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into the franchise clubs too. It’s been amazingly popular – we started off with a small group fi tness room and pretty soon 80 people were trying to get into that class. The challenge was just getting the scheduling right.”
low-cost success Although Crunch had filed for bankruptcy prior to its acquisition by NeV, since coming under new ownership it has been very successful. So why isn’t the franchise offering more in-line with the owned model – particularly given that some believe the budget model to be unsustainable? “First of all, I think low-cost is
completely sustainable. A lot of people seem to be caught up in the notion that the health and fi tness industry runs in one way, but it clearly doesn’t. Look at all the fringe companies popping up – the yoga studios, the CrossFit clubs… There are a hundred ways to do fi tness. “And trying to launch a franchise in
this particular economy, really it had to be low-cost. In any case, the low-price model can be extremely lucrative. Different operators have approached it differently and had varying degrees of success because it is a tricky model, but it’s actually a very intelligent way to approach the business. You have to
have a certain amount of discipline, and of course there are limitations – you wouldn’t put a low-price club in a location where you’re paying US$50 a square foot for the space, for example, although given the economy now you can in any case get great real estate deals. However, I would say that the margins in these clubs are the same or better than any other. You just have to be smart about it.”
expansion plans At the time of writing, Crunch Franchise had 12 operational sites – 10 in the US and two in Australia – with deals agreed for a further 100 units in those markets.
“If someone were to buy a 50-club territory, they would be required to open five stores a year over 10 years. So a portion of those 100 units will open this year, a portion the year after and so forth,” explains Midgley. So how does that map out against
expectations? “I don’t know of any other fi tness franchise in our space that’s ever sold that many units in their fi rst year. Companies with smaller footprint clubs – Anytime and Snap, for example – may have sold much more, I don’t know. But each of our 1,580-1,670sq m (17,000-18,000sq ft) clubs requires an investment of over US$1m. Just to get
“TRYING TO LAUNCH A FRANCHISE IN THIS PARTICULAR ECONOMY, REALLY IT HAD TO BE LOW-COST”
32 Read Health Club Management online at
healthclubmanagement.co.uk/digital
Measuring between 17,000 and 18,000sq ft, each of Crunch Franchise’s new clubs requires an investment of US$1m
fi nance for that in the US nowadays, you have to be fi nancially solid. So I think for our space we’ve done exceptionally well. I’d always like to see us do better, of course, but we’ll get there. “In the long run we’ll look at further
international expansion, but you have to go into new markets at the right time, and most importantly with the right operator. It’s not about selling as fast as you can. At a young stage for a franchise, if you get the wrong operators and they do a terrible job, you’re going to hurt yourself a lot more than the benefi t you got from selling the additional units. “So yes, we’re certainly working
on other international markets – I’m not going to talk about which ones at this point – but at the moment we’re really concentrating on growth in the US. We’re getting a lot more interest in the model now, and as the business matures that interest is getting more sophisticated. For example, someone who owns one of the largest Dunkin Donut territories in the country has now come over and bought into our brand. That’s exactly what we’re looking for – people seeing us as a strong investment opportunity, even in this young stage of our development. “Part of that is of course down to the brand, but I also have to credit our
february 2012 © cybertrek 2012
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