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How to Scale Your Fitness Franchise and Become a Master Franchisor

By Nan de Bruin

Published 1 September 2021

James Cotton is the Franchise Development Director at Franchise My Business GymSales Software and he joined us in the FitNation Lunch & Learn webinar today. He will be sharing his experience and knowledge about how to scale your Fitness Franchise. 

James Cotton has over 15 years of experience in fitness and franchising and worked with various brands from a private equity level and some new starts in the UK in the fitness sector. You can say he has experienced it all. With his current business, he scaled up to over about 180 units, about 250 franchisees across the network. The person to share tips and tricks for growing and managing a franchise at scale.

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Alex: Welcome everybody. We’re back on for another round of FitNation’s Lunch and Learn. As always, we want to thank everyone for taking the time to join us. On today’s show, we’re diving into franchising in the fitness industry. Now I think most of us can think of a few franchises that have had massive success in our space. Many of those started from either one or a small number of sites and were able to grow based on the right business plan. So that’s what we’re focusing on today is how to scale your fitness franchise.

The person qualified to talk about this with us today is James Cotton. He’s the Franchise Development Director at Franchise My Business which is based in the UK. The key topics that we’re going to focus on today are guidelines for turning your fitness business into a franchise, successful practices of industry-leading franchises, and tips for growing and managing a franchise at scale.

So whether you’re thinking of starting a fitness business, you’re looking to gain momentum and scale your fitness franchise by adding some new locations into your portfolio, or you’re in the process of trying to get one of your fitness facilities into every city around your country, I think there’s bound to be something valuable in today’s session. So James, thank you for taking the time to join us.

James: Yeah. Thank you, Alex. Yeah, much appreciated. I look forward to it.

Alex: Nice. Well always a good way to kick off, maybe you can give us a little bit of background on who you are and what you do.

Introduction

James: Yeah, thank you. So first of all, my name’s James Cotton. I’ve been in fitness and franchising now for just over 15 years. I’ve worked with some of the larger brands. I initially developed and delivered Anytime Fitness in the UK in 2010.

Then I’ve worked with various brands from a private equity level and some new starts in the UK in the fitness sector. So I’ve pretty much experienced it all. I’d like to think.

I opened the first couple of businesses and started scaling now over a period of time, actually got up to just over about 180 units, about 250 franchisees across the network then. So you know, I’ve experienced a lot in the franchise industry when it comes to fitness. It’s very passionate.

Different types of owners, everything from investor types to owner-operators to give you a bit of an overview and I’ll delve into a little bit more details about how they work differently with fitness and franchising as we go through today.

Alex: Nice. Can you tell us a little bit about Franchise My Business? Your role there and kind of what you guys do from day-to-day?

James: Sure. So I’m one of the co-founders of Franchise My Business and what I do is support new brands. Even brands that have been operating for at least three years being profitable and looking to take a step into the franchise industry. So some of that’s in leisure, some of it’s outside leisure.

What we do is put into place a kind of project management approach to turning your business into a Franchise Your Business. It takes about 16 to 20 weeks and we go through a range of phases. Those phases focus on the products you serve, seeing what your offerings going to be, what you’re going to be charging, legalities as well as setting up systems and processes.

So when a franchisee comes into your business, they actually can get into business in a timely manner and have a good experience. So we offer that service. The service is called Launch, Recruit, Grow. So launching is the bit I’ve just spoken about. Recruit focuses on recruiting the right type of franchise profiles and grow is consulting with you as a franchisor for the length of your business as you start scaling your fitness franchise up.

Alex: Okay. Nice. Great. Thanks for that. And I guess to just start diving into the conversation one of the key topics we mentioned was that it’s guidelines for turning your fitness business into a franchise and generally just getting started.

Now, I think most people who are listening probably understand the high-level basics of what a franchise is, but maybe as a general overview of franchising as a business model and then also looking at who should consider this and why. So as a general overview of franchising maybe you can give us your take on that.

