10 Things We Learned About the UK Gym Market Straight from the CEO
What a fantastic webinar with John Treharne, the CEO of The Gym Group plc.
John kindly gave up an hour of his time to provide detailed insights into the strategy and operations of the UK's second largest fitness chain. We learned so much about what makes The Gym Group so successful.
Here are 10 highlights.
John was asked - have you considered takeovers of rival gyms? The answer - not worth it. Organic growth provides a much higher return. Why pay a premium price of around £3-4m per gym when The Gym Group can instead invest £1.3 - £1.4m to open its own new facilities.
Extensive market research suggests that 70% of gym users only use gym equipment. So The Gym Group only offers gym equipment. No need for spas or pools.
There are currently around 500 low-cost or budget gyms in the UK. Market analysis suggests there is potential for at least 1,000 facilities. So The Gym Group is remaining focused on the UK opportunity for growth.
Technology drives down costs, which enables the business to be competitive. The Gym Group has taken out nearly all behind-the scenes administrative work. Membership is managed by members online. Extensive data mining is done on gym usage (every machine is monitored in real-time) and customer relationship management is all driven using technology.
For every gym the business opens (it has already committed to opening 17 in 2017) it rejects a further 30 possible locations. Extensive analysis is done to assess the suitability of potential locations, including population analysis mapped against their profile of likely gym members and a scoring system on the suitability of the potential building. A wide variety of buildings have been used to locate The Gym facilities, including former casinos, office blocks and spare space at a Sainsbury's supermarket which now attracts 2,000 gym member visits per day.
The three leading budget gym chains (Pure Gym, The Gym Group and Xercise4Less) are increasing their market share by growing more strongly than the other rivals in the low-cost segment.
It costs around £1.3m - £1.4m (on average) to fit-out and launch a new gym. Typically a new gym opens with around 3,000 new members due to strong launch promotion and break-even is reached within 3 months.
A typical gym has two employees - a Manager and an Assistant Manager, supported by 10-12 freelance fitness trainers who provide 10 hours of free "floor time" to support gym users (e.g. with induction training. Many of those fitness trainers go on to join the business management training programme and several have are now running locations as managers. Strong growth and an emphasis on internal recruitment go hand in hand.
15% of gym usage is between the hours of 10.00 p.m. and 6.00 a.m.. Shift workers and others love the flexibility of 24/7 opening. The gyms are not "manned" by staff during those hours, but every square inch of space is monitored centrally by CCTV equipment and other security measures.
Floating The Gym Group on the stock market was a time-consuming and expensive process (the fees alone were £6m). However, the business raised £195m of new equity capital and this has had a significant benefit in terms of being able to obtain the best terms from landlords of new locations as well as funding the capital investment required for rapid organic growth.