Health and fitness clubs: a sector analysis

While the nation's growing waistline might be a problem for government policymakers, it is a godsend to one sector: the health club.

Gyms used to be populated by the dedicated health freak. Today, they are part of the lifestyle of a growing number of Britons, with up to a million people a year joining a club for the first time. There's a good chance that the market will go on expanding along with our waistlines, as people become more concerned with their health and the government tries to convert Britain into a nation of exercise junkies.

With health and fitness clubs increasingly acting as social centres for those trying to avoid the pub, it's not surprising that owning one is a growing aspiration. And it's not as financially unviable as many might guess.

With health and fitness clubs increasingly acting as social centres for those trying to avoid the pub, it's not surprising that owning one is a growing aspiration

A reasonably sized club can be purchased for a little as £60k in some parts of the country, although leaseholds are far more common at this price. Prices vary enormously, peaking in the South East, where smaller clubs can fetch £1m, or around £100k per annum leasehold.

All about marketing

Potential club proprietors must be aware that a large and expanding membership is the lifeblood of any gym. You must therefore have a twin strategy whereby you strive to keep your existing clients happy, while constantly trying to win new business.

Winning new business in January is like shooting fish in a barrel, but retaining it is a different story. The number of people joining soars after Christmas, only for people to let their attendance slip after a few unproductive sessions.

Keeping these people coming back in January is fiendishly tricky. Some will simply be a lost cause.

Attracting new members isn't about fitness know-how, it's about marketing.

"You're not buying a health club as it stands," explains George Jaskowski, owner of Leisure Clubs Property Agency. "You always have to think about marketing and sales.

"Experience in those sectors is ideal if you are thinking about running a club. Buyers will often look at equipment and get impressed by computer-controlled running machines.

"But Mr Brown or Mrs Smith don't recognise an advanced machine from a basic one. They want to be told that if they work out for 10 minutes, they'll burn off a glass of wine."

This sort of salesmanship requires a people person able to understand the public's needs. It's certainly not a role for someone shy of human contact - unless you're lucky enough to afford one of the larger clubs, where membership can be dealt with by employees, and administration becomes the all-important managerial task.

When Jaskowski refers to marketing, he says he doesn't think this should include expensive page-length ads in local papers. Word of mouth is vital, and no one should underestimate the power of Christmas and New Year offers, reduced membership fees, trial periods and friends' introductions in enlisting new members.

Jaskowski warns that, while fitness clubs are not prohibitively expensive to buy, it is important not to underestimate additional costs.

"You have to cover solicitors' fees, while landlords can demand up to three months' rent in advance," he stresses.

Reflecting your market

But the machines are a surprisingly low proportion of the running costs, as many companies offer hire or hire-purchase agreements on the latest models. Wage costs are comparatively cheap, too, as instructors only take home between around £12k and £15k per annum.

Precise costs will depend on the make-up of the club, which in turn should reflect your market. There are gyms aimed at the hardcore bodybuilder at one end of the spectrum, with women-only clubs focusing on classes at the other.

You could even orientate your facilities to the over-55 market. Although traditionally they don't go to the gym, they are increasingly keener to keep fit, and, crucially, have money to spend.

Swimming pools and dedicated classrooms can take up valuable space that might be used to house the machines - particularly cardiovascular ones - that could attract more members. Pools are expensive to maintain, while classes generally make very little money - although their inclusion does give your club a significant edge over the competition.

Of course, if you have a large enough club, then you can have the best of all worlds. With large facilities of over 12,000 sq ft, members will expect Jacuzzis and saunas, as well as classes and a swimming pool.

Income is mainly composed of membership fees, which are limited by location. In central London, over £60 per month might be viable. In less thriving areas, lower fees and generous offers will be needed.

Some larger clubs generate substantial income from extras such as cafes, drinks machines and shops. Profit can vary enormously - Jaskowski knows of one club of only 1,300 sq ft which makes £120k per annum net profit, while other, larger ventures can turn over £500k without making any money. On average, though, he estimates £40k to £50k per year is easily possible.

Franchisor know-how

If you feel daunted by choosing the location, marketing mix, membership fees and facilities, then buying a franchise is an easier way into the industry.

The franchisor has the market know-how to locate you in areas where demand is sufficient for you to thrive. Then, once set up, the marketing muscle of a national brand will help lever you into the local market - a big advantage given the importance of sales and marketing in this sector.

Specialist fitness franchises include énergie, which runs women-only gyms, Little Gym, which caters for children, and Hire Fitness, which rents out gym equipment for people to use at home.

Management and administrative training, and the assistance you receive in fitting out your gym, makes a franchise an ideal investment for anyone lacking experience in the industry. And even if you feel capable of succeeding on your own, remember that this industry is dominated by the big players.

If you get the marketing and facilities right, then Jaskowski says running a club can be among the most enjoyable and relaxed ways to make serious money.

"You can have a very visible income from not a lot of effort and time spent. You will have peaks when you have to be there, depending on whether you deal with members or not.

"But it's definitely not a nine-in-the-morning to nine-in-the evening job."

The main joy of running a club, though, is the atmosphere - which is partly developed by the proprietor.

"People come to health clubs to relax. They generally have the same mindset, and because of that it's a very social atmosphere," adds Jaskowski.