Tuesday, January 15, 2013

2013 my not be a year for the chain fitness clubs.


1/14/13
 

 My  training today:
Warm-up; Stretch bands, Indian Clubs, and joint mobility  
Leg ups and wheel roll outs 4 set each
Deadlifts: 12 sets of 2 reps
Kettlebell floor press. 28, 32kg 5 sets of 5
Dumbell rowing 75# 5 x 5
Paul Dick Floor press:
Rowing 2000 meters.

2013 may not be a great year for the Chain fitness business.
Based on what I have read in the latest Club industry paper, things are not looking great for this year’s business. There are a number of things what insulated the fitness business during past recessions, but this one is on steroids. Like always there are a few issues with their business model and the changes that are taking place in the market cause may prolonged recession and market dynamics. Here are some of the issues:
1. The recession is still in our faces and the unemployment is not 7.7% ,which is a deceptive number and should be somewhere around 12% and not decreasing, as insufficient new jobs are not being created. This is now hitting all business across the nation as this recession is going on for years now. You can’t ride this one out.
2. The economy has hit the middle class the hardest, who were the largest customers of chain health clubs. With less disposable income they can no longer afford even the bargain basement clubs at 10 dollars per month. The middle class will take years to come back to the mid 2000 year’s wealth….if ever.
3. 75,000 dollars a month is not uncommon for a large chain club overhead, with fees, equipment and rent, employees etc. to ever break even at 10 dollars per client, you will have a low margin. Therefore the 10 per month club is not a great investment in a tight job market as you need more bodies to keep the lights on.
4. Private equity business have normally picked up a few of these chains like Planet Fitness, and now rejecting clubs like 24 hrs Fitness as not a great investment. Equity firms will buy any business, even low performers as long as they can cut the fat and eat the steak. Once you are taken over by Equity Corporation, you’re a pawn for a few high end Harvard MBA types, who just want to make money and could give a rat’s ass about what you are doing.  In their defense, they save some of the business from total bankruptcy, after they make the appropriate business positive corrections.
5. The Obesity problem is not going away and getting worse. Most people unfairly blame the fitness business for not altering the problem.  The chain fitness finally realizes they have a problem as they don’t have a good program or message.  They are doomed as you need a well qualified staff to monitor and program the clients instead of just handing out towels and fucked up energy drinks. That requires more overhead for trained staff, and increased employees they can’t afford now.
6. Speaking of message. One of the upper management people of a major chain was upset, when their New Years promotion resembled soft porn. The employee said”our fitness business is a fraud and all about fashion.” That person is not unemployed there anymore. You see it on TV every so often, highly fit models that probably never train in those gyms and have personal trainers to keep them ripped. Fraud; maybe, but surely deceptive.
7. The big chains are finding that their business of relying on client volume year after year is no longer working, especially when you have to drop your prices to 10 dollars and still make a profit. Some of the HVLP chains will still be out there, but if they  over expand in a poor economy, they too will have rough time as the recession shows no sign of going away for years.
8. The dirty little secret out today in the fitness business, is that the small box, Micro crossfit or private strength gyms, which has a low client volume and much higher fees is making money and growing. Then there is the specially gyms like MMA ,Kickboxing, Yoga, and personal training clubs are doing well also as they cater to the more serious client that will demand results and want to be surrounded by like individuals. Its not uncommon to pay 200 to 500 dollars a month but at those prices YOU WILL get what you pay for and the pressure is on the client as well as the owner to get fit as well as looking good.
9. with all the mergers, consolations, equity buy outs, the fitness business can never hope to sort itself out as a solid business model to help the public. It’s really the fickle consumer that is at fault as they are always looking for a quick fix, without too much effort. In fitness that is not going to happen.
10.  The Chain fitness business is driven by the people they should reject. I know of one Crossfit gym, that if you want to train there, you sign a paper stating that you will make improvements and train has hard as everyone else or you will be terminated and your money is no good. There idea is that you are not going to make their club look bad by not getting some results.
The mission is sacred
Ken

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