What Do Fitness Franchises Look For in a Market?

As a kid, you wouldn’t put your lemonade stand on just any corner in your town. You’d want to make sure it was a popular area with plenty of families and kids in search of a fresh summery drink, maybe next to a park or outdoor amphitheater with lots of foot traffic. Now, imagine your lemonade stand is a fitness franchise searching for the best corner in the best town to put its next location and continue its expansion.

How would you pick that corner? How would you pick that town? Sure, there are quite a few more details to consider when working with a multi-unit franchise operation, but the concept is the same. 

Here are a few key things fitness franchises need to consider before expanding into new territory.

Fitness-Friendly Demographics

Before a franchise agreement is ever signed, a large amount of effort in new market development goes into demographics research to ensure the population and overall economy is supportive of a fitness brand. Most franchisors use consumer research software to get a detailed understanding of the market, who lives there and what the general lifestyle is like.

“We have a tool called Buxton that allows us to analyze different markets,” said Terri Harof, director of franchise development at Workout Anytime. “We’ll map out a 10- to 15-minute drive radius from the location we’re considering to see what the population, competition, income levels and overall growth of the area looks like.”

Looking at data through a computer screen is one thing, but experiencing life in the target market can tell a different story. Once the demographic research is complete, some franchisors go a step further (pun intended) with a boots-on-the-ground approach.

“We use CoStar and Buxton to do a pretty detailed demographic study,” said Jason Markowicz, CEO of Fitness Premier. "Once we make sure the market meets our basic criteria, we send a member of our team to the market for a week to look around, check out the competition, workout at a few gyms, talk to the chamber of commerce and get to know the community a bit. If the market passes the test after that, then we start reaching out about site selection.”

Healthy Competition

Competition isn’t necessarily a bad thing, especially if a fitness franchise comes to a new market with a truly unique concept. But there is such a thing as oversaturation, which is something to be avoided when looking at expansion.

“On average 20% of people in a town are members of a health club,” said Markowicz. “So you have to look at how many other fitness options are serving the community already to determine if your option is truly unique or if it’s an oversaturated market.”

Minimal competition is ideal so that the new market is somewhat familiar with the concept already, but there is plenty of room for innovation.

“We look for underserved markets,” said Harof. “Can we go into markets with gyms on every corner and still be successful? Absolutely. But if we can find one that doesn’t, then the chances of being successful are much greater.”

Gym-Sized Real Estate Spaces

There are typically two real estate models when it comes to fitness franchises — take over an existing space or start from scratch and build something new. The first option is more cost-effective and allows franchise owners to get up and running much more quickly. But the second may be the only option if existing property inventory is scarce. 

Either way, looking into the commercial real estate market in the area, especially for warehouse or industrial spaces, should be a significant part of the initial research phase when expanding into a new market so the franchise can adapt its strategy if need be.

“Once a franchisee commits, we work with local real estate brokers to find new spaces,” said Harof. “We almost always go into second-generation spaces, usually in shopping centers with other businesses aimed at our target market. Construction is just taking so long these days that it’s not feasible. A full buildout of a new space used to take 10–12 weeks, but now it’s more like 16.”

Opportunities to Impact the Community and Future Business Development

Fitness franchises continue to expand into new markets for one simple reason: the risk is worth the reward. With each franchise location that opens, brand awareness increases, which only draws in more customers and business opportunities. Plus, with more locations in a given market, franchise owners will see cost savings when it comes to expenses like labor and supplies.

But for most fitness franchises, one of the primary drivers for expanding into a new market is the opportunity to change lives.

“The beauty of fitness is that you get the opportunity to positively impact the lives of others,” said Jedidiah Schmidt, chief development officer of Self Esteem Brands, parent company of fitness concepts such as Anytime Fitness, Basecamp Fitness and The Bar Method. “Our mission is to improve the self-esteem of the world, and every market we enter means there is a new set of consumers who can benefit from the wellness and personal care solutions of our brands. Entering a new market means helping our franchisees make a difference in our consumers' lives. That's what makes the work we do, and more importantly, the work our franchisees do, worth it.”