General Overview of Franchising as a Business Model

James: Yeah. Just to give you the general aspects of it. So what franchising is, is you taking your concepts, your business, and you’re looking for partners that are franchisees, and you’re selling your operations, your business concepts and you’re looking to replicate that, so copy and paste it with a franchisee in either territory or different locations.

You’re doing that and you’re looking at taking fees from a franchisee. You’ll take fees in different areas and normal areas of franchise fees initially. That could be for your license or for the know-how of your business, including you as a franchisor training them. The second aspect will be the ongoing fees or you could call them continuum fees and that will be for the length of the franchise agreement. Those are typically done in two different ways. It can be a licensed model or it can be a turnover-based model.

So licensed is typically a flat fee, maybe with some increments of payments coming through based on science targets or they can be a turnover-based model and that’s where you pay a percentage of turnover to your franchisor for the rights to be able to operate your business.

Alex: Nice. And from a business perspective, who do you think should consider this as a model and why?

Who should consider Franchising as a Business Model?

James: Yeah. Good question. So anybody considering franchising really probably has been through developing and growing their own business already. So first of all, they probably should have been running or trading their business for at least about three years. And in those three years, they would experience probably the ups and downs of what it’s like to run a business.

Firstly, any business should be profitable to a certain extent. It should be. So there should be some clear indicators that business has been growing and there are other interests. Maybe they’re at the point of where they would like to take the business on but don’t have the capacity to do so. That’s a really good time to consider starting franchising or thinking about franchising.

Bringing on the franchisee, Alex, is slightly different because rather than being an employee or a staff member, whilst employees are obviously fantastic, but having somebody with invested money into your business obviously could make a real difference.

Alex: Yeah. I can imagine those can be some of the pros and cons where you’re growing the business, but you also don’t have as much, let’s say autonomy over each individual site. What would I be correct in thinking that?

Pros and Cons of Franchising

James: Yeah, definitely. So there are pros and cons to franchising. It’s not perfect. Definitely not at all. So you know, the reason why it’s pro is because it’s a proven business model normally, right? It’s an effective process the company has already been through and you can kind of skip those first couple of years of learning what the franchisor has really done.

You just delve into their experience. You normally find that banks as well are more friendly to franchise. Banks than somebody starting their business on their own. So banks, well most high street banks in the UK, the four main ones or outside [unclear10:17] franchise departments and they normally cover the UK itself. Plus, you get economies of scale.

So if you’re thinking if you’re a franchisee and you want a franchise suddenly, if there are multiples of you, you can start driving down buying privacy services that supply you. So you start to make margins, better margins, and products. So these are all good reasons why to become a franchisee.

Another one would be the experience that you’re kind of tapping into. So if you had, you know a wealth of experience, you’ve already gone for it, and then the franchisee is got a support process that they can work for you on and that is their original concept, maybe problems have come across. [Unclear11:08] got a hand-holding experience of what you expect in franchising.

That’s why franchisors and franchising are so successful, the failure rate is very, very low versus a business that generally just operates on its own.

There are cons of course, as you said. So yeah, sometimes creative license can be a little bit limited, you know, but you’d normally buy into a franchise based on if you have the over inactive business interests, but one won’t always have the creative license that you want to, but you bond to a proven model.

Yes, there will be fees to pay, and financially there are, as I said already. But there will be fees that will be due to the franchisor but you got expect some can return. Give you an example, national marketing. You may pay to national marketing to help promote your brand and that national marketing, you as a franchisee want that to be spent on you in the right way to get more members or more marketing materials or campaigns to help your business grow.

Sometimes there is a restriction in products and services that you can sell, but again, you buy into a franchise but you’re looking for a proven model. So there are different aspects. You need to weigh that up as part of the due diligence process for any franchisee with a franchisor and that’s something that Franchise My Business help with as well.

Alex: Nice. Okay. And would you say there are any common misunderstandings about the business model that when you’re meeting with someone who’s unfamiliar or you hear this kind of come up time and time again, that you think people should be more aware of?

