Fitness Franchise Strategies: How to Open in Smaller Markets

Terri Harof is Workout Anytime’s director of franchise development. With nearly 200 units open across the U.S., Workout Anytime has started 2023 with two new gym openings and five additional signing deals in just Q1 alone. Five additional gyms are slated to open in the second quarter as the franchisor works to open a total of 30 new locations in 2023.

In this segment of Follow the Fitness Leaders, we caught up with Harof to get her insights on how to open a fitness franchise in smaller markets and what it’s like inside the mind of a fitness franchise owner.

Q. Share a little bit about what Workout Anytime is doing with its Hometown Model offering.
Harof: We were able to use a software package that we use all day, every day called Buxton. That lets me look at territories all across the country, and I can look at territories where we already have a location and pinpoint all of the members. We’re able to see where they live and how far they drive to get to the gym.

We love going into underserved markets. When we find these markets, the actual city may have less population than a typical market that we would choose, but because there’s no other competition present in the area, we’re able to include the market in our search. We know that 22% of a given population will join a gym, and in under-served communities, we can see that members will drive as far as 45 minutes to get to a gym. When we’re looking for a market to establish a Hometown Model, we’re looking at markets with a 30-minute drive time.

Q. Most brands stay away from smaller markets thinking they are not worth the ROI. Why did Workout Anytime decide to go into smaller markets? What sort of research went into this decision?
We’ve had some experienced franchisees approach us with legitimate reasons for wanting to go into smaller markets. Though this wasn’t what we typically would do, they were experienced and knew the markets well, so we decided to do some beta tests. Sure enough, they went well.
When you go into a market where there are no other gyms, people walk in and get that “wow” feeling. As long as the numbers make sense and there is enough population within a certain drive time, we know (and have proven) that entering smaller markets still makes sense.
The one thing we know now more than ever is the importance of health and wellness and, more specifically, taking personal responsibility for our own health and wellness. 2022 was a record-breaking year for us in terms of membership and franchise development growth, and I attribute some of that to COVID. With the 24/7 convenience that we have, the Workout Anytime model works; it works both in large and smaller, underserved markets.

Q. How different is it to plan for, build/renovate and open a club in a smaller market than a larger market? What are the differences?
From a cost standpoint, rent is typically less expensive. Our smallest gym is just under 5,000 square feet, and our largest is just over 15,000. In a smaller market, we choose a smaller footprint. Because there are fewer equipment and construction costs, franchise owners are able to go into these markets and not have to spend as much. And typically, they’re able to open more quickly.
One of the things we’ve found in smaller markets is that some people might think it’s harder to find employees in small towns, but it has actually been the opposite. There are not as many opportunities for jobs in these smaller markets, so the retention of employees and members is much longer. It also helps that we’re in a pretty cool business. Everyone needs and almost everyone can afford a commitment to fitness. From a franchise owner standpoint, you’re in a
business where you’re making a difference in people’s lives and helping them become the best they can be.

Q. Do smaller markets require different membership offerings than larger markets? If so, how are the offerings different?
When we go into the smaller markets, we just offer one membership — the premium one. Franchise owners don’t need as many enrollments to bring in the same amount of funds given that the lower tier is not available. The members love it because they’re getting so much more with that premium membership. In the last few years, we’ve really put an emphasis on not just cardio and strength but also a recovery zone. This includes infrared sauna, red light therapy, cryotherapy, HydroMassage chairs and human touch massage chairs.  Workout Anytime has expanded its Premium Suite services to include red light therapy, cryotherapy and infrared sauna. 

image of Workout Anytime Studio

Q. Why was this decision made?
We’ve been doing this for almost 24 years, and while our motto is to keep it simple and do it with integrity, we also have to listen to the wants and needs of our franchisees and members. We’re always diving into data and going to different shows to make sure we know what the latest and greatest things are. Recovery is what people want and need, and we believe in it. We want to be able to help our members with cardio, strength and recovery, and we’re able to do that. It’s been great for our brand and members.

Q. How much more is adding this to the membership price, and how have customers responded?
Our basic membership is $22.99, and the premium membership is $29.00. Typically, the gyms that offer both tiers track in the high ‘80s or low ‘90s in terms of the percentage of all memberships that are a premium membership. The ROI is there, and the feedback we get from our members is there. Before we roll out big new changes, we always beta test it all over the country. We want to make sure we’re looking at
all areas and every beta test has been super positive. The gyms and members are happy. It’s been a really positive addition across the board.

Q. How are existing franchisees adapting to adding these offerings in their facilities? Are most on board?
The cool thing about being part of a franchise is that you're in business for yourself, but you're not in business by yourself. We do have some franchisees that are not afraid to try new things, and often, they’re the ones that other franchisees will reach out to for advice.
We have some locations that have been open for 24 years. When you’re a gym, even though there might be more of a legacy membership population, you’ll still sign up new members. Adding amenities like these is a great opportunity to let the basic members try them out and potentially upgrade their memberships while upgrading in a way that draws new members in, too. With these changes, the franchisees are making more money, as well. The buy-in has been really, really positive. However, we don’t force our franchisees. There are certain pieces of equipment and things you’ve got to have, but as years go by, there are new things we may find that we really like and
are going to approve as an amenity that franchisees can add to their offerings. If they don’t want to, they don’t have to. But numbers don’t lie, and that’s a pretty good motivator for other gym owners.

Q. Where are they finding the space?
They are doing this in a few different ways. There have been opportunities for franchisees who had an existing space to take over vacant space that previously housed a next-door neighbor. I’ve had franchisees add outdoor space that is furnished with gym equipment that’s specifically designed for indoor/outdoor use. John Carsillo, one of the vice presidents, is in charge of equipment. He’s been with us since day one. He’ll look at the layout of the gym, and it may be that we pull out a couple of pieces of equipment that aren’t being utilized as much as we want, or he may just redo the layout so we’re able to fit everything in. There are lots of different ways, and we’ve been figuring it out.

Q. How are they communicating this to their members?
The great thing about being part of our franchise is not only do we have processes, procedures, a playbook and everything in place, but whenever something new is coming out, we have an online training. We make a training video with all of the information — what the equipment is, how it works and how to present it to the members. We provide the blueprint so that it’s super easy for franchisees to understand how to do it. Everyone in the gym will watch the videos so that we roll it out and present it in the same way, regardless of whether you’re in Portland, Oregon or Portland, Maine. We also have the franchise academy, which is made up of franchisees from all over the country. We do regular on-site and zoom trainings so that we’re able to make sure that everyone understands what it is that we’re doing, how to do it, how to roll it in and how to sell it.
Finally, we have an amazing support staff that makes sure everything is done seamlessly and timely and is well-understood within the franchise community.

Q. Your company shared that it has broken its membership growth record and its record on the number of clubs opened. Can you quantify this? How much has membership grown this year compared to previous years?
We should hit 200 clubs by the end of 2023. More than 60% of our franchisees own multiple locations, which is truly a testament to our business model. The gyms opening this year are both new and existing franchisees Currently we are at 316,665 members. At the end of 2022 we were at 298,231.

Q. How many news clubs have opened in 2023 so far, and how does that compare to previous years?
Four clubs open through May 2023 and an additional 12 gyms that are at lease and will begin construction soon. We are projected to have over 200 gyms open by the end of ‘23.