Small independent gyms face struggle to survive

Small, independent gyms should take note of the recent collapse of health and fitness operator LeisureCo into voluntary administration and make sure they can ride out the next six months, a senior analyst from research firm IBISWorld says.

The LeisureCo collapse is another blow for the industry and comes after fitness franchise Beach House Health and Fitness entered administration in November with the closure of 13 locations.

LeisureCo, which has been operating in Australia for the last 20 years in eight locations, fell into administration yesterday, with Pitcher Partners partner Michael Basedow appointed as the company’s administrator.

Basedow says the company is “operating as usual” for now, but puts some reasoning behind the company’s troubles, saying it may have been hit by the closure of certain operations.

“We’re talking about a group of companies which has relied on a critical mass of centres, and in some of those centres, the contracts have been terminated for various reasons and that has certainly put pressure on the group.”

IBISWorld senior analyst Ed Butler says the gym community should take notice, and that the market is seeing a lot of smaller gyms struggle against larger chains such as Fitness First and Fernwood.

“The smaller guys are struggling with being crowded out by the big players. Fitness First has such scale and brand power, and while their prices tend to be higher, they give a broader depth and service. They also have access to more facilities and have more capacity to offer services because of their size.”

“Another factor is that there are an increasing number of non-gym operators becoming available, personal trainers, individuals opening “boot camps”. They’re becoming increasingly popular, and they’re taking a little bit of business away.”

Butler says another collapse in the industry is possible, and that smaller, independent gyms will be the most likely operations to be shut down.

“Independent ones should be worried, but if they can ride out the next six months they should be okay, as the industry is seeing a lot of growth. With these independents, it’s just about having a good location. You need to be near a lot of residences and people who have the time to visit the gym.”

Diana Williams, founder of the women-only gym franchise Fernwood, says any collapses in the industry will be dependent on management.

“You’ve got some companies that are well-structured and running well, and some companies are not structured right. Maybe they have too much debt, there are a whole lot of reasons businesses go broke.”

“There are obviously some casualties, and obviously the businesses that will be affected are the ones who were doing badly before the downturn. Some are struggling to keep ahead.”