Common Misunderstandings About the Franchising Business Model

James: Yeah, I think that’s a good question. I think probably the biggest question that we have is a proven concept. So if you’re looking to franchise your business, well, there has to be data on it. It has the information behind why your business has been successful today.

So I would say of any franchisor and don’t be afraid to actually share that kind of information with your prospective franchisees. Now, just give you a good example. So if you’re looking to buy in a business, you won’t understand how it’s performed and seasonal trends and what worked, what hasn’t worked.

So offering the information up very early in the process, we create something called a Franchise Disclosure Document and that disclosure gives you all the financials of how much money they’ve made, how much money they’ve spent, where their sales have come from, and who’s the audience. What type of audience is out there and what kind of channels they’ve developed to be able to bring that income in.

Now, behind all of that, when a franchisor will normally supply a franchise manual, a bit like an operations manual, but it’s got a little bit more guidance. So kind of imagine tasks, like a project plan and for you to achieve as you go through your franchise lifecycle. A franchise lifecycle in a plan could be five or even 10 years, depending on what length of franchise agreement you’re looking to sign.

It wouldn’t be unusual to do a franchise agreement for five or 10 years, especially in the fitness sector. A lot in the fitness sector, I won’t go into who they are, but typically 5, 10-year franchise agreements with an automated another five afterward. So depending on what kind of model you’re looking to go for, it’s all consideration of what you believe is the right length agreement and what the returns are going to be.

You want to retain a franchisee so offering good service as the franchisor throughout the whole process so they can renew at the right time that suits them. Sometimes there is brick and mortar involved, so there are fixed costs. Normally fixed leases are typically the minimum is normally five years and they can be as long as 15 years. So again, giving yourself surety of what you’re working towards is really important.

And then there’s outside. It always doesn’t have to have bricks and mortar involved, but if it’s a territory itself, you may work within a defined territory and offer services outside or even educational and they work really well as well. So you can control your costs but your overall business might be slightly different based on the level of service or capacity that you have. So it’s trying to get a balance.

One of the businesses that we work with or I’m involved with is called RISE and RISE Fitness, we’re supporting personal trainers looking to get into the group delivery sessions in relation to personal training. So it’s a great franchise to look at to take a business model.

Personal training’s been around a long time, but evolve that with partners to be able to actually get some good returns. So that’s a really good franchise that we’re working with now.

Alex: Okay, nice. Yeah. We’ll make sure to put some links in the show notes to see if anyone here listening is interested in that in the UK. Hopefully, this isn’t too loaded of a question, but how does one start to build this business model from scratch? Like, if they are thinking that they have this business plan and they want to franchise it from day one. What differences do you think they need to consider versus someone who’s starting just a gym A.K.A. a non-franchise business.

How Does One Start to Build This Fitness Franchise Business Model From Scratch?

James: Okay. So if somebody is totally new and looking to franchise from day one, and it’s in their business plan from day one, well, the likelihood is you need to do a decent amount of research. Does it already exist in the market? What are the unique selling points? What I mean by unique selling points is what’s the experience going to be like? Is that core experience going to be different?

It’s going to make you stand apart from what’s already out there in the franchise industry. Don’t forget about the core products. Franchising, we sometimes believe why don’t we get franchisees that we can develop. Core products are really key. Core service, core product. And if you can really know a decent framework around that then building out your processes at the same time as you’re getting into business or getting the concept alive because you’re going to need all that information to be able to start replicating your business later on.

Devil’s in the detail. So going into real detail when you’re looking at space is really important. So understanding what’s there, having a really broad scope, a broad view look at the competitive landscape is really important and look the basics in probably what you’ve heard before is doing a business plan. I like to do financial pro forma, and that’s at least a three-year plan of what your financials are going to look like for yourself or your franchisees.

Now, that pro formas would cover off your typical costs, your income lines, expenditure lines, and of course the return on investment. You’re going to have to stick some investment in your business, I’m sure to start off. Franchising is key for that. But the difference is those costs have already been drilled down on. You’re probably should be getting the best price and best in most areas, and it might be systems and processes very much like Virtuagym that you may be using to understand what the processes are actually are going to be. Having partners like that onboard make a real difference to actually delivering something for the long term.

