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Building It Up By Breaking It Down: Snap Fitness’ Scaled Back Franchise Strategy Re-sculpts Fitness Industry

By: Patrick Strait

CONTACT: Patrick Strait, Snap Fitness, 952-426-7173

Building It Up By Breaking It Down: Snap Fitness' Scaled Back Franchise Strategy Re-sculpts Fitness Industry  
Anti-big box franchisor experiences repeated triple-digit revenue rises by trimming down an excessive health club industry and simplifying life for club patrons and owners alike  

CHANHASSEN, MINN. June 6, 2007 - "When it comes to franchising, less often means more. " This lesson from Minnesota-based Snap Fitness 24/7, recently ranked 3rd on Entrepreneur Magazine's list of "Top New Franchises," is a strategy other start-up companies have more reason to take notice of than ever. The franchisor of convenient, 24/7 fitness centers has achieved exponentially high revenues through an ultra-compact approach that counters the huge square footages and amaranthine amenities of big box gyms with the "simple bare necessities," priced at lower rates and placed in nearby locales. The results: a high quality, no frills workout for today's busy health club member universe - and an amazing ROI for franchisees.  

Led by its young yet experienced CEO Peter Taunton, Snap Fitness is staging a "small gym revolution" of hundreds of neighborhood franchise owners transforming couch potatoes into fit bodies. Focusing on quality over quantity and stripping away all but the core elements of effective exercise, Snap opened 18 stores and tallied $180,000 in revenues during 2004, its first year. The company has since blossomed into a network of nearly 830 stores underway in 45 states and grossing $5.4 million in corporate revenues last year. It projects total 2007 revenues of $14 million and is on pace to achieve its goal of selling at least 1,200 stores by year-end.  

This success is indicative of a greater movement within the health and fitness industry towards smaller franchise-based operations. According to recent data from Club Business International, fitness franchises have collectively experienced a 144 percent increase over the past five years, a time span in which some well-known big-box clubs have struggled to make ends meet. In explaining the trend, Taunton points to increased gym use among the economically powerful baby boomer generation, which tends to be very health conscious and values convenience and accessibility. Eliminating the extras and relaxing restrictive policies has paid off, he says. For instance, despite its customers' ability to freeze accounts at anytime and rejoin free of penalties, Snap Fitness boasts a membership retention rate higher than the industry average.  

"Another ‘a-ha' of our growth potential was when we discovered the concept worked just as well in rural areas as urban neighborhoods," notes Taunton, who says 90 percent of its members live within two miles of the stores. Indeed, the scaled down business model has succeeded for Snap franchise owners based everywhere from tiny Cokato, Minn. (population 2,700) to major cities including Los Angeles, Chicago and Atlanta.  

Taunton knew his idea held real growth potential when he reached profitability for his first two test stores, a 4,500 square foot club in Alexandria, Minn. and a 2,500 square foot site in Litchfield, Minn., in six and three months respectively. Since that time, 80 percent of Snap's stores, typically sized between 2,000 and 4,500 square feet, have reached a 250 memberships within a mere 120 days. For the majority of clubs, this means generating a profit approximately four months after opening.  

Since the company started its amazing growth curve, not one Snap Fitness gym has closed, a feat attributable to franchisees' low buy-in cost - $50,000 upfront and $150,000 to $165,000 overall - reducing time to profitability. Taunton says another success factor has been the company's support system, which begins immediately after a franchisee signs on with Snap and continues when the store opens. New gym owners are often up and running in as little as two months due to a combination of skilled site selection; close connections to lenders and an unparalleled store set-up and installation process. Upon opening, franchisees benefit from a delay-free billing structure (some Snap competitors take a percent out of revenues, which can more than double what franchisees owe); a Web-based franchisee portal with internal news updates; monthly Webinars; sales and marketing consultation; personal training options and an automated billing structure that expedites revenue, to name a few.

Taunton also has introduced new revenue streams to help franchisees achieve success quickly, including online meal planning, nutritional supplements and music downloads. And he has adeptly leveraged supplier relationships by mandating they contribute to each store's grand opening fund-a critical factor in a successful launch. It's a total recipe that has worked for a wide gamut of owners: personal trainers channeling their passion for fitness into a more lucrative framework; executives looking for a smaller scale side gig - even a lottery winner investing his winnings.  

Proof that owning a business doesn't need to be a constant hassle

Despite the tremendous moneymaking opportunity that comes with being a Snap Fitness franchisee, it's the uniquely laissez-faire management model that owners point to with most gratitude, often recounting the HR headaches experienced from previous franchise opportunities. Seven of 10 Snap Fitness proprietors regularly manage their clubs as "absentee owners," meaning they remotely oversee their stores' activities - sometimes thousands of miles away - rather than being tethered to the facilities. While continual sanitation and check-ins from a store manager are necessary, franchisees have the luxury of a state-of-the-art technology and security system that has led to a zero-incident history within the entire store network. The Web-enabled infrastructure includes features such as secure door access, constant and recorded video surveillance and two-way alert and communication systems with fire, medical and law enforcement personnel. At any moment's notice, owners can monitor the activities within their clubs online, review usage statistics or be notified of any real or false alarms triggered. The automated process carries into bookkeeping as well, with Snap Fitness' headquarters using a Web-based financial system to collect membership dues, distribute payments and prepare tax forms, all at the convenience of store owners.  

Snap's relatively hands-off nature also solves an age-old challenge encountered by many entrepreneurs interested in growing but unable to proceed due to never-ending operational needs: Approximately 60 percent of Snap's franchisees own multiple stores, adding to their portfolio once existing sites become profitable. After already seeing a dramatic restructuring within the entire recreational services industry, Taunton predicts near limitless opportunities for his neighborhood-driven, ‘round-the-clock fitness product. "All-inclusive can become a difficult service to sustain, particularly when customers recognize that it comes at a price."  

About Snap Fitness
Ranked 11th on EntrepreneurMagazine's list of "Top New Franchises" and among SuccessMagazine's "10 Franchises We Love," Snap Fitness is experiencing phenomenal growth with nearly 800 locations nationwide and some 30-40 new locations sold monthly. Founded in 2003 by CEO Peter Taunton, the Chanhassen, Minn.-based franchisor offers compact, state-of-the-art, 24/7 express fitness clubs that emphasize fast, convenient and affordable workouts to neighborhoods across America. For more information, visit snapfitness.com.

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