer/Payroll Taxes

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Total Gross Profit

$26,000 $9,000 $7,500 $42,500

$24,000 $6,000 $6,000 $84,000 $6,000 $30,000 $2,400 $24,000 $51,552 $182,400 $78,000

$21,700 $21,700 $260,400 -$19,000 -$19,000 -$83,775

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YEAR 2 PROJECTIONS

CASH RECEIPTS Membership Dues Amenity/Training/League Sales Food/Beverage Sales Subtotal COST OF GOODS SOLD Direct Wages Food/Beverage Inventory

$29,000 $9,500 $5,500 $44,000

$29,000 $9,500 $8,000 $46,500

$35,000 $11,500 $8,000 $54,500

$35,000 $11,500 $8,000 $54,500

$47,000 $14,000 $10,500 $71,500

$47,000 $14,000 $10,500 $71,500

$47,000 $14,000 $10,500 $71,500

$35,000 $11,500 $8,000 $54,500

$35,000 $11,500 $8,000 $54,500

$36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $1,650 $1,650 $2,400 $2,400 $2,400 $3,150 $3,150 $3,150 $2,400 $2,400 $8,100

$16,100 $16,100 $32,350 $32,350 $32,350 $16,100 $16,100


$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500


$23,100 $23,100 $23,100 $23,100 $23,100 $23,100 $23,100 $23,100 $23,100 $23,100 $39,250 -$16,750 -$15,000 -$7,000 -$7,000 $9,250 $9,250 $9,250 -$7,000 -$7,000


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$62,350 $6,350

$29,000 $9,500 $5,500 $44,000

$29,000 $9,500 $500 $39,000

$482,000 $135,500 $88,500 $706,000

$36,000 $36,000 $432,000 $1,650 $150 $26,550 $6,350

$2,850

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$247,450

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Total Gross Profit

$85,000 $9,500 $5,500 $100,000

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Cash on hand (beg. of month)

Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Total -64,775 -25,525 -42,275 -57,275 -64,275 -71,275 -62,025 -52,775 -43,525 -50,525 -57,525 -74,275

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$2,500 $550 $600 $7,000 $500 $2,750 $200 $2,500 $4,320 $16,600 $6,500

$30,000 $6,600 $7,200 $84,000 $6,000 $33,000 $2,400 $30,000 $51,840 $199,200 $78,000

$23,100 $23,100 $277,200 -$16,750 -$20,250 -$29,750

Page 24

YEAR 3 PROJECTIONS

Cash on hand (beg. of month)

$100,000 $11,000 $7,000 $118,000

$33,500 $11,000 $7,000 $51,500

$33,500 $11,000 $7,000 $51,500

$42,000 $14,500 $9,500 $66,000

$42,000 $14,500 $9,500 $66,000

$55,500 $16,000 $12,000 $83,500

$55,500 $16,000 $12,000 $83,500

$55,500 $16,000 $12,000 $83,500

$42,000 $14,500 $9,500 $66,000

$42,000 $14,500 $9,500 $66,000

$38,000 $38,000 $38,000 $38,000 $38,000 $38,000 $38,000 $38,000 $38,000 $38,000 $2,100 $2,100 $2,100 $2,850 $2,850 $3,600 $3,600 $3,600 $2,850 $2,850

$33,500 $11,000 $7,000 $51,500

$33,500 $11,000 $7,000 $51,500

$568,500 $161,000 $109,000 $838,500

$38,000 $38,000 $456,000 $2,100 $2,100 $32,700

$77,900 $11,400 $11,400 $25,150 $25,150 $41,900 $41,900 $41,900 $25,150 $25,150

$11,400 $11,400


$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500


$24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $53,900 -$12,600 -$12,600 $1,150 $1,150 $17,900 $17,900 $17,900 $1,150 $1,150


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Total Gross Profit

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CASH RECEIPTS Membership Dues Amenity/Training/League Sales Food/Beverage Sales Subtotal COST OF GOODS SOLD Direct Wages Food/Beverage Inventory

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Total -$74,275 -20,375 -32,975 -45,575 -44,425 -43,275 -25,375 -7,475 10,425 11,575 12,725 125

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$2,500 $600 $700 $7,000 $500 $3,000 $200 $3,000 $4,560 $17,500 $6,500

$349,800

$30,000 $7,200 $8,400 $84,000 $6,000 $36,000 $2,400 $36,000 $54,720 $210,000 $78,000

$24,000 $24,000 $288,000 -$12,600 -$12,600 $61,800

MARKET RESEARCH Market Research developed from IBIS World Industry Report

Box1 Sports Center

Page 25

Gym, Health & Fitness Clubs in the USDecember 2014 1

WWW.IBISWORLD.COM

Hit the gym: The industry will remain resilient as demand from health-conscious consumers grows

IBISWorld Industry Report 71394

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Sarah Turk

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December 2014

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Gym, Health & Fitness Clubs in the US 2 About this Industry

17 International Trade

32 Key Statistics

2

Industry Definition

18 Business Locations

32 Industry Data

2

Main Activities

2

Similar Industries

20 Competitive Landscape

3

Additional Resources

20 Market Share Concentration

32 Annual Change

20 Key Success Factors

4 Industry at a Glance

32 Key Ratios

33 Jargon & Glossary

20 Cost Structure Benchmarks 22 Basis of Competition

5 Industry Performance

23 Barriers to Entry

5

Executive Summary

24 Industry Globalization

5

Key External Drivers

7

Current Performance

9

Industry Outlook

11 Industry Life Cycle

25 Major Companies 28 Operating Conditions 28 Capital Intensity

13 Products & Markets

29 Technology & Systems

13 Supply Chain

29 Revenue Volatility

13 Products & Services

30 Regulation & Policy

15 Demand Determinants

30 Industry Assistance

15 Major Markets

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com


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About this Industry Industry Definition

This industry operates fitness and recreational sports facilities that feature exercise and other active physical fitness conditioning or recreational sports

Main Activities

The primary activities of this industry are

activities, such as swimming, skating or racquet sports. Operators are also involved in facilities management and fitness instruction.

Operating aerobic dance and exercise centers Operating athletic club facilities for physical fitness Operating body building studios for physical fitness Operating fitness centers, health clubs and gyms Operating recreational sports club facilities Operating ice or roller skating rinks Operating spas Operating squash, racquetball or tennis clubs

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Operating swimming pools

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Dance centers

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The major products and services in this industry are Gyms and fitness centers Ice and roller rinks Swimming pools Tennis centers Other

Similar Industries

71399 Golf Driving Ranges & Family Fun Centers in the US Establishments in this industry operate recreational sports clubs (i.e. sports teams), but do not operate sports facilities. 72111 Hotels & Motels in the US Establishments in this industry are primarily engaged in operating health resorts and spas where recreational facilities are combined with accommodations. 81219a Weight Loss Services in the US Establishments in this industry are primarily engaged in providing nonmedical services to assist clients in attaining or maintaining a desired weight. 81219c Tanning Salons in the US Establishments in this industry are primarily engaged in providing artificial tanning services.