It has to be scalable. So scalable what I mean is, you know, if we can copy and paste that in the right way without too much hassle in a simplistic point of view, and you’ve got the right process and pillars for franchisees to follow, it becomes less time-intensive for the franchisor. Where you don’t have processes in place, what happens is your franchisee is going to be working and the franchisee is always going to be calling the franchisor all the time.

[Unclear19:46] come a time drain and what you want is really defined clear guidance. So having partners to do that is really important. When you have partners who will work for you like that, it can be a really, really good match or a marriage for a franchisee because they can see that define process that they know exactly where from Point A to Point Z and what steps they need to take to be able to achieve their return on investment and enjoy their business as well.

Alex: That’s good. So being ultra-systems-oriented, it’s kind of what I’m hearing from you.

James: I guess. Maybe I’m highlighting that point a little bit too much.

Alex: Yeah. Well, I think it’s important, especially as you look to grow. And would you say any company can be franchised or does franchising need to be the goal from day one?

Can any company be franchised?

James: No. I get this question quite a lot. Not every franchise, not every business can be franchised. We think we can, but in reality, if you’re going to franchise a business, you want to have some scalability in it. If you can identify the market where if it hasn’t happened before, well, there’s got to be a good amount of sales data behind your business to be able to go into that market.

If it’s in the market already, then somebody’s probably already opened the door for you. So it probably is franchisable. My first advice is if you’re looking at a particular space, do some research, first of all. Speak to us, Franchise My Business, we can give you some free advice have a quick look at that market for you, and just give you an idea of what’s out there and is it a market we suggest stepping into.

Some markets cost more than others in their nature. Some industries are actually bigger than others in their nature as well. So you need to give yourself a good amount of time. We normally do a study. We do something called a Franchise Readiness Questionnaire. We go for about 35, 36 questions about some of the things I’ve already spoken about. Is your business already trading? What kind of level is it trading at? What’s the marketing like? Are you ready as a franchisor? What kind of processes has he got in place? Are they scalable?

If not, you know, there might be some gaps that we can work with you guys to be able to gently move in the right direction. There are always going to be gaps in the business. That’s inevitable in life. We always [crosstalk22:27] business. It’s just having a plan or you’ve worked the right plan to be able to get there in the right way.

Alex: Got you. And one of the next key topics that we want to focus on was the successful practices of industry-leading franchisors, maybe we can also look at some of the common pitfalls that you guys see. But I think we’ve already touched on some of these, but, you know, let’s really focus on what enables a franchise to be successful.

What kind of things do you see there, outside of say like just scalability things like that we’ve already discussed? What other things do you see that enable some of the best franchises that you’ve worked with to really hit the levels that they want to hit?

Successful Practices of Industry-Leading Franchisors

James: Sure. So having, first of all, laser focus on what you want to deliver is really important. So if you’re in a gym environment and you’re looking to franchise, the key thing is that core product.

The core product and your delivery are really good and you believe it’s really good and you can impact yourselves. The next thing would be around what services that you can provide to your franchisees to be able to scale your fitness franchise. To give you an example, having like a service commitment of each other, having the time to speak around their key areas. An example would be a balanced scorecard.

So balanced scorecard and maybe a five or six different areas in that business, and that could be financial performance to sales to the retention of your members to product delivery and talking about those over a number of weeks, a number of months, really having a laser focus on those key areas.

What I’ve found is good franchise systems do that, and sometimes it can be a bit repetitive for a franchisor but for the franchisee, it’s really key for them because you’re focusing on key things for them to be able to scale their fitness franchise in the right way.

It is process-driven again, as you can probably tell. But core products, having the time to work with the franchisees on those key areas is how you scale a wonderful business. Those franchisees will then learn a lot. Guess what happens? Their success, they suddenly turn Franchisee Number One into Franchisee Number Two, and they’ll start taking multiple territories.

