Health and Wellbeing: Franchising the Future

Richard Brodie & Kaajal Dharan, Deloitte Private

The health and wellbeing of Australians is of utmost importance to ensure the continued growth and success for current and future generations.

Earlier this year, Deloitte published Part 3 of its Building the Lucky Country series, entitled Positioning for prosperity? Catching the next wave. This publication explores how we can position Australia – and its individual sectors and businesses – for future prosperity, and identified the preventative health and wellness industry as one of 19 key growth pockets with the greatest potential to contribute to Australia’s prosperity.

In this article, we focus on the physical health industry and highlight the key trends and future outlook for this growing ‘local hero’ of our economy. In particular, we focus on how well-established, franchised Australian fitness providers and newcomers alike are catching the wave of prosperity and positioning themselves to grow in the future.

Health & wellbeing

Positioning the physical health industry in Australia

Future wave, local hero

Over the next two decades, no market is likely to see better growth in Australia than preventative health and wellness services. We’re living longer but we also want to keep living better, and that tension will generate billions of dollars in opportunities. Whilst this industry is vast and varied in terms of the services included (think everything from vitamins and supplements to pharmaceuticals; tailored exercise regimes to specialist cosmetic procedures), the underlying message is the same – businesses that can focus on the rapidly growing health submarkets, such as physical health and wellbeing, will be well placed.

In 2012, Fitness Australia, in conjunction will Deloitte Access Economics, published the Australian Fitness Industry Report which estimated the physical health and fitness industry to be worth $1.2 billion. Incidentally, in 2014, IBISWorld estimated the industry to be worth $1.3 billion. This represents a compounding growth rate of more than eight per cent over a two year period. The Report stated that ‘in comparison to other sectors, the fitness industry on the whole, has fared better and continues to grow despite the backdrop of uncertainty that has affected the broader economy’. The Report attributes this to ‘a myriad of factors including cultural and demographic changes associated with the increasing importance accorded to fitness, the recognition that it delivers personal health benefits, and industry innovation in tailoring programs to meet the needs of consumers’. Whilst the impact of Australian-owned health and fitness businesses on the international economy is limited, there is significant potential to ride the wave locally, making this industry one of the local heroes of our country.

Australia's future growth waves

Composition of the physical fitness industry

The overall structure of the industry has changed over recent years, allowing for healthy growth and enabling newcomers into the industry to prosper. The majority of industry growth has been stimulated by two key areas – affordable 24 hour gyms, and consumers becoming better educated about the importance of physical health. Recent Government initiatives on obesity, and television programs like ‘The Biggest Loser’, have inadvertently had a positive impact across the fitness industry. There  is now more and more emphasis being placed on tailored health and fitness regimes being provided in safe and non-judgemental environments. According to Fitness Australia, traditional full service gyms have also seized the opportunity and are enjoying an uptake in memberships due to increasing health and fitness awareness.

The industry is primarily made up of privately owned health and fitness service providers which are either independent or franchised in nature. The major players in the industry include Anytime Fitness, Fitness First, Jetts Fitness, Goodlife Health Clubs, Fernwood Fitness, and YMCA. While membership fees still account for the majority of the sector’s revenue, there is an increasing trend in personal training fees and the use of specific services, such as physiotherapists, yoga and pilates studios, and group fitness trainers. It is becoming increasingly popular for independently owned businesses, which prosper from organic growth, to offer franchisees the opportunity to be part of their growing brands.

Survey response by organisational structure of fitness centre

To better gauge the current issues and trends within the franchise health and wellbeing market, Deloitte Private called upon three influential contributors to the industry – Di Williams, founder and CEO of Fernwood Fitness, Jason Smith, founder of Back in Motion Health Group, and Ben Fletcher, founder of Listen to Your Body. Each of these successful individuals have, in their own right, been shapers of the industry to date.

Fitness experts with a healthy appetite for success

The first Fernwood Fitness health club, dedicated to women, opened in Bendigo in 1989. The club now has over 70 locations and over 68,000 members throughout Australia. Ms Williams identified the need for women to have their own space to work out, especially when it came to weight training. She had no intention of creating a national brand, but the combination of hard work on building the brand, increased demand for womens’ gyms and dedicated and commercially savvy franchisees, has created just that – an iconic, fresh and modern space for women to work out comfortably.

Back in Motion was launched as a small practice in the garage of Jason and Paulina Smith’s family home in 1999. As a physiotherapist, Mr Smith came to realise that there “were two converging forces” in the sector – “disillusionment with philosophy of care seen in most private physiotherapy practices, and a deep desire to help the disadvantaged.” The unique philosophy that Mr Smith employed, which he coined Results4Life, caught on and this early success resulted in quick growth. By April 2000 they had moved the practice from their home into more suitable commercial medical facilities. An expert and committed team soon gathered around Jason and Paulina as they focused on building their business and reputation to be one of the choice physiotherapy providers and employers in the industry.