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About this Industry

For additional information on this industry www.ballyfitness.com Bally Total Fitness www.ihrsa.org International Health, Racquet and Sportsclub Association www.sfia.org Sports and Fitness Industry Association

writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go towww.ibisworld.com

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IBISWorld

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Additional Resources

WWW.IBISWORLD.COM

Gym, Health & Fitness Clubs in the US December 2014

4

Industry at a Glance Gym, Health & Fitness Clubs in 2014

Key Statistics Snapshot

Revenue

Annual Growth 09-14

Annual Growth 14-19

Profit

Wages

Businesses

$26.5bn $2.3bn

2.3%

$8.3bn

Time spent on leisure and sports

Revenue vs. employment growth

Market Share

There are no Major Players in this industry

8

5.4 5.3

4

Units

% change

6

2 0

10

12

14

16

18

20

5.0

Year 06

08

10

12

14

16

18

20

Employment

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08

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−4

5.2 5.1

−2

Year 06

2.8% 29,894

SOURCE: WWW.IBISWORLD.COM

Products and services segmentation (2014)


6%

Participation in sports

5%

Tennis centers

Ice and roller rinks

Time spent on leisure and sports

7%

Swimming pools

Per capita disposable income

7%

Dance centers

Number of adults aged 20 to 64 Yield on 10-year Treasury note

10% Other

65%

Gyms and fitness centers

p. 5

SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COM

Industry Structure

Life Cycle Stage Revenue Volatility Capital Intensity

Growth Low Medium

Regulation Level Technology Change

Light Medium

Barriers to Entry

Low

Industry Assistance

Low

Industry Globalization

Low

Concentration Level

Low

Competition Level

High

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32


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Industry Performance

Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Executive Summary

The Gym, Health and Fitness Clubs industry has weighed in on the recent marketing campaigns and consumer trends that have aimed to fight obesity and advocate for improved consumer health. In the five years to 2014, health club memberships have grown at an estimated annualized rate of 6.1% to 54.1 million individuals. While health club memberships have fared well over the period, they still declined an estimated 15.5% in 2009, in line with many budgetconscious individuals terminating their memberships. Further exacerbating this

trend, time-strapped consumers became more prevalent, evidenced by individuals’ time spent on leisure and sports remaining relatively stagnant, with an estimated annualized growth rate of 0.1%, which has slightly constrained industry revenue growth. However, from 2010 to 2014, many small, low-cost gyms with few amenities and month-by-month contracts have fared well when compared with highcost, all-inclusive gym memberships. Furthermore, many health-conscious individuals have implemented fitness

into their daily regimen, which has buoyed industry revenue. Additionally, the number of adults aged 20 to 64, the largest gym-going demographic, has exhibited growth, which spurred demand for gym memberships over the period. As a result, in the five years to 2014, industry revenue is anticipated to grow at an annualized rate of 2.3% to reach $26.5 billion, including 2.4% revenue growth in 2014 due to more consumers valuing fitness to bolster their overall health and well being. Nevertheless, profit is expected to contract from 9.6% of industry revenue in 2009 to 8.6% in 2014, which can be attributed to many gym, health and fitness clubs offering memberships with low cancelation penalty fees, thereby cutting into profitability, particularly for gyms that had high attrition rates over the period. Over the next five years, the industry will benefit from the burgeoning elderly population becoming increasingly active, which will result in many baby boomers signing up for health club memberships. Consequently, industry revenue is forecast to grow at an annualized rate of 2.8% to $30.5 billion in the five years to 2019. Moreover, consumers will substitute larger, all-inclusive clubs for low-cost memberships, which is anticipated to propel industry revenue forward.

Participation in sports Participation in sports measures the percentage of individuals that participate in sports, recreation or exercise per day. As more individuals participate in sports, this trend reflects more health-conscious individuals, which typically increases consumer demand for gym, health and fitness club memberships. Participation in sports is expected to decrease in 2015.

Time spent on leisure and sports As individuals have more leisure time, they can allocate more time toward their fitness regimen, which spurs consumer demand for gym, health and fitness club memberships. While the industry will contend with more time-strapped individuals, many health-conscious consumers will increasingly value fitness

industry will benefit from the burgeoning elderly population becoming more active

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The



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for their overall health, thereby stimulating demand for gym memberships. However, time spent on leisure and sports is expected to decline in 2015, posing as a potential threat to the industry.

Number of adults aged 20 to 64 Individuals aged 20 to 64 comprise a large gym-going demographic for the industry. The aging of the baby boomer generation, coupled with the maturation of their children, will broaden the market for this industry. The number of adults aged 20 to 64 is expected to increase slowly in 2015. Yield on 10-year Treasury note The yield on a 10-year Treasury note measures the current interest rate. As interest rates rise, the investing environment for gym, health and fitness clubs will be less favorable, therefore inciting fewer gyms to expand their franchise operations and boutique gyms to enter the industry. The yield on a 10-year Treasury note is expected to increase in 2015.

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Per capita disposable income As per capita disposable income rises, more individuals can purchase gym, health and fitness club memberships. Furthermore, as disposable income increases, more consumers can allocate discretionary income toward high-cost, all-inclusive gym memberships, which benefits the industry. Per capita disposable income is expected to increase in 2015, representing a potential opportunity for the industry.

Participation in sports

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Time spent on leisure and sports 5.4

21 20

5.3

19 5.2

%

Units

Key External Drivers continued

18 5.1 5.0

Year 06

17

08

10

12

14

16

18

20

16

Year 06

08

10

12

14

16

18

20



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8 6 4 2 0 −2 −4

Year 06

08

10

12

14

16

18

20


as many gyms have increasingly offered low-cost gym memberships with monthly contracts to attract budget-conscious consumers, cutting into industry probability, particularly for gyms with high member attrition rates.

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Industry revenue

% change

Gym, health and fitness clubs have grown over the past five years, bolstered by public health initiatives that have shed light on fitness’ role in fighting diabetes, obesity and other health ailments. This trend is evidenced by the number of health club memberships growing over the period, as more individuals have valued fitness as an integral component in their health regimen. Furthermore, population growth, particularly among individuals aged 20 to 64, which comprises the largest gym-going demographic, has spurred demand for health club memberships. Over the five years to 2014, revenue is anticipated to grow at an annualized rate of 2.3% to $26.5 billion, including 2.4% revenue growth in 2014 alone, driven by the increasingly active baby boomer population purchasing gym memberships. However, profit is expected to contract from 9.6% of industry revenue in 2009 to 8.6% in 2014,

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Current Performance

Industry landscape

Demand for health club memberships typically exhibits the strongest growth in the first three months of the year. For example, an estimated 30.0% of all new members have signed up for their gym and fitness club during the first few months of the year, driven by New Year resolutions, which may incite consumers to implement healthier lifestyles. To boost the number of new memberships during other months, many gyms have offered discounts and monthly memberships; however, January still comprises the largest portion of membership sales. Over the past five years, the industry has benefited from the rapid expansion of health club memberships. For example, the total number of gym memberships has grown from an estimated 40.3 million members in 2009 to 54.1 million in 2014. While this trend has bolstered industry revenue, many gyms still compete on the basis of price. Furthermore, gyms that have offered low-cost, contract-free memberships with

fewer amenities fared well over the period, in line with strong demand from many budget-conscious consumers over the period. The industry has contended with many time-strapped consumers over the period, many struggling to allocate time toward fitness; this trend was offset by more health-conscious individuals still incorporating fitness into their regimen. Moreover, demographic trends have helped to shape the industry’s landscape. For example, the aging of the baby-boomer generation and the maturation of their offspring, the echo boomers, have broadened the market for gyms and health and fitness clubs. Government-sponsored programs, such as Michelle Obama’s “Let’s Move!” initiative, which has advocated for fighting against childhood obesity, have increased awareness of the benefits of physical exercise for consumers of all ages, especially families. Over the past five years, this initiative, among other health programs, has provided a boon to the industry.


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Poor economic conditions, coupled with many consumers continuing to be budget conscious over the period, have caused new trends to emerge within the industry. A growing preference for easily accessible, smaller gyms with fewer amenities has benefited boutique gyms that have catered to a market niche of local consumers. The market share of smaller-budget gyms is subsequently growing, as consumers have substituted gyms with fewer amenities for expensive, all-inclusive clubs, which include related facilities, such as tennis centers, racquetball courts, ice rinks and swimming pools. For example, Planet Fitness experienced strong membership growth during the recession, with some clubs signing up more than 1,000 new members each month in 2009, according to the International Health,

Consumer

preference has shifted toward smaller gyms with fewer amenities Racquet and Sportsclub Association (IHRSA). Planet Fitness offers inexpensive gym membership fees of $10 to $19 per month, depending on the location, and has steadily expanded operations over the past three years. Other growing franchises include Snap and Anytime Fitness, which have demonstrated the popularity of niche gyms that target budget-conscious clientele. Moreover, consumers that seek individualized fitness programs, specific fitness goals or are uncomfortable exercising in larger gyms particularly favored small-scale gyms.