Proud to say one of my ever first franchisees got them up to about 15, 16 territories in the fitness center. So that gives somebody a real opportunity to grow their business or their franchisees grow their businesses as well.

There is the other side to this. So things that I’ve gone into franchise systems where you’ve had franchisees that aren’t as happy or happy franchisees. The reason why that normally is because they’re not getting the return on the investment, normally as number one. Number two is they’re obviously working hard in the business, but maybe it’s not working as well and maybe the relationship with a franchisor and a franchisee.

Of course, there’s normally a legal agreement in place, a franchise agreement. But really all that franchisee wants to do is get a return and be successful. So concentrating on their core products is normally what’s required to be able to get them moving in the right direction.

But there are other examples where a franchisee might not be suited to your franchisor network. And that’s making sure there’s a recruitment and selection process, clearly defined. I say about territories, but really a franchisor should be awarding territories based on if they believe that franchise profile’s right for their market or right for their business.

You know, they’re going to have the energy, entrepreneurial drive. Do you know if they going to follow systems and processes to a point? They’re going to bring some flair to it under your umbrella. Not every franchisee is successful of course, but you [unclear26:54] top 50 or top 20 franchisees why they’re successful is because they follow processes, the systems and what the franchisor brands are about is some of the reasons why it works. When you start trying to change what’s already worked are sometimes the reasons why it doesn’t work as well.

Alex: Yeah. Okay. So a lot of trust is needed from that franchisor for the franchisee to carry out not only like the business vision, but that they trust that they can follow the systems in place and that they’re not going to be too rogue or anything like that.

James: Yeah. Look, you know that’s the reality of it. That’s why, I guess I talk that way, I talk a little bit in relation to systems and processes. You don’t have them there, guess what’s going to happen? That franchisee might not get the return on investment and that’s quite a big thing in my view, you know.

They should get a return on their investment. If they’ve bought into processes that have defined that they should expect that and the franchisor should work for them to be able to deliver that in the right way. That’s as long as it works for both parties, of course.

Alex: Great. Yeah. And I remember one thing that we talked about in our pre-call was really thinking about how you can communicate a competitive edge and then how to stand out from other franchisees. Now, this is obviously important for any business model, but how do you think this shows up perhaps a little differently in the franchising world and maybe what advice would you have there for anyone listening in?

How Can You Communicate Your Competitive Edge And How to Stand Out From Other Franchisees

James: Yeah. So having a competitive edge or somebody looking into your business and understanding straight away what that core product’s about, what does it do, and then they’re going to compare you, irrespective, they’re always going to compare your business with somebody else.

So if you can summarize your business within a few, three, or four words, and you can convey what your business is about or even a sentence and get that across to either a consumer or franchisee why they should be buying into your brand. That’s really important. I’ll give you some examples. Initially, when we launched the leading franchise brands in the UK, there are only two franchise brands there. So it was very easy to communicate, well, 24-hour gym, franchise midmarket. You know it kind of hits home very quickly.

High-end quality finish versus a budget offering and that’s all. So at that point in time that was coming out of the last recession in 2009, 2010. It was very easy to communicate what the landscape was like. If I look at that industry at the moment, there are probably some 15 or 16 main players, looking at the fitness industry.

So you need to be really clear about, hey, this is the space that I’m going to own in that industry and this is why. If you can communicate that really well, that sets you apart from the others. That’s why I say concentrate on that core product to be able to set yourself apart.

Alex: Nice. Okay. And we mentioned as well, it would be good to highlight or shine some light on some of the common pitfalls you see, and maybe this is with people you work with or people you don’t work with, but you saw the franchise maybe not hit the targets that they need to or falter a bit early. So what would you say are some of the common pitfalls that people fall into when trying to scale their franchise business?

Common Pitfalls When Scaling Your Fitness Franchise

James: Yeah, I think there are a couple of areas. So first of all, a common pitfall is marketing not having