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US health club chains AnyTime and Snap Fitness looking to expand internationally
| Guest post by: Dhawal Shah |
Article Overview: As cross-town rivals, Snap Fitness and Anytime Fitness are in corporate arm-wrestling match of sorts for bragging rights as the nation’s foremost industry operator. The two fitness featherweights both operate small, 24/7 neighborhood fitness and health clubs and are enjoying explosive growth since coming online earlier this decade, a stark contrast to the plethora of U.S. companies that have slashed expansion plans or downsized operations in the wake of the national recession.
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US health club chains AnyTime and Snap Fitness looking to expand internationally
Currently, Snap Fitness has 1,100 U.S. locations, including about 110 in Minnesota. The company has locations sold for about another 900 clubs, company, including some in Minnesota, Snap Fitness CEO Peter Taunton said this week in a speech to the Minnesota chapter of the Association for Corporate Growth. The group honored Snap Fitness as its 2010 Emerging Growth Winner award.
Snap Fitness could realistically add another 100 locations in Minnesota since it can place its 2,700- to 3,200-square-foot clubs in communities with as few as 3,000 people, Taunton said. Meanwhile, Anytime Fitness has about 1,300 clubs in 49 states and five countries. It has sold franchise rights']);"> master franchise rights to about another 1,000 clubs, said Mark Daly, the company’s national media director.
In Minnesota, Anytime Fitness has 115 locations. In 2010, the company plans to add another 300 fitness clubs including about 10 in Minnesota, Daly said.Both fitness operators are eyeing overseas expansion as a key part of their growth, too. Anytime Fitness has sold franchise rights']);"> master franchise rights to individuals in the United Kingdom and the Netherlands and expects to enter the Japanese market this year. Meanwhile, Snap Fitness is currently in New Zealand, Australia, India, Mexico and Canada, and anticipates entering China, Europe and Brazil soon.That Snap Fitness and Anytime Fitness are growing by leaps and bounds is a testament to the two companies carving out a niche in the $20 billion-per-year U.S. gym, health and fitness club industry that has upwards of 50 million members, according to retail observers.
Lower capital costs
With their clubs’ typical footprint ranging from 2,700 to 4,000 square feet, Anytime and Snap Fitness enjoy much lower capital costs for their start-ups compared with bigger-box operators, said David Brennan, co-director of the Institute for Retailing Excellence at the University of St. Thomas in St. Paul.
For example, a typical LifeTime Fitness club, with its resort-like amenities, is usually 110,000 to 115,000 square feet and costs about $15 million to erect. In contrast, the typical cost to get Snap Fitness and Anytime Fitness clubs off the ground ranges upwards of $200,000. With their smaller-size clubs, the two companies are also able to fit their fitness centers into neighborhood areas, such as strip shopping malls, that make their locations easily accessible for consumers, Brennan added.
Lower capital costs also mean lower threshold to achieve profits. For example, Taunton said he’s found the typical Snap Fitness club can break even with as few as 220 to 250 members. Nevertheless, the national recession has still left its mark on Snap Fitness. These days, even franchisee wannabes these days are having trouble securing bank financing, Taunton said. In a bid to break down that financing barrier, Snap Fitness has started in some cases, offering to guarantee 40 percent of a franchisee’s bank loan and have equipment vendors cover another 30 percent as inducement to win over bankers, Taunton said.
“That is music to the banker’s ears, that we are willing to step outside of the box and put some of our skin in the game,” Taunton said. Whatever their growth and financing challenges, Snap Fitness and Anytime Fitness have become fierce, direct competitors. And that has upped the ante for the two companies as they search or prime real estate spots even in smaller markets, Brennan said. “They (Snap and Anytime) are looking for the same or similar segment of the market,” Brennan said. “I don’t think they can co-exist in the same trade areas.”
Meanwhile, there is an aura of business bravado between the two companies. Anytime Fitness touts itself as the No. 1 co-ed fitness club company in the world and the originator of the neighborhood fitness model, whose features include 24/7 availability to members and integrated security and tracking systems to protect them. Responding to Anytime’s talk, Taunton told Finance & Commerce, “They (Anytime Fitness) like to take credit for a lot of things,” He considers his company as the innovator in the small fitness club niche, including offering no contract memberships.
Taunton added that Entrepreneur magazine last year rated Snap Fitness No. 1, in the category of fitness franchises. But Anytime Fitness spokesman Mark Daly isn’t impressed. He countered that Anytime Fitness has snared several accolades, including industry Visionary of the Year award in 2009 from the International Health, Racquet and Spotsclub Association, with the company’s founders being recognized for identifying a niche and developing a new business model. “Our first club opened in 2002,” Daly said. “Snap’s first club [opened] well after that. Enough said.”
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