How gym chain Fernwood Fitness managed to expand under lockdowns, even as revenue fell to $63 million

How does a gym chain manage to not just stay afloat, but expand during a global pandemic? Veteran franchise business Fernwood Fitness has the answers.

Somehow, despite seemingly endless lockdowns that saw gym memberships put on hold, the female-only chain has come out flexing its muscles post-COVID.

“Funnily enough, we’ve had a bit of a growth spurt during COVID-19,” founder and managing director Diana Williams says.

“It’s weird really; we’ve opened four new Fernwood clubs in the last 12 months and two Fusion clubs.”

In an interview with SmartCompany Plus, Williams shares the history of Fernwood — a business model that was seeing $81 million in revenue in the pre-pandemic year of 2018/19 — and explains how despite the losses, a smart pivot led to some weird-yet-wonderful growth.

Key takeaways

1. Keeping up with the trends doesn’t mean copying what others are doing, nor completely reinventing the wheel. There’s a sweet spot in the middle

2. Setbacks, such as the pandemic, can actually be used to reconsider your business direction — if you have the right mindset

3. Every business needs a cash reserve, no matter what

Decades of growth

In 1989, Williams, now 77, was a stay-at-home mum with two teens when she decided to launch her first female-only gym in Bendigo.

She’d discovered a love of weight training and wanted to encourage more women to take it up, but in a sanctuary of their own — far from the macho-sweatiness of other gyms.

“Next thing I had wall-to-wall members,” Williams recounts.

“I had to relocate to bigger premises and it just grew and grew.”

Fernwood now has the equivalent of about 2500 full-time employees and, of its 72 traditional clubs, four are company-owned.

Then there’s those two new Fusion clubs, which recently opened in Melbourne’s Richmond and Mordialloc, with the aim to connect premium and fitness and complete wellness for ‘women who want it all’ according to the website.

“I think there’s a lot of small studios around that offer yoga, or that offer pilates, or that offer HIIT (high intensity interval) training,” Williams says.

“What I was wanting to do was put it all into the one, so they can get all of those disciplines in the one membership without costing an absolute fortune.”

Diana Williams power lifting in 1987. Source: supplied.

Crunching the numbers

The pandemic has undeniably been one of the toughest times in Fernwood’s 33-year history.

There are 72 clubs across every state and territory in Australia; however the majority are located in the eastern states, which experienced some of the longest lockdowns in the world.

COVID-19 restrictions led to low morale among many franchisees (particularly those who had just bought into the business), mental health concerns and staff layoffs, says Williams.

And while the head office in Melbourne remained open on restricted hours to serve franchisees in other states, gyms in Victoria were closed for the better part of two years.

Unsurprisingly for a business that was unable to open, revenue also took a hit. In the financial year 2019-20, Fernwood’s revenue dropped from $81 million to $64 million. Last financial year, it dropped again — down to almost $63 million.

Yet Williams notes that many of the usual expenses weren’t coming out either, so the percentage drop isn’t as bad as it sounds. Though she did have her initial worries.

“When the pandemic first hit, I thought ‘oh my god, I’ve spent all these years building this business and now it’s going to be wiped out’. But that hasn’t happened,” says Williams.

“I mean it’s not ideal obviously. We’ve taken a hit, but we’re still here.”

Finger on the pulse

If there was one silver lining to Fernwood’s long closures, it was the time to really consider the direction of the business, says Williams.

“We had a clean sheet of paper. We were able to look at the way our business was run, look at the business model — what can we tweak and what can we change?

An online hub, Fernwood Pulse, featuring workouts and nutrition tips, was key in helping Fernwood stay engaged with its members during gym closures.

Williams says the site was in the process of being put together when the pandemic hit, but was quickly deemed a priority.

While Pulse wasn’t monetised during the worst of COVID-19, it is now available as a membership — allowing Fernwood to reach new customers in regional areas (or those who prefer exercising at home).

Back in-person, the concept of the Fusion clubs was also born out of the down-time of the pandemic, with plans to roll more out quickly.

“We’re looking at probably opening 10 [more Fusion studios] in the next 12 months from now, maybe a little bit longer, and then grow from there,” says Williams.

The Fusion studios, at about 250 to 300 square metres rather than the usual 1000 square metres or so, are easier to roll out — and cheaper for franchisees to buy and operate.

“It’s quite a lot of capital to open a full-box Fernwood. You’re talking probably $250,000 to $300,000 for a Fusion, where you’re talking $800,000, $900,000 for a Fernwood,” she says.

And while Williams hopes no one has to learn from such an experience again, she says her most important strategy has been staying positive and focusing on the things that can be changed.

“If you can’t change the fact that there’s a pandemic and there’s no customers, then take that as an opportunity to re-evaluate every aspect of your business and write a new business plan,” she says.

“Get the team involved and motivated to come out of it with some fantastic goals and a vision for the future, rather than thinking ‘oh my God what’s going to happen?

“Another lesson is that obviously all businesses need to have a cash reserve, because obviously if we didn’t have a cash reserve, that would have been a different story.”

Comeback charge

While overall revenue has suffered in recent times, Williams says average revenue per member has jumped 20%, due to add-ons such as reformer pilates and HIIT classes in addition to the Pulse and Fusion offerings.

As members drift back, some of Fernwood’s clubs are back to where they were pre-pandemic, though Victoria is taking a little longer.

“In the fitness industry, every month we lose members — they cancel or drop off for one reason or another and we get new ones,” says Williams.

“But of course all of those months that we were closed, there was no getting new ones. We were just losing the ones we had.”

Now that the world is back open, Williams says that along with the additional Fusion clubs, Fernwood is set to open four of its larger clubs in the coming year.

“I would say by another 12 months from now, we’ll be probably better than we were pre-COVID,” says Williams.

“We’re full steam ahead — it’s very positive.”