Jeff Klinger has devised the industry's leanest and meanest new franchise, Anytime Fitness, and his market timing seems perfect
by Jon Feld
CBI: You've been quoted as saying that club members' desire for 'convenience' was what prompted you to create Anytime Fitness. How did that goal lead to this unique, technology-driven, 24-hour concept?
Jeff Klinger: The basic idea, which we came up with in early 2000, was actually a response to two pressing demands. At the time, my partner, Chuck Runyon, and I had a 40,000-square-foot club, with 3,000 members, and many of the problems familiar to most club owners: underutilized space, an expensive work force, high member turnover, etc. We spent about 80% of our time simply making sure that our employees were doing what they were supposed to do. The truth is we had to 'churn' memberships to keep our revenues up. That was one part of the equation.
The other was our sincere desire to deliver what our members really wanted. We polled about 2,000 of our core members-the diehard fitness enthusiasts-and discovered that what they desired, more than anything else, was convenience. They didn't want juice bars, and personal trainers, and a lot of frills. They wanted to be able to park right in front, walk into the club, work out and leave-whenever it suited them.
That's when the light bulb went off! That's what inspired us to develop an efficient, streamlined fitness concept.
CBI: Anytime Fitness offers members a clean, attractive facility; plenty of equipment; 24-hour access; state-of-the-art security; and staffing on an as-required basis. Can you imagine anyone else coming up with an even more efficient approach?
JK: I don't know...I guess someone could put a club in a big bus or RV and drive it to people's homes. That might be inevitable, but, for the moment, our concept is working very well.
CBI: Society, it seems, is becoming more and more insular, with people working independently, on computers, addicted to passive entertainment, etc. Most clubs work against this trend, trying to get people to interact, to socialize. Is Anytime Fitness working with the trend-simply giving people what they want?
JK: That's absolutely right! We are working with the trend. Our members know what they like in terms of a workout, and they want to come in, do what they do, and leave. We make it as simple, direct, easy, and productive for them as possible. Then we leave them alone.
CBI: Let's touch on a few of the basics: What's the average size of an Anytime Fitness facility?
JK: We have clubs ranging in size all the way from 2,200 to 13,000 square feet, but the optimal size, we've found, is about 3,300 to 4,500 square feet. Another important factor, in terms of profitability, is a location near a supermarket or other major retail hub, which allows people to do a number of different things-window shop, pick up something for dinner, drop off clothes at the dry cleaners, exercise-during a single trip. Again: it's all about convenience.
Our bigger clubs don't adhere to our formula as closely, but they're also sensibly staffed and offer round-the-clock access.
CBI: Pricing seems fairly uniform-an initiation fee of about $99 and monthly dues, generally, in the $35-$40 range. Is that something that's determined by corporate?
JK: We really can't dictate prices. What we can do is help our franchisees research club pricing in their own individual market, and then work with them to arrive at a price point that makes sense. In one part of northern Minnesota, for example, there are more than 20 fitness centers within a 10-mile radius, so, there, we'd suggest that our franchisees match the local pricing pretty closely-rather than, for instance, opening with a big blowout sale.
CBI: Staffing-we've read that Anytime clubs are typically staffed between 8:30 a.m. and noon, and 3:30 and 8 p.m. Is that the recommended coverage?
JK: Staffing, like size and pricing, is also flexible and determined by such factors as the size of the market, the number of club members, and, in many parts of the country, the season of the year. Using northern Minnesota as an example again: there, because there are a lot of outdoor activities for people to participate in during the summer, club usage declines considerably. Our members still enjoys 24-hour access, but our franchisees aren't obliged to waste money on payroll.
CBI: Other than 24-hour access, what distinguishes Anytime Fitness from the other fitness franchises?
JK: As far as I know, we're the only chain that guarantees complete reciprocity for members. Once you have one of our swipe cards, you can use any of our facilities-no guest fees, no questions asked.
CBI: Are there particular types of markets in which Anytime Fitness works best?