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Fitness trends

Enterprises and employment

As operators try to attract consumers with low-cost, contract-free and lowamenity memberships, many industry players have limited their establishment expansion to lower operational costs. However, industry establishments have grown at an estimated annualized rate of 0.7% to 34,023 businesses over the five years to 2014, as many large industry players have acquired small, niche gyms that have catered to local clientele. To address consumers’ preference for local, boutique gyms and fitness

centers, many gyms are increasingly substituting smaller facilities for national chains. For example, from 2007 to 2010, Curves International Inc. closed 2,500 locations because the franchise was unable to compete with local, low-cost gyms that offered longer operating hours. The number of employees in the industry is expected to grow at an average annual rate of 1.7% to 583,075 people as demand for fitness instructors increases in line with growth in health club memberships.


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Over the next five years, the Gym, Health and Fitness Clubs industry will lift itself to success, benefiting from the revitalization in consumers’ discretionary spending. As consumers’ disposable income rises, more individuals will purchase gym memberships that include a plethora of amenities, compared with low-cost memberships with few amenities that have fared well over the previous period. Moreover, while many individuals will be time-strapped over the period, which may constrain demand for gym memberships, this trend will be offset by growing demand for results-driven gyms that can help individuals achieve fitness goals in

New demographics

In the next five years, population growth and demographic changes will increasingly drive revenue growth. For example, the burgeoning baby boomer population, which is becoming increasingly active, will purchase gym memberships to maintain a healthier lifestyle. Additional revenue streams will also play an integral component in industry revenue growth. In particular, as healthcare costs continue to escalate, many health insurance providers may implement incentives to promote preventive health practices, including the use of fitness centers among individuals within their provider network. Furthermore, the number of obese individuals in the United States is increasing. According to a study by the Centers for Disease Control and Prevention, an estimated 42.0% of Americans will be considered obese by 2030. In particular, many health insurance providers will attempt to lower individuals’ risk for type 2 diabetes, heart disease, dementia, cancer and high blood pressure, among other health ailments, to cut healthcare costs. Additionally, the proliferation of initiatives that shed light on the health benefits of exercise will likely occur over the next five years, which will stimulate industry revenue.

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Industry Outlook

shorter time increments. For example, personal and group trainers, as well as fitness classes, will be popular. In the five years to 2019, revenue is forecast to grow at an annualized rate of 2.8% to $30.5 billion due to more consumers purchasing high-cost industry services, such as cohesive, individualized health plans that include trainers and nutritional guidance. Profit is also expected to slightly rise from 8.6% of industry revenue in 2014 to 8.9% in 2019, as many gyms offer more high-margin services, such as group personal training sessions, to strengthen their product portfolio and bolster member retention rates.

Demographic

changes will increasingly drive revenue growth Many employers are increasingly viewing fitness as a vital component of employee health due to studies indicating that fitness can boost worker productivity. As a result of this trend, many employers may subsidize gym memberships for their employees, therefore providing a boon to the industry. Furthermore, as many families become health and fitness conscious, more consumers aged 17 and younger will purchase gym memberships. Less physical education in schools, coupled with growing concerns regarding childhood obesity, will prompt gym membership sales for this age demographic. As consumers become increasingly time strapped, many will invest in fitness classes and individual or group sessions with trainers to obtain their fitness goals more efficiently. In the next five years, group classes are expected to increase in popularity, especially fusion classes that combine yoga, Pilates, ballet, dance and surfing.


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While large-scale gyms will continue to dominate the industry landscape by offering a diverse portfolio of services, many small gyms will persist in attracting a niche market of local customers. In particular, small operators will attempt to entice local, time-strapped customer bases by offering conveniently located establishments in unsaturated areas. However, large industry operators can relatively mitigate this trend by attracting consumers via technology, such as phone applications that enable gym users to access their previous fitness statistics. In the five years to 2019, the number of industry enterprises is anticipated to slightly grow at an annualized rate of

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Industry landscape

Operators

will implement a larger workforce to develop and retain their clientele 0.6% to 30,818 operators, as the trend of health consciousness continues to boost demand for industry services. Additionally, the number of employees is anticipated to grow at an annualized rate of 1.5% to 628,668 people over the same period, as industry operators implement a larger workforce to provide additional services, such as fitness classes and spa services, to develop and retain their clientele.


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Industry Performance Increased awareness and interest in fitness and health has bolstered industry performance

Life Cycle Stage

Although industry value added is growing at a slower rate compared with the overall economy, this can be attributed to the recession

20

Maturity

Quality Growth

Company consolidation; level of economic importance stable

High growth in economic importance; weaker companies close down; developed technology and markets

Revenue grows faster than the economy Many new companies enter the market Rapid technology & process change Growing customer acceptance of product Rapid introduction of products & brands

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Key Features of a Growth Industry

D

% Growth in share of economy

General population growth leads to increased demand for facilities

10

Quantity Growth

Many new companies; minor growth in economic importance; substantial technology change

5

Hotels & Motels Heating & AirConditioning Contractors 0

Golf Driving Ranges & Family Fun Centers

Gym, Health & Fitness Clubs Steam & Air-Conditioning Supply Weight Loss Services

Decline

-5

Shrinking economic importance

-10 -10

-5

0

5

10

15

20

% Growth in number of establishments SOURCE: WWW.IBISWORLD.COM


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industry is Growing

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This

The Gym, Health and Fitness Clubs is in the growth life cycle stage, because consumers continue to be interested in exercise to boost fitness and health. During the 10 years to 2019, industry value added (IVA), a measure of an industry’s contribution to the overall economy, is expected to grow at an annualized rate of 2.5%. Comparatively, GDP is anticipated to grow at the same rate during the ten-year period. Although the industry is growing at the same pace as the overall economy, the industry has grappled with slow growth during the five years to 2014. As per capita income declined, more consumers purchased low-cost gym memberships with fewer amenities, which has hampered industry profitability and constrained revenue growth. However, this trend will be mitigated in future years as growing per capita disposable income, coupled with less leisure time, will incite time-strapped consumers to

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Industry Life Cycle

purchase personal trainers to accomplish fitness goals. As public health campaigns spread awareness about the health benefits of fitness, consumers will increasingly perceive gym and fitness club membership as a vital expense. For example, as government programs and businesses support participation in fitness programs, consumers will recognize the benefits of exercise for productivity and health reasons. As gym memberships become more entrenched in the average American’s life, revenue growth will slow to match population growth, bringing the industry from growth to maturity. Future growth areas will likely be in participative sports for women and the older sections of the community; and in individual sports rather than team sports. These factors will support continued growth for gyms and health clubs over the five years to 2019.


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Products & Markets

Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

Supply Chain

KEY BUYING INDUSTRIES 99

Consumers in the US Consumers drive the demand for gyms, health and fitness clubs.

KEY SELLING INDUSTRIES Steam & Air-Conditioning Supply in the US This industry supplies air conditioning for facilities.

23822a

Heating & Air-Conditioning Contractors in the US This industry supplies heating and air conditioning for gyms and fitness centers.

23822b

Plumbers in the US This industry supplies plumbing services for changing rooms.

33992a

Athletic & Sporting Goods Manufacturing in the US This industry supplies sporting equipment to operators.

33992b

Gym & Exercise Equipment Manufacturing in the US This industry supplies sporting equipment to operators.

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The Gym, Health and Fitness Clubs industry offers a wide array of services across a variety of facilities, including gyms, tennis centers, ice skating rinks and swimming pools. The industry is generally divided into groups based on these types of facilities, but it can also be separated by function or payment. Industry operators generate income from membership dues, admissions or use of facilities, tuition services, rental hire, food and beverage sales, retail sales and other services. Health and fitness clubs typically derive a large portion of their revenue from membership fees, followed by admissions to additional facilities, such as pools, courts, rinks and classes. However, the breakdown will vary considerably between different types of gym, health and fitness clubs, depending on their operations and services offered.