Ben Fletcher, a qualified personal trainer, founded Listen to Your Body in 2008. Mr Fletcher started his career as a one-onone personal trainer in 2002, and rapidly built up a portfolio of over 400 clients, and employed 20 personal trainers. He identified a gap in the market and developed a group model (to ensure cost effectiveness), with individualised personal training programs. This would give more people the opportunity to become fit and healthy, whilst enjoying all the benefits of having a motivating, qualified Personal Trainer by their side. In 2008, the first Listen to Your Body was opened and by early 2013, the first franchised studio was opened.

The future of the industry

While the industry as a whole is established and mature, certain pockets are likely to face continued growth over the next three to five years. Specifically, locally owned and grown businesses are likely to further expand, with franchising structures a preferred way to grow and prosper. In order to do so, two key factors that successful franchisors have acknowledged as imperative to success are:

• Attracting and retaining passionate franchisees; and

• Ensuring that these franchisees have the right platforms to ensure not only personal satisfaction, but financial success.

In order to assist franchisees with their success, franchisors advocate the importance of the following three key foundations:

• Providing personalised solutions for their clients;

• Utilising state of the art technology to deliver an exceptional service and stay ahead of competitors; and

• Reliance on experts for legal, financial, and other non-operational aspects of their business.

Of the three key foundations, technology is having an increasingly large impact. Recent social trends suggest that the industry is sensitive to factors such as innovation, advertising, and use of social media. Ms Williams says “you need to keep your business relevant and keep up with the market”. On 1 July this year, Fernwood Fitness launched an online fitness program called 28 Day Breakthru – the first of its kind in the fitness industry. Amongst other things, the program has created an interactive online community. According to Ms Williams, technologically, Fernwood Fitness is “miles ahead of its competitors”. As stated by Jason Smith, Back in Motion actively uses “social media to further engage and retain our clients, our recently redeveloped website now offers online booking capability putting us at the forefront of the industry and making us more accessible to our clients. It also means we have more avenues for enhancing and growing our brand, segmented by the different audiences we target. In practice, we’re exploring new and innovative ways to work with our clients, from state of the art exercise prescription software to the possibility of branded apps enhancing the experience both in and outside of the practice for our clients.”

The technology trend is booming; social media and real-time convenience are at the forefront of many business owners’ minds. In order to prosper in this growth pocket, franchisors are looking for “courageous, free thinking, strategic professionals who are prepared to take the best of our traditional and conservative heritage and mix it with the ethical creativity that capitalises on our bright future,” states Ben Fletcher.

All three franchisors are considering the impact that technology has, and will continue to have, on the ability of their franchisees to manage their businesses. In particular, cloud technology disruption has the potential to impact:

• Franchisees looking for insights, not just compliance.

• Franchisees that are flying blind in terms of understanding their financial performance at any given time.

• Franchisees’ desire to spend less time on day-to-day transactions, paying staff and suppliers and scrambling to balance the books at month end.

• Franchisees wanting to spend more time on the bigger picture; things that helped their business succeed in the first place – working on the business, not in the business.

• Information sharing across the franchise network and even against industry best practice.

• Franchisors are looking to add additional value to the network by providing insights and guidance into individual/regional franchisee performance.

In conclusion

The physical fitness industry is well established, and growing. With an expected annual growth rate of four per cent, and increasing emphasis placed on the importance of physical health and fitness by Government and social media, budding entrepreneurs looking to build new businesses are looking for fresh ways to enter this industry and differentiate themselves.

The future state of the industry is set to provide great opportunities for those with a passion for people and with the ability to influence others to achieve business and financial success. Every business owner needs to understand what their proximity is to prosperity in the wider industry. Technology, personalised, goal-driven solutions, and the support of a strong franchise network have proven to be critical levers of success in this industry. Focussing on these areas will be critical for running a successful, modern, and relevant franchised business.

Richard Brodie is a Deloitte Private Partner based in Melbourne and has been involved with the Franchise Industry for over 17 years both as an advisor to clients and roles within the Franchise Council of Australia.

Kaajal Dharan is a Client Manager in Deloitte Private’s Melbourne practice and has over 8 years’ experience as a trusted advisor to privately owned businesses, ranging from newcomers to iconic Australian brands.

As one of Australia’s leading professional services firms, Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 6,000 people across the country. Deloitte Private has over 100 partners and 800 dedicated staff, with offices in every state across Australia. We work with families and individuals who are passionate and hands on with their business.

For further information contact:

Richard Brodie
Phone: 03 9671 7474

Kaajal Dharan, Client Manager, Deloitte PrivateKaajal Dharan
Phone: 03 9671 6844

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