JK: We're convinced that it can work anywhere, but it's especially effective in smaller communities. Rents are cheap, and one of our facilities can provide residents with an option that, otherwise, they wouldn't have. There may not be enough people in town to support a traditional fitness center, but our clubs don't require as many members to generate a nice return. We have one franchisee, in Gaylord, Minnesota, who's doing quite well with just 400 members.
CBI: How many of your franchisees have owned clubs before?
JK: Probably about 15%. One of the first 10 franchises we sold was purchased by a gentleman who owned a very large club; he sold that facility to a major chain and opened an Anytime Fitness . . . In fact-and this is rather ironic-the person that we sold our original, 40,000-square-foot club to in 2002 recently acquired one of our franchises.
CBI: What sort of a return can a franchisee expect to see?
JK: That's difficult to say. It's really driven by your ability to sell memberships. One of our franchisees doesn't necessarily need to know how to change the filter on a hot tub, but they do have to be able to make themselves well known-a familiar figure-in the local community. Marketing, sales, public outreach-they all figure prominently in our franchisee training.
I can offer one instructive comparison, however. Some of our franchisees also operate franchised, semi-fast-food sandwich shops. They spent, perhaps, $500,000 to launch those businesses, which have a higher overhead and much heavier staffing requirements than our clubs; one owner, for instance, told me that, during the dinner rush, she had to overstaff by 20% to cover for employees who, invariably, wouldn't show up. A typical Anytime Fitness franchisee may spend $35,000 to $90,000 to open a facility, doesn't have to deal with staffing hassles, and will see a return similar to that delivered by the sandwich shop.
I think if you compare ours to a lot of other franchises-we're a better general investment.
CBI: You recently signed a multi-franchise agreement with the GymDay investment group. As you move forward, will you be focusing on multi-site or master-franchise agreements based on territory?
JK: We're going to evaluate opportunities on a case-by-case basis. GymDay has excellent people who will be able to make this particular arrangement work very well; in the future, we'll do multi-franchise agreements only if the situation is equally propitious. For all practical purposes, we'll continue to concentrate on the independent operator-we want to be there for them.
CBI: How long do you think it will be before someone else clones your concept? When that happens-what will you do?
JK: To the best of my knowledge, that hasn't happened yet, but I guess it will. It's probably inevitable. When it does? . . . Well, I don't think we'll change what we do. By then, we'll have gotten a healthy head start, and replicating what we've done won't be easy. It requires serious skills and a significant investment-in time, business-model development, hiring, training, software, sales and marketing, legal issues, customer support, etc.-to launch a new franchise successfully.
Moreover, our industry has never been more competitive. Big-box, small-box, women-only, community recreation centers, corporate fitness-everyone's trying to grab market share. Anytime Fitness has a distinct competitive advantage in that we can be profitable with a relatively small number of members.
CBI: Okay-other than Anytime Fitness, what's your favorite fitness franchise?
JK: I think that you have to applaud what Gary Heavin has done with Curves International, Inc. He identified a niche that no one else had noticed, developed a product that fit it to a T, and has done a great job of nurturing, promoting, and optimizing the concept. It's certainly helped with consumers: they've begun to realize that exercise is as essential as changing the oil in their cars. It's helped us-because people have begun to think of fitness as a viable investment opportunity. And it's helped the industry, hastening the inevitable of, I think, a club on every corner.
CBI: You've said that you expect to have 500 franchises operating, in the U.S. and abroad, by 2007. How's your game plan going?
JK: You be the judge-we already have seven corporate sites, some 120 franchised facilities in operation, more than 100 additional commitments, and are signing up an average of 15-20 new franchisees per month. We have one club open in Canada, and have secured trademark protection in several other countries. We've accomplished all of that in just three years . . . In fact, we now expect to have about 1,500 franchises in place by 2010.
CBI: Given a growth plan that ambitious and a scenario that rosy, is it possible that you might want to take Anytime Fitness public some time down the road? As far as we know, no other fitness-franchise company has ever done so.
JK: At some point-yes. Not right now, though-at the moment, we're having too much fun watching it grow.
Jon Feld is a contributing editor for CBI and can be reached at kjfeld@rcn.com.