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Products & Services

22133

Gyms and fitness centers The largest product segment is gyms and fitness centers, which make up about 65.0% of revenue in 2014. This segment dominates the industry due to a high participation rate; about 40.0% of people aged seven and older worked out at a club at least once in 2010 (latest data

available), according to data from the National Sporting Goods Association (NSGA). Members generally join gyms by signing one-year contracts. Gym, health and fitness clubs include a range of activities and continue to offer new classes and recreation options to their members (e.g. yoga, Pilates and spa services). This segment has especially grown in the past five years, as gyms have implemented more fitness activities, compared with leisure, to appeal directly to the health-conscious population. There are various kinds of health and fitness clubs that cater to different markets, including female-only gyms (such as Curves International), premium fullservice health clubs, 24-hour gyms and bodybuilding gyms. Swimming pools Swimming pools are the second-largest industry segment, which comprises about 7.0% of revenue in 2014. Outdoor pools are more popular in the warmer southern states, but indoor heated pools are common in colder states. Swimming is a popular activity, though outdoor pools tend to be seasonal. According to the Centers for Disease Control and


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Products & Markets

Products and services segmentation (2014)

5%

Tennis centers

7%

Swimming pools

6%

Ice and roller rinks

7%

Dance centers

10% Other

65%

Gyms and fitness centers

Total $26.5bn


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Prevention, swimming is the most popular recreational activity for children and teens. According to the latest available data, about 63.5% of the US population went swimming at least once in 2010.

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Products & Services continued

Dance centers Dance centers and studios are a growing segment of the industry, generating about 7.0% of industry revenue in 2014. These centers are largely available to the general public for all ages and ability levels. A wide variety of dance classes (e.g. salsa and hip hop) are made available in most areas, appealing to both beginners and professionals. Ice rinks and in-line skating rinks Ice rinks and in-line skating rinks are another popular industry activity, accounting for about 6.0% of revenue in 2014. Skating rinks are popular, as participants can skate both for leisure and to participate in hockey and figure skating. The NSGA reports that about 10.0% of the population participated in either ice or in-line skating during 2010 (latest available data), and 2.0%

participated in ice hockey. IBISWorld estimates that there are about 1,800 ice rinks in the United States. Tennis centers and other Tennis centers are expected to account for about 5.0% of revenue in 2014. As the popularity of other competitive sports has increased over the past five years, demand for tennis courts has wavered. In 2010 (latest data available), 12.6% of the population played tennis at least once, according to the NSGA. Recently, there have been significant technological advances in tennis racquets. These advances have stemmed from areas such as grip shapes, shaft flexibility, string patterns, head size and string gauges. Tennis court surfaces are also changing for both indoor and outdoor tennis courts, with synthetic and artificial surfaces providing a more even and predictable bounce, compared with grass or clay. Other fitness and recreational services include a variety of racket sports, such as handball, racquetball, squash, table tennis and badminton and account for about 10.0% of industry revenue.


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Products & Markets

Across the United States, increasing awareness of the need for exercise, weight control, good nutrition and healthy lifestyle choices among adults and children is having a positive effect on fitness and recreational sports centers. The demand for services provided by the Gym, Health and Fitness Clubs industry is determined by a number of factors, including household disposable income, consumer confidence, leisure time availability, participation in recreation and sports, seasonal conditions, attitudes towards health and fitness and the cost of services relative to other recreation options. Household disposable income is particularly relevant to industry demand, as the level of disposable income within a household will determine the amount spent at fitness and recreational sports centers. As discretionary spending rises, demand for gyms and fitness clubs typically increases. Similarly, industry growth is impacted by consumer confidence, as an increase leads to higher demand and willingness to spend on the industry’s services. Overall, demand is also sensitive to seasonal and weather conditions; for example, cold weather can reduce the level of swimming pool attendance

(particularly for outdoor pools), while also increasing attendance at ice skating rinks. Additionally, the beginning of the calendar year marks the busiest season for new sales. A large portion of new gym members sign on in January or February, often because of New Year’s resolutions. Leisure time availability also influences demand, with time-poor consumers finding it difficult to incorporate industry services into their routine. As work hours decline, people find more ways to attend gyms and use facilities. The link between leisure time and demand relates to health and fitness awareness, as people view fitness as a valuable way to use their spare time. While health crazes generally have a positive effect on the industry, certain fitness trends can have varied effects on the industry. For example, the increase in popularity of yoga, and especially in its muscle toning qualities, reduces demand for weight training among females in particular. Finally, the lower cost of industry services compared with other sport and recreation activities can stimulate demand as well. Conversely, when industry costs are relatively higher than other recreational activities, consumer demand for gym memberships may contract.

Major Markets

Over the past decade, the industry has experienced substantial growth in demand, and as a result, the breakdown of the industry’s markets have also changed. The aging population has encouraged health and fitness clubs to widen their target demographic beyond the traditional market of 18- to 35-yearolds. Industry operators are increasingly expanding their target market to include 35- to 54-year-olds and individuals aged under 18. The majority of gym and health club members are female, which account for about 57.0% of all gym, health and

fitness club memberships and have increased in recent years. The growth of female participation is likely a result of the rising number of female-only health club facilities.

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Demand Determinants

Consumers aged 35 and older The central characteristic of the Gym, Health and Fitness Clubs industry has been the growth in the population of older members who are joining health clubs. In 2014, IBISWorld estimates that there will be 54.1 million health club members in the United States. Additionally, about 20.0%


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Products & Markets

Major market segmentation (2014)

8%

4%

Consumers Consumers aged 6 to 11 aged 12 to 17

35%

Consumers aged 18 to 34

20%

Consumers aged 55 and up

33%

Consumers aged 35 to 54

Total $26.5bn


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of these members will be older than 55, which signifies the trend of older individuals increasingly implementing active lifestyles. The industry has also grown significantly within the 35-to-54 age group, with an estimated 13.4 million health club members (24.8% of the market). The two segments identified can be generally grouped within baby boomers and generation X profiles. There are about 120.0 million people within these age categories, accounting for more than 35.0% of the total US population. These segments continue to drive growth in membership numbers and participation in sport and fitness activities. During the next five years, demand for industry services from this major market will increase due to a greater proportion of individuals comprising this age demographic.

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Major Markets continued

Consumers aged 18 to 34 This age category accounts for the industry’s largest market segment, with an estimated 5.0% market share. Despite its size, this segment has shown little growth over the past decade, compared with other age categories. While this demographic is expected to include 10.5 million individuals, this market segment

has experienced slow growth during the past five years. Slow growth can be attributed to this market segment’s strong, yet stable, demand for fitness options. Furthermore, other fitness activities, such as team sports, have cut into this market segment’s demand for gym memberships. Consumers aged 17 and younger The 6-to-11 and 12-to-17 demographics are expected to account for 4.0% and 8.0% of market share, respectively. Growth within these areas (particularly the latter) has been strong over the past decade, as the echo boom generation (children of baby boomers) has increased in size. Additionally, many parents have been increasingly purchasing health club memberships for their children in response to rising child obesity rates. Youth memberships have become one of the fastest growth areas for the fitness club industry, and many clubs are shifting their focus to target this market segment. Moreover, many school programs, in response to state budgetary issues, have cut back on physical education classes, which has caused many parents to purchase alternative fitness options for their children.


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Products & Markets

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International trade does not generally apply to the US Gyms, Health and Fitness Clubs industry, as it is a serviceoriented sector with no measurable imports or exports. International trading of fitness and exercise

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International Trade

equipment is recorded at the manufacturing level for fitness or sporting goods (IBISWorld report 33992). For more information on global operations, please refer to the Industry Globalization section.


