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Wellness Industry 2016-05-03

Fitness franchise: Perched for better returns of Investment

Indian fitness industry has not only lured global brands, but made Indian celebs and cricket stars like Mahendra Singh Dhoni, Zaheer Khan and Virat Kohli to invest in this space, via franchise route.

Fitness franchise: Perched for better returns of Investment

As of 2010 the fitness industry was valued at Rs. 800 crore, which today is estimated at a whopping Rs. 3000 crore.It has taken a leap at a scorching average of 28% year-on-year.Spread across India is the presence of about 1,200 clubs and independent local gyms, bringing fitness to the lives of about 1.35 million Indians.Out of 80 million middle class households, 55 million (69%) reside in Tier-II and Tier-III cities and towns, which is the main target for the HiFi brand.India already has 42 cities with population exceeding 1 million.

In the past couple of years, Indian fitness industry has lured an increased number of global fitness brands via franchise business model. Backed by a growing confidence in this business format, the industry saw lucrative disruption with the entrance of global players and there is no doubt about the fact.

Current status

As of 2015, the fitness industry was valued at Rs900 crore, which today is estimated at a whopping Rs3,000 crore.It has taken a leap at a scorching average of 28 per cent year-on-year, informed Amrith Rao, CEO, Talwalkars Franchising Division.

A Deloitte-IHRSA report indicated that there are 4.8 million fitness seekers across Mumbai, Delhi and Bengaluru.

Spread across India is the presence of about 1,200 clubs and independent local gyms, bringing fitness to the lives of about 1.35 million Indians. Out of 80 million middle class households, 55 million (69 per cent) reside in Tier-II and Tier-III cities and towns, which is the main target of leading fitness franchisors.

Business format

The fitness industry earlier chose to operate via single unit franchising, but multi-unit franchising and FOFO (franchise owned & franchise operated) model is gaining popularity for several well established global brand at present.

Nevertheless, in rare of the rarest cases, the country is increasingly witnessing the growing popularity of Area Development Model (ADM) and Area Representational Model (ARM). In the case of ADM, partners of a chain are singularly focused on managing outlets within a specified region as well as ensuring a suitable customer experience. In contrast, in ARM, the emphasis is on expanding the presence of a gym via finding new franchisees.

Sharing views on the business format, Nikhil Kakkar, Vice President - Franchising, Gold’s Gym said, “The success of franchisee is acknowledged with a fact when a single franchise owner start opening or operating multiple franchise of the brand. We have numerous cases wherein a franchisee started with single unit and has gone to 2, 3 or 4 units. We have 11 franchisees owning 27+ Franchise of Gold’s Gym.”

Decoding strategic location

Like in other industries, location is equally essential for the success of a fitness franchise. Especially when a hero brand is planning to foray into a new geographical space, mostly people fail to choose it right.

With the desire to expand fast, most of the brands miss on selecting a fitness friendly location where people observe the presence of a brand. Sometimes locations also restrain a gym brand to meet or maintain quality standards.

“Any location that meets our extensive selection criteria is fine. Backed by our expertise of launching and operating 150+ outlets, we need not to restrict ourselves in any way. However, we do give preference to tier II and III locations with population of minimum Rs3Lakh, as they are up-coming and with low rentals, which ultimately reflect in higher EBIDTA. We target carpet area of 2,500 sq ft as this is a compact model,” said Rao.

As per the experts, each business has a different requirement when it comes to real estate, and the call on locations should be centralised in the franchise business and each store should be profitable.

Young vs experienced franchisee

Finding the right franchise partner is like getting into a marriage where few years’ struggle can make better understanding. The experts in the industry swear by three golden rules of franchise selection:

  • 1.The franchise partner should be an owner operator.
  • 2.The investment required should be fully funded through internal resources and not by bank loans especially on the first store deal.
  • 3.And, most importantly, the franchisee should have some prior business experience because business requires a lot of effort.

However, the new age fitness franchisors believe in the power of both- Young and experience.

“Young entrepreneurs are open for challenges where as experienced ones are very calculate in their approach. Experienced ones will dig into rock bottom to understand ROI,” said Sheru Angrish, Co-owner, Sportsfit Gyms, a Mahendra Singh Dhoni initiative.

Significantly, Fitness franchise isn't banking on this newly dawned realisation alone. It is also working on ensuring franchisee training and education, Hiring certified trainers for the gym, operating through advance technology and continuously introducing innovative workout activities to lead the game.

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