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Wellness blog 12 Sep 2016

How to slash fake franchise in the world of gyms and fitness business

Accounting to over $24 billion of the franchise industry, fitness industry is waiting to be expanded and exploited to achieve its complete potential in India. The Rs.500 crore gym market is rapidly growing at 35-40% pa.

Among all the influences, which India has adopted from the west, getting back in shape is one factor which not just improved the lifestyle of Indians, but also gave them a new baby to pamper in the business world.

Lately, the growing rage of fitness has encouraged mushrooming of global as well as local brands in India – brands, which entered the Indian market via franchise or are focusing on aggressive expansion through franchise. The process is simple. But a spurt of fake franchises may be hampering some of these brands.

To learn the impact of fake franchise in fitness space, let’s take an example of Gold’s Gym, a globally renowned fitness brand. After thorough market research, the brand entered Indian market and opened multiple outlets in the country. This is just to observe the public response towards a hi-tech fitness space, their brand value and offerings. Seeing the welcoming market response, the brand eventually decided to multiply its presence via franchising.

Although, there is no harm in taking the franchise model to spread wings in the market, but, it’s the unwanted fake franchise which may tarnish the image of your brand. As Gold’s Gym was a big brand, a sick unit won’t hamper their profits, however, if a relatively new brand foraying into the market with franchise expansion, fake franchise may leave a scar on the brand for the rest of its existence.

To learn the tit-bits of the trade and understand how to differentiate between good and bad fitness franchise venture, one needs to learn about the fitness industry first, and be aware of the risks involved in setting up a venture. This will help the aspiring entrepreneur in putting together all the chords to make it a popular venture.

Before I started my franchise business, I met a lot of gym owners and all were of the same opinion- Gym Cannot be a Side Business!

Thus, it’s advisable to all the aspiring entrepreneurs to not open a gym just for the sake of fun- Please Don’t!

It’s a full time profession, where one should be dedicated to transform people’s lives.

Secondly, since you are taking the franchise of a fitness brand, there are certain checklists you shall have to follow to maintain standards. This acts in the benefit of the franchisee, as he/she is given guidance while setting and running the unit.

Thirdly, before taking up a franchise, please do your homework on the brand. The grass always looks greener on the other side!

Meet as many people associated with the brand and take their unbiased opinion.

Finally, understand the business plan of the brand thoroughly.

I shall explain this further with two examples.

A Named brand focuses on opening gyms with a carpet size of 3000-4000 sqft and caters to the audience with a low spending capacity.

They don’t spend much on the look and feel of the place nor look after their franchisees very well.

As a result, because of low capital expenditure, they sprung up very soon and also because of lack of support from the master franchise, they started toppling down and as a result, they vanished from Delhi/NCR in span of 3years.

While, B named brand focuses on carpet size of 6000-7000 sq ft and caters to the medium spending audience. They closely monitor the look and feel of the gym and help the franchisee through all their problems.

Since they require a huge capital investment, they expand at a slower pace, yet they are more stable in the market because of their goodwill earned on their success rate.

A turned out to be an example of fake franchise as they wrapped up within 4 years, after leaving their franchisees nowhere. Eventually, franchisees either shut down, or started their own local gyms or took over to B brand after investing further

The A brand not only left the franchisee but also left its customers dissatisfied and disgruntled.

Evidently, apart from investing into a wrong fitness franchise, aspiring entrepreneurs also need to be vigilant about the points below to avoid wasting money in fake franchise:

1. Rentals

In a country, where no one is interested in lifting weights, one cannot venture into a gym which doesn’t caters to other fitness programs like pilates, circuit training, spinning, steam and so on.

This requires a huge space, which of course will not come cheap. Rent usually constitutes 25-30 per cent of your operating expenses and finding a place which has the right visibility, right area, right catchment and right rent is a mammoth task!

Make sure your rent doesn’t exceed 25-30 per cent of your total gross sales.

2. Location

As stated above, gym is a place which is visited by members on a daily basis. Hence the location has to be easily accessible by both the genders at any time of the day!

3. Manpower with proper training

Since it’s an upcoming sector, it is not very easy to find trainers with the right knowledge. Most of them are either under skilled or just consider it as a glamour industry.

4. Retainership

Making a new member is not a difficult task! The fight is to retain them. In a market which is price sensitive, every rupee counts. Most of the gyms operate on 50-60 per cent renewal rate in a good year. Any decline in this ratio leads to a major drop in profits.

5. New streams of revenue.

Members get bored of same routine very soon. Hence, the gym needs to keep their members motivated by constantly adding new streams of workouts, which of course don’t come cheap.

These do, add to the revenue, but only after capital has been invested in them.

To sum up, fitness is a sector, which is trying to find feet in Indian market, where both real and fake elements exist. One needs to be extremely careful and needs to do in-depth analysis before finalising the next course of action.

This article is written by Ashishh Gupta, Director, Gold's Gym Gurgaon, as per his personal experience and research.

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