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Products & Markets Business Locations 2014

West New England

AK 0.3

Great Lakes ND

MT

Rocky Mountains ID

1.5

West NV 0.6

SD 0.3

WY

0.5

2.0

CO

0.7

KY

0.8

9

OK 0.9

NC 3.4

TN

AZ

NM

1.5

0.5

Southwest TX 6.0

HI 0.3

Additional States (as marked on map) 1 VT

2 NH

3 MA

4 RI

5 CT

6 NJ

7 DE

8 MD

0.3 1.6

0.6

4.2

3.5

0.4

SC

Southeast

0.7

MS

AL 1.2

1.4

GA 2.6

0.7

LA 1.4

FL 5.5

Establishments (%)

0.5

2.2

AR

8

0.5

1.6

10.8

7

WV VA 2.8

1.2

1.9

CA

West

3.8

MO

KS

1.8

OH

2.0

4.2

6

4.7

IN

IL

0.7

UT

PA

3.0

1.1

0.5

1 2 3 NY 7.1 5 4

MI

2.2

IA

NE

0.2

WI

Plains

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OR

MN

0.3

0.4

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2.6

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WA

ME

MidAtlantic

9 DC 0.2

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more SOURCE: WWW.IBISWORLD.COM


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Products & Markets

Distribution of establishments vs. population 30

%

20

10

Southwest

Southeast

Rocky Mountains

Plains

New England

Mid-Atlantic

Great Lakes

West

0

Establishments Population SOURCE: WWW.IBISWORLD.COM

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The four regions that encompass the greatest percentages of gyms and health and fitness clubs include the Southeast (22.9% of establishments), the MidAtlantic (18.9%), the West (16.0%), and the Great Lakes (15.2%) regions of the United States. Together these four regions account for 73.0% of total industry establishments. Establishments are particularly concentrated in the following states: with 10.8% of establishments in California, New York (7.1%), Texas (6.0%), Florida (5.5%) and Pennsylvania (4.7%). Typically, highly populated regions have a higher portion of industry establishments. This trend can be attributed to consumer’s lack of willingness to travel excessive distances to perform exercise or become a member of a fitness or recreational sports center. However, geographical locations can also determine the popularity of a fitness activity as many areas have climates that are not conducive to particular sports. For example, the population of Maine is twice as likely to participate in ice-skating as the national average. Similarly, the population of Arizona is almost twice as likely to participate in swimming at a pool as the national average. As a result, areas across the United States will have a greater amount of establishments dedicated to a particular

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Business Locations

activity depending on climate and other related factors. Changes in geographic distribution over the past five years have been minimal, with no region increasing or declining in share by more than one percentage point. The West and Southwest regions have experienced slight growth in the past five years, whereas the Rocky Mountains, New England, and Great Lakes observed small declines. These changes can be attributed to shifting demographics and varying demand levels.

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Competitive Landscape

Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Key Success Factors IBISWorld

identifies 250 Key Success Factors for a business. The most important for this industry are:

Easy access for clients A high profile location offering easy access and parking can provide a competitive advantage for firms in this industry.

Provision of appropriate facilities Providing appropriate equipment and maintaining it regularly is essential to attracting and retaining customers.

Effective product promotion Effective promotion of fitness center services and amentities increases awareness and attracts greater membership and local patronage.

Having a good technical knowledge of the product Skilled employees that can demonstrate the use of various types of equipment and assist participants are important to attract repeat customers.

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in this industry is L ow

percentage of nonemployers is substantial because the industry’s low barriers to entry and low startup capital costs. The larger players in this industry have numerous locations throughout the United States, while small players are generally independently owned and operate in one or two states. However, over the past five years, the proportion of businesses that employs 20 people or more has increased, indicating that concentration is rising. The industry’s market share will become more concentrated over the next five years, as larger firms acquire small, niche gym, health and fitness clubs.

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Level Concentration

The Gym, Health and Fitness Clubs industry exhibits a low level of market share concentration, with the top four firms in the industry comprising an estimated 13.9% of total revenue in 2014. The industry’s low level of market concentration can be attributed to high fragmentation, due to many industry operators having a market niche with local clientele. Additionally, a large number of fitness and gym centers only employ one person or are nonemploying establishments. In 2014, 36.0% of all industry establishments are expected to be nonemployers, and these establishments generate an estimated 11.9% of industry revenue. The

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Market Share Concentration

Economies of scale Fitness firms that have a large number of establishments and provide a wide range of services are able to attract and retain new and existing members, as well as reduce costs per member.

Cost Structure Benchmarks

Profit Member retention is a key component in fitness centers’ profitability, as many gym, health and fitness centers have fixed overhead costs. According to the International Health, Racquet & Sportsclub Association, the average attrition rate for gyms in the United States is up to 45.0%, meaning that 45 out of 100 individuals will

Business expertise of operators The long-term success of a firm in this industry depends on the skill of the operator in running a business profitably over time.

cancel their gym memberships each year. Furthermore, the cost of recruiting a new member is more than twice the cost of retaining an existing member. As a result, many health clubs will continue to direct funds toward retaining existing members in 2014 by prioritizing excellent customer service, adding amenities and lowering their membership cancelation penalties.

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IBISWorld estimates that industry profit will comprise 8.6% of revenue in 2014. Following a weak year in 2010, profit has steadily grown due to heightened demand and a wider array of services (such as massages, spas, classes and lessons). While health club membership declined in 2009, operating costs have remained relatively fixed, which has lowered the industry’s profit margin.

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Wages Wages are the largest cost for the industry, accounting for about 31.3% of revenue in 2014. To minimize this cost, many gym, health and fitness clubs have implemented staff that includes part-time employees that are paid on an hourly basis. Additionally, gym, health and fitness clubs also hire salaried staff, including backoffice support, personal trainers and other professionals, but the majority of these staff members generate additional

revenue streams for fitness and health clubs. For example, these staff members also help attract new clientele, as fitness classes and training programs are integral components in developing new business. The average wage varies between employing and nonemploying establishments, as large businesses require a range of employees to run their operations, including accountants, financial analysts and other back-office support staff. During the next five years, IBISWorld expects the average size of an industry establishment to increase, thus indicating that many gym, health and fitness clubs will implement more full-time staff, particularly trainers with more credentials, thereby increasing the average wage. Purchases Purchases represent the second-highest cost to this industry, comprising about 20.0% of revenue in 2014. Purchases

Sector vs. Industry Costs Average Costs of all Industries in sector (2014) 100

80

Percentage of revenue

Cost Structure Benchmarks continued

Industry Costs (2014)

12.6

8.6

27.1

31.3

60

27.4 40

20

5.1 4.1 6.6 17.1

0

■ Profit ■ Wages ■ Purchases ■ Depreciation ■ Marketing ■ Rent & Utilities ■ Other

20.0 7.4 10.0 15.5 7.2 SOURCE: WWW.IBISWORLD.COM

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Cost Structure Benchmarks continued

largely include smaller types of equipment, office requirements, retail products and other miscellaneous items. Purchases can also include food and beverages that are sometimes sold within the fitness and recreational sports centers. Some of the larger centers have negotiated national buying agreements with suppliers to secure low equipment prices, particularly for fitness equipment.

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Rent and utilities Rent makes up about 12.0% of industry revenue in 2014. Many businesses in this industry do not own their fitness facilities, and as a result they must rent their buildings. Additionally, some equipment used in recreational and fitness centers are not purchased entirely, but on a “rental” basis, thus adding to the cost in this segment. Industry operators incur utility costs that make up an estimated 3.5% of revenue, because the industry requires electricity for lighting, treadmills, crosstrainers, steppers and other electronic equipment. To lower utility costs, some centers have implemented energy-efficient lighting fixtures and automatic switches and timers. Advertising The industry is expected to spend about 10.0% of its revenue on advertising in

Basis of Competition Level & Trend ompetition C

in this industry is Highand the trend is Increasing

During the past five years, the Gym, Health and Fitness Clubs industry has become increasingly competitive. Wellfinanced competitors have entered the industry, and existing regional and national operators have expanded their operations. Gym and fitness clubs typically compete for high consumer retention rates on the basis of price, customer service, brand recognition and types of services offered. For example, industry operators may offer additional services, including nutritional programs,

