First, Bruno explained that the first thing I should keep in mind is the way that the gym industry is segmented. He told me that there are three major categories:
- The YMCA
- The chain gym (Gold’s Gym, Planet Fitness, Anytime Fitness, etc.)
- Individual gyms
The YMCA’s are well funded and “have all the money [they need]” he told me. They will typically have the funding needed for various programs and the newest gym equipment. Since they receive money from the state, donations, and membership fees they have the money for this kind of infrastructure – an infrastructure that is more difficult for other types of gyms since they don’t have the luxury of state funding or donations. Instead, the chain and individual gyms have to rely on their membership fees and personal training sessions to pay the bills and turn a profit. Interestingly, Bruno explained that personal training is where most gyms make the lion’s share of revenue. He told me that, in effect, the membership base of a gym serves as a funnel to lead to the more profitable personal training. The larger the membership base of a gym, the more personal training clients there will be and the better off the gym will become.
Another interesting insight about the chain gyms was who the typical owner of the franchised locations is. Bruno told me that, in his experience, the “vast majority of franchised gym owners are medical doctors” who are looking for a way to use their money so it lowers their taxes at the end of the year, since opening a gym will show up as a loss. The typical investment for a large franchised gym (think Gold’s Gym) is above $1 million dollars, so this really made sense when I thought about it. Facing the reality that chain gyms are an extremely expensive endeavor, the information I learned so far has further pushed me into the category of creating my gym on an “individual” level without any type of affiliation.
Individually owned gyms tend to be started by people who cannot afford the large investment in a franchised gym, Bruno told me. As a result, the building is often smaller, the location is often worse, and the gym equipment is far from cutting edge. He told me how cardio equipment is typically substantially more expensive than weights, and also how cardio equipment breaks more often and goes out of style more often. Newer treadmills with Bluetooth technology or smartphone integration are always coming out and people will be drawn towards them over older treadmills. As a result, the turnover rate for cardio equipment is much higher than that of, say, a dumbbell. In essence, a dumbbell is a dumbbell and it doesn’t go out of style with the next reiteration of technological advance. For this reason, Bruno mentioned that he usually finds the cash-strapped individually owned gyms to have less cardio equipment while placing heavier emphasis on weights and strength equipment.
Although my business idea doesn’t involve weights (but will involve cardio equipment), I found it fascinating to learn more about the industry from an insider like my uncle. This information certainly gives me a broader understanding of my competitors and also the options I have for my own gym. Finally, he offered to bring me along the next time he goes to buy gym equipment from a large warehouse in North Carolina – so I’m sure this won’t be the end of the information that I will learn about the gym industry from him. After this conversation, I feel even better about the plans that I have developed thus far for my gym concept.