Women-only businesses get into top shape
Australian Financial Review - SPECIAL REPORT - FRANCHISING
Female-only gyms are an expanding business and one perfectly suited to the franchising concept, says Miriam Hechtman.
When Virginia Woolf wrote about having a room of one’s own, chances are she wasn’t talking about the gym. But increasingly women are able to work out in female-only gyms, thanks to the fast-growing franchise trend of women-only fitness centres. The largest chain of this type is the Fernwood chain, which started with a single club in Victoria in 1989. Founder Diana Williams says she saw the need to open a club for women where women would feel comfortable and not threatened. “I think it’s a success because women today want their own place – not necessarily because they’re anti-men, they’re not – but they want to have their own environment where they like their own space, same as men do.”
Williams says low self-esteem and culture are just a few of the reasons why women prefer a female-only environment. She says one advantage of targeting women as a niche market is that Fernwood is better able to tailor its product to the market. “Rather than trying to be something to everybody, we focus on what women want and we can identify what the market wants and we can give it to them.”Fernwood opened its 65th franchise last year and has another 15 openings on the books for 2006. To become a Fernwood franchisee, applicants are evaluated to see whether they are the type of person the company is looking for.
“You can usually tell pretty much upfront whether someone has got the qualities that we’re looking for,” says Williams. Applicants don’t necessarily need business experience, says Williams, but need to “have their antennae up”, she says. “They have to be alert and you have to feel that they’ll be able to run a business well and have the fire in the belly to do it.”
The initial cost to operate a Fernwood franchisee is $55,000. Another $600,000 to $700,000, is usually required for the fit out, the equipment, the lease for the location and any pre-sold memberships.Says Williams: “Once the franchisee opens up their doors on the first day, then they start processing those contracted memberships every fortnight and so they have a really good steady cash flow.”The presale costs include paying the wages for the marketing and the presale staff. “It’s usually around about $80,000 to $100,000 but then they are obviously contracting somewhere between $1 million and $2 million dollars worth of memberships,” says Williams.
Subsequent costs include advertising and royalties to Fernwood. As much as 5 per cent of a franchisee’s turnover goes into a national advertising fund and a 7 per cent royalty goes back to the club to fund support, training, research and development. “We only do what makes the franchisees profitable, I mean that’s why we’re in business to make them profitable, otherwise we’re not going to expand and grow, we’re going to have a lot of unhappy franchisees. So their profits are what we’re all about.”
Contours Express, which also targets woman’s fitness, discovered the concept gym in the US in 2004 and bought the rights to Australia and New Zealand. The three managing directors – Steve Sacks, William Deane and Peter Hammond – started franchising Contours from January 2005. Says Hammond: “We pay royalties back to the US and they help us with our marketing material, they help us with concepts, buy all the equipment, they help refine and improve the equipment and the whole concept. We’ve got freedom to make it relevant to the Australian market.”
Hammond says they are looking at women between the ages of 25 and 65 but also pushing more into the older market, which he says is pretty much untapped. “They haven’t really focused on that older market and it’s really a big section. That particular part of the market is looking for a product that is small, not intimidating, in a local area at a price point that suits them.”
“Most of the franchisees are able to open up [a centre] between $80,000 to $100,000,” says Hammond, which includes the initial fee of $34,500 plus $14,000 for the equipment and around $40,000 to $50,000 for the rent and fit out. Six months after opening, franchisees contribute $195 every month to the national marketing fund. Hammond says franchisees also contribute to marketing on a local level.“Doing letter drops, doing referral programs with other businesses in the area is very important and a big part of the marketing effort. And that’s really what the franchisee does at that local level.”Franchisees also pay a set royalty fee of $650 per month.
Contours has sold 50 franchises with 25 currently open and 25 to open in the next three months. Says Hammond: “One aspect of this franchise and why it’s been so successful is because it’s very affordable to establish and it’s very fast to break even and the ongoing royalties are low. And if they can get decent membership bases then the rest drops.”
Richard Evans, chief executive of The Franchise Council of Australia, says he is seeing diversification within the women’s segment within franchising whether it be make-up, beauty services or fitness centres. Many years ago fitness centres were seen as “sweaty places dominated by men and hefty body builders”, says Evans, but sporting clubs along with sporting fashion have changed that. “And I think the next extension of that is, let’s make it a bit more comfortable for gender-specific services to operate. And that’s where you see the success of gyms within the market where women want to go along.”
Exclusion zone· Fernwood has 65 franchises with another 15 expected to open this year.· Women between 25 and 65 are the target market.
· The women-only franchisees are also flourishing in areas such as make-up and beauty services.