2014, as strong marketing support is essential for attracting new clientele in such a highly competitive market. Firms advertise via TV, direct mail, newspapers, telephone directories, radio, billboards, internet websites and other promotional activities. Advertisements aim to differentiate firms from competitors by focusing on amenities, prices, services and promotional offers. Operators also try to appeal to the public’s desire to lose weight, look better and improve health. Depreciation and other costs Depreciation of buildings and equipment represents another significant expense item for the industry, accounting for about 7.4% of revenue in 2014. Expenditure on capital includes purchasing new and replacing old equipment, such as treadmills and weight machines. To operate both efficiently and profitably, firms must continually acquire up-to-date fitness technology to maintain and attract their customer base, which adds to depreciation costs. Other costs include general administration, IT expenses and insurance costs, which account for an estimated 7.2% of revenue. Many businesses have had to insure their products against damage, which increases insurance costs as more consumers use fitness equipment frequently.

meal planning and facial services. While facials and nutritional programs are not included in industry revenue, operators that offer additional services may increase their consumer retention rates, which boosts industry revenue. Internal competition Industry operators compete for brand recognition and member’s word-ofmouth to generate revenue. Many operators rely on retaining and developing large membership rates to

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cover their operational costs. Operators also compete on the basis of price. For example, gym and health clubs that offer low initiation fees and monthly membership will attract first-time gym members in particular. Additionally, low-cost membership on a month-by-month basis appeals to both budget-conscious consumers and individuals that do not want to lock in a year contract. Also, industry operators may compete for customer service. In particular, strong customer service boosts both member attrition rates but also develops a strong customer base of individuals that may be new to gym memberships. Firms in this industry also compete with other commercial fitness center and recreational facilities that are established and operated by local governments. Nonprofit and government organizations have an edge on commercial gyms and

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Basis of Competition continued

Barriers to Entry Level & Trend arriers to Entry B

in this industry are Lowand S teady

Overall, barriers to entry are relatively low for the Gym, Health and Fitness Clubs industry. Prior to the recession, operators successfully obtained financing from a range of sources, including financial institutions, landlords, equipment manufacturers, private equity sources and the public capital markets. However, in 2009, the credit markets tightened, which has limited further expansion for many gym, health and fitness clubs in 2009 and 2010. Leasing, rather than owning, industry facilities provides a low-cost option for potential industry entrants. Additionally, average wages in the industry tend to be low, as staff are typically unskilled and provide training services on a part-time basis. Equipment costs are relatively low as well, and have long life spans. Many start-up gyms use second-hand exercise equipment to cut down on costs or rent their equipment.

fitness clubs because they can obtain land and build centers at lower costs. Additional services offered by hospitals, businesses and salons are another source of competition, adding to the highly competitive environment. These firms typically compete based on location, which is the greatest convenience factor for the consumer. External competition Firms also experience external competition from entertainment and retail businesses for the discretionary income of the specific target markets in this industry. Industry operators compete with amenity and condominium clubs, exercise studios, country clubs, weight-loss centers and home fitness equipment businesses. Many other leisure industries, such as bowling alleys and marinas, also compete with this industry for leisure time, albeit without the fitness aspect.

Barriers to Entry checklist Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance

Level High Low Growth Medium Medium Light Low SOURCE: WWW.IBISWORLD.COM

Barriers to entry in urban markets include restrictive zoning laws, lengthy permit processes and a shortage of appropriate real estate. New entrants may also incur heavy costs when acquiring or leasing the required equipment for members and participants to use. Access to capital to fund these startup costs are therefore essential. In addition, tight credit markets have made it difficult for small businesses to enter

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the industry since 2009. Lending practices are expected to become less stringent in the next five years, however, which will make it easier for new entrants to enter the market. The high cost and lengthy time it takes to build brand reputation is a

potential barrier to entry. Existing players have already established trade names, and new entrants will have to invest financial resources and time to persuade consumers to shift away from established, brand-name gym and fitness centers.

Industry Globalization

The Gym, Health and Fitness Clubs industry has a low level of globalization; the majority of firms are small local operators, employing between one and 19 people or are nonemployers, which account for about 85.0% of the industry’s total firms. While the industry is not typified by a high level of globalization, some of the industry’s larger players are increasingly becoming globalized. For

example, Gold’s Gym International Inc. and Curves International Inc. have subsidiaries that operate in global markets. Gold’s Gym International operates in over 25 countries, while 24 Hour Fitness also enjoys a global presence with locations throughout Asia. Globalization is increasing as national and regional competitors expand the scope of their operations, but at this stage, it is relatively low.

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in this industry is Lowand the trend is Increasing

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Barriers to Entry continued


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Major Companies

There are no Major Players in this industry | Other Companies

Due to the fragmented nature of this industry, no players hold a market share greater than 5.0%. Moreover, there is limited financial information available for players in this industry because many are private organizations with franchised operations and, therefore, annual revenue figures are unavailable.

24 Hour Fitness Worldwide Inc.

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Estimated market share: 4.9% 24 Hour Fitness Worldwide Inc. is a large, privately owned and operated fitness center chain. Established in 1983, the company’s first club location opened in California. With more than 400 clubs across the United States, 24 Hour serves nearly 4.0 million members. The company also offers a plethora of gym services, including personal training services, group exercise classes and a variety of strength, cardio and functional training equipment. Furthermore, the company is one of the largest supporters of amateur athletics in the United States, serving as the Official Fitness Center Sponsor of the US Olympic and Paralympic Teams. 24 Hour also uses celebrities and professional athletes to advertise its brand; the company is also partners with the reality TV show The Biggest Loser. As a result, these marketing strategies help differentiate 24 Hour Fitness from its competitors, which allows the company to strengthen its market share. In 2005, 24 Hour Fitness entered a partnership with New York-based private equity firm Forstmann Little & Co. Financier Theodore J. Forstmann acquired the company for $1.6 billion and has continued to promote 24 Hour Fitness as a leader within the fitness industry, with the aim of continual expansion. The company has also sponsored the US Olympic team and was the official fitness center for the team through the 2008 Olympic Games in Beijing. At the 2010 Winter Olympic Games in Vancouver, 24

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Other Companies

Hour Fitness provided fitness ambassadors to NBC staff, including the broadcast teams, production crews, on-air talent and other personnel. Since 24 Hour Fitness is a private company, limited financial information is available; however, IBISWorld estimates that the company will generate revenue of $1.3 billion for 2014.

Life Time Fitness

Estimated market share: 4.1% Life Time Fitness Inc., under the Life Time Fitness and Life Time Athletic brands, operates 105 centers, including sports and athletics, professional fitness, family recreation and resorts and spas. The company offers a range of services, such as group fitness, yoga, swimming, running, racquetball, squash, tennis, Pilates, kid activities and camps, rock climbing and other services. The company designs and develops its own centers, with a focus on providing members with products and services in the areas of exercise, education and nutrition. The company currently operates in Canada and the United States, primarily in suburban locations. Life Time Fitness’ business model includes attracting a larger customer base within the first three years after a center opens, as well as retaining members and controlling expenses. In 2012, the company acquired the Racquet Club of the South, a tennis facility in Atlanta that the company rebranded as Life Time Fitness Atlanta. Additionally, in 2011, Life Time Fitness acquired nine fitness facilities from Lifestyle Family Fitness in Indiana, North Carolina and Ohio. In 2014, IBISWorld estimates that company will generate $1.1 billion in revenue.

Bally Total Fitness Holding Corporation

Estimated market share: 3.1% Bally Total Fitness Holding Corporation was incorporated in Delaware in 1983 and is a commercial operator of fitness centers


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Major Companies

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in North America. Bally operates about 60 locations in 18 states and serves one million active members nationwide. In March 2010, Bally launched a new campaign that uses music downloads from partner Universal Music Group to motivate its members. In 2014, IBISWorld estimates that Bally fitness clubs will generate $829.0 million in revenue. Most of the company’s locations operate under the flagship Bally Total Fitness brand. Bally’s members have access to pools, aerobic programs, running tracks and racquet courts, as well as personal trainers and sports medicine services. Bally also markets private-label nutritional products and sells healthrelated products in most of its clubs and about 7,000 retail outlets. Bally has followed a strategy of selling high-margin, multi-club memberships and consolidating its brand. In addition to the private-label nutritional products and in-club retail stores, the company has diversified its revenue stream through branded apparel. The move into the high-end marketplace has caused their customer base to shift toward a more senior demographic in the past five years. However, the company has also experienced financial difficulty. For example, in 2008, the company owed $478.0 million in debt to US Bancorp and HSBC Holdings. In July 2009, the company reached an agreement with its lenders to exit bankruptcy and, under the deal, the lenders (including JPMorgan Chase) took a 94.0% share of company equity and reduced Bally’s debt by $660.0 million.

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Other Companies continued

Town Sports International Holdings Inc.

Estimated market share: 1.8% Town Sports International Holdings Inc. (TSI) is the largest owner and operator of fitness clubs in the Northeast and MidAtlantic regions of the United States. TSI owns and operates a number of brands,

including New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs. Founded in 1974, the company now operates over 160 health and fitness facilities and boasts half a million members. The company’s business strategy involves serving densely populated metropolitan regions and developing locations near TSI’s targeted customer base. Town Sports notes that they target particular clientele, such as individuals in the 21 to 50-year-old age group, with income levels between $50,000 and $150,000 per year. In 2014, IBISWorld estimates Town Sports International’s revenue to be $484.0 million.

Curves International Inc.

Estimated market share: 1.8% Founded in 1992, Curves International Inc. developed a market niche in fitness and weight-loss facilities that targeted women. The company developed a customer base of 4.0 million members in 90 countries, with over 10,000 Curves for Women fitness centers. Curves is the largest fitness franchise in the world, with the company offering 30 minute health and weight-loss sessions for women in Australia, Canada, the Caribbean, Europe, Mexico, New Zealand, South America and the US. In 2008, the company opened franchises in Ukraine, Slovakia, Botswana, Bahrain, Qatar and Saudi Arabia. It also added franchise establishments in Belgium, Finland, Jordan, Malta and Senegal. Moreover, in 2009 Curves opened centers in China, India and the Philippines. IBISWorld estimates that US segment revenue will reach $466.0 million in 2014.

Gold’s Gym International Inc.

Estimated market share: 1.5% Established in 1965, Gold’s Gym International Inc. serves more than 3.0 million members in 38 US states and 28


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Major Companies

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countries. The company offers gym services that include cardio and strength training, zumba, yoga, group cycling, mixed martial arts, muscle endurance training and Pilates. In addition to opening franchises, the company buys smaller regional health clubs and converts them into Gold’s Gyms. The company also licenses the Gold’s Gym name for products including fitness equipment and accessories, luggage, T-shirts and men’s and women’s

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Other Companies continued

sportswear. In 2004, TRT Holdings acquired Gold’s Gym for $158.0 million. The company aims to develop a budgetconscious consumer base by developing Gold’s Gym Express, which includes low-cost gym facilities. Gold’s Gym also continues to maintain its core weightlifting tradition, which generated its early success with the company’s initial Venice beach location. In 2014, IBISWorld estimates that the company will generate $389.0 million in revenue.


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Operating Conditions

Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance Capital Intensity Level The level

Capital intensity

Capital units per labor unit 0.5 0.4 0.3 0.2 0.1 0.0

Economy

Arts, Entertain- Gym, Health & ment and Fitness Clubs Recreation

Dotted line shows a high level of capital intensity SOURCE: WWW.IBISWORLD.COM

entry; the total startup costs are low but are split relatively evenly between capital and labor.

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of capital intensity is Medium

The Gym, Health and Fitness Clubs industry is moderately capital intensive. In 2014, for every dollar spent on wages, the industry incurs an estimated $0.24 in capital costs. Wage costs are expected to account for 31.3% of total industry revenue. Capital costs are moderate for the industry and includes the cost of fitness equipment, buildings, vehicles, furniture and computers. Nevertheless, labor costs remain high because of administration, training, supervision and maintenance requirements. Gyms and fitness centers seek to minimize their labor costs by employing a part-time labor force and employing instructors and personal trainers on an as-needed basis. The industry has moderate capital intensity despite the low barriers to

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Tools of the Trade: Growth Strategies for Success Investment Economy

Recreation, Personal Services, Health and Education. Firms benefit from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Information, Communications, Mining, Finance and Real Estate. To increase revenue firms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Heating & Air-Conditioning Contractors Weight Loss Services

Traditional Service Economy Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore firms must use new technology or improve staff training to increase revenue growth.

Hotels & Motels

Gym, Health & Fitness Clubs

Golf Driving Ranges & Family Fun Centers

Change in Share of the Economy

Steam & Air-Conditioning Supply

Capital Intensive

Labor Intensive

New Age Economy

Old Economy Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand firms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products. SOURCE: WWW.IBISWORLD.COM


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Technology & Systems Level The level

players, hearing aids for television equipment, and other devices that keep customers entertained during fitness activities. Centers use computers to manage operations and to keep a database of members. Many of the larger firms strive to offer customers state-of-the-art training equipment to bolster their customer retention. Patrons are looking for added extras to improve their fitness regimens, therefore, it is vital for gym, health and fitness clubs to offer various equipment options that incorporate the latest technology. This has encouraged firms to continually update their equipment. For example, treadmills can become outdated within two years.

The Gym, Health and Fitness Clubs industry has a low level of revenue volatility. While there are varying degrees of membership rates across centers, which increases revenue volatility, the industry’s diverse array of services and high level of fragmentation has minimized revenue volatility over the past five years. Furthermore, steady promotion of the health benefits of exercise by the medical community has

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Revenue Volatility

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of Technology Change is Medium

Fitness centers offer electronic payment options to members. In selecting this option, on about the same date each month, a fixed payment is either automatically transferred via debit from members’ bank accounts or charged to members’ designated credit card. Most fitness centers compete to be the establishment with the most state-of-the-art equipment. This equipment includes the latest cardiovascular and weight-training machines. Entertainment units are also becoming increasingly common in centers. The units are mounted to cardiovascular equipment and are equipped with a color screen for television viewing, links to MP3

of Volatility is Low

A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment. When a firm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Volatility vs Growth 1000

Revenue volatility* (%)

Level The level

supported consumer demand for gym memberships, which has constrained fluctuations in industry revenue. While technically a discretionary service, health and fitness clubs are increasingly viewed by consumers as a vital health expense. Furthermore, the structure of gym memberships has slightly mitigated revenue volatility. Gyms and fitness centers have traditionally signed up their members for

Hazardous

Rollercoaster

100 10

Gym, Health & Fitness Clubs

1 0.1

Stagnant –30

–10

Blue Chip 10

30

50

70

Five year annualized revenue growth (%) * Axis is in logarithmic scale SOURCE: WWW.IBISWORLD.COM


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Revenue Volatility continued

12 to 24 month periods and typically have included cancelation fees in their contracts. These fees often deter customers from cancelling their memberships. As competition has increased over the past five years, many

gyms have offered more flexible membership options, such as shorter contract periods and rolling contracts. As flexible membership options become more prevalent, revenue volatility is expected to increase in the coming years.

Regulation & Policy

The general rules and regulations of the Federal Trade Commission and of other federal, state, provincial and local consumer protection agencies apply to franchising, advertising, sales and other trade practices. State and provincial statutes and regulations relevant fitness industry have been enacted or proposed in all of the states and provinces across the United States. Typically, these statutes and regulations prescribe certain forms and regulate the terms and provisions of membership contracts, including: giving members the right to cancel the contract, in most cases, within three business days after signing; requiring an escrow for funds received from preopening sales or the posting of a bond or proof of financial responsibility; and in some cases, establishing maximum prices and terms for membership contracts and limitations on the financing term of contracts. Firms are subject to numerous other types of federal, state and provincial regulations governing the sale, financing and collection of memberships, including the Truth-in-Lending Act and Regulation Z, as well as state and provincial laws governing the collection of debts. These laws

and regulations are subject to varying interpretations by a large number of state and federal enforcement agencies. Under the “cooling-off” statutes employed in most states and provinces, new members of fitness centers have the right to cancel their memberships for a period of three to fifteen days after the date the contract was entered and are entitled to refunds of any payment made. The amount of time new members have to cancel their membership contract depends on the applicable state or provincial law. Advertising of nutritional products is subject to regulation by one or more federal agencies, including the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC). For example, the FDA regulates the formulation, manufacture and labeling of vitamins and other nutritional supplements, while the FTC principally regulates marketing and advertising claims. Industry firms are also subject to several state and federal labor laws governing the relationship with employees, such as minimum wage requirements, overtime and working conditions and citizenship requirements.

The level of industry assistance is low, but it is increasing as more institutions promote the benefits of assistance. Such assistance is a significant benefit for the industry, as it reduces expenses and creates demand. The industry received indirect assistance from the federal government in 2009 under the $787.0 billion stimulus package, or the American

Reinvestment and Recovery Act of 2009. The Department of Health and Human Services has been allocated $1.0 billion for a Prevention and Wellness Fund. The National Association for Health and Fitness (NAHF) is a nonprofit organization that promotes physical fitness and sports and supports Governor and State Councils that promote such

Level & Trend he level of T

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Regulation is Lightand the trend is S teady

Industry Assistance Level & Trend he level of Industry T

Assistance is L ow and the trend is Increasing


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activities. The association produces newsletters on strategies and successful approaches to increasing physical activity and improving health. The International Health, Racquet & Sportsclub Association also supports the industry and is a nonprofit trade association representing more than 9,100 health, racquet and sports clubs worldwide. This association provides media articles and press releases that promote the benefits of keeping fit and active. Therefore, this association helps drive industry demand. The Fifty-Plus Fitness Association (FPFA) is another nonprofit organization, which was established 20 years ago. This

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Industry Assistance continued

association’s mission is to promote an active lifestyle for the older population. The organization started at Stanford University as an outgrowth of some medical research on the value of exercise for older persons. The FPFA currently has about 1,000 members across the United States. The association also publishes a newsletter and distributes books and videos. In the past, it has offered a sixweek “Fifty-Plus Fitness Challenge Camp” on the Stanford University Campus that involved the participants in a variety of physical activities. Some facilities are initially established with the assistance of government grants.


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Key Statistics

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sector Rank Economy Rank

Revenue (%) 3.2 5.9 0.0 -1.8 2.2 2.3 2.0 2.5 2.4 3.1 3.2 2.8 3.1 2.0 7/19 280/705

Key Ratios 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sector Rank Economy Rank

IVA/Revenue (%) 47.70 47.25 45.91 47.96 46.50 43.51 45.66 45.74 46.64 47.33 47.80 47.40 47.00 46.52 46.27 6/19 148/705

Establishments 31,988 32,432 33,269 33,451 32,864 32,820 33,068 33,385 33,527 34,023 34,331 34,540 35,112 35,498 35,818 5/19 161/704

Enterprises Employment 28,779 488,795 29,000 507,921 30,154 541,562 30,269 550,634 29,031 536,231 28,912 527,086 29,136 548,375 29,365 561,536 29,501 573,328 29,894 583,075 30,031 594,153 30,199 603,660 30,331 610,225 30,604 619,989 30,818 628,668 5/19 3/19 149/704 65/705

Exports ---------------N/A N/A

Industry Value Added (%) 2.2 2.9 4.5 -4.8 -4.4 7.3 2.1 4.5 3.9 4.1 2.4 1.9 2.1 1.5 3/19 179/705

Establishments (%) 1.4 2.6 0.5 -1.8 -0.1 0.8 1.0 0.4 1.5 0.9 0.6 1.7 1.1 0.9 8/19 269/704

Enterprises Employment (%) (%) 0.8 3.9 4.0 6.6 0.4 1.7 -4.1 -2.6 -0.4 -1.7 0.8 4.0 0.8 2.4 0.5 2.1 1.3 1.7 0.5 1.9 0.6 1.6 0.4 1.1 0.9 1.6 0.7 1.4 9/19 10/19 246/704 297/705

Exports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Imports/ Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.

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Annual Change

Industry Value Added ($m) 10,532.6 10,765.3 11,080.3 11,579.7 11,023.3 10,540.4 11,314.8 11,557.3 12,081.5 12,552.8 13,069.5 13,378.5 13,635.7 13,915.9 14,118.5 5/19 200/705

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sector Rank Economy Rank

Revenue ($m) 22,080.6 22,783.4 24,136.1 24,145.4 23,707.9 24,227.5 24,781.4 25,269.1 25,904.3 26,522.4 27,339.2 28,225.2 29,014.0 29,913.4 30,511.7 4/19 305/705

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Industry Data

Exports/ Revenue (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Revenue per Employee ($’000) 45.17 44.86 44.57 43.85 44.21 45.96 45.19 45.00 45.18 45.49 46.01 46.76 47.55 48.25 48.53 15/19 675/705

Wages/Revenue (%) 31.10 30.85 31.01 31.06 30.20 29.31 29.56 29.94 30.74 31.33 31.50 31.18 30.70 30.22 30.07 7/19 158/705

Imports ---------------N/A N/A

Wages ($m) 6,867.2 7,028.8 7,484.0 7,499.1 7,158.9 7,100.1 7,325.0 7,564.8 7,962.7 8,309.2 8,613.2 8,800.4 8,906.4 9,040.0 9,175.6 5/19 169/705

Domestic Demand N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Health Club Memberships (Mils) 46.7 47.3 47.5 47.7 40.3 50.2 51.4 51.7 52.6 54.1 54.8 56.0 56.9 58.2 58.8 N/A N/A

Imports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Wages (%) 2.4 6.5 0.2 -4.5 -0.8 3.2 3.3 5.3 4.4 3.7 2.2 1.2 1.5 1.5 2/19 91/705

Domestic Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Health Club Memberships (%) 1.3 0.4 0.4 -15.5 24.6 2.4 0.6 1.7 2.9 1.3 2.2 1.6 2.3 1.0 N/A N/A

Employees per Est. 15.28 15.66 16.28 16.46 16.32 16.06 16.58 16.82 17.10 17.14 17.31 17.48 17.38 17.47 17.55 11/19 295/704

Average Wage ($) 14,049.24 13,838.37 13,819.29 13,619.03 13,350.40 13,470.48 13,357.65 13,471.62 13,888.56 14,250.65 14,496.60 14,578.41 14,595.27 14,580.90 14,595.30 16/19 672/705

Share of the Economy (%) 0.07 0.07 0.07 0.08 0.08 0.07 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08 5/19 200/705



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Jargon & Glossary

Industry Jargon

BABY BOOMERA person born between 1946 and 1964 accounting for a major proportion of the population. CARDIOVASCULAR EQUIPMENTEquipment used for aerobic exercise, meant to be used at light to medium intensity for a long period of time, e.g. treadmills, elliptical trainers and stationary bikes.

BARRIERS TO ENTRYHigh barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry. CAPITAL INTENSITYCompares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

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CONSTANT PRICESThe dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

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IBISWorld Glossary

DOMESTIC DEMANDSpending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports. EMPLOYMENTThe number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry. ENTERPRISEA division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control. ESTABLISHMENTThe smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise. EXPORTSTotal value of industry goods and services sold by US companies to customers abroad. IMPORTSTotal value of industry goods and services brought in from foreign countries to be sold in the United States. INDUSTRY CONCENTRATIONAn indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

PILATESA physical fitness system developed in the early 20th century by Joseph Pilates with a focus on the strength and endurance on core muscle groups. RETENTION RATEA rate comparing the number of new gym memberships to canceled gym memberships.

INDUSTRY REVENUEThe total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded. INDUSTRY VALUE ADDED (IVA)The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation. INTERNATIONAL TRADEThe level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%. LIFE CYCLEAll industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services. NONEMPLOYING ESTABLISHMENTBusinesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals. PROFITIBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax. VOLATILITYThe level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%. WAGESThe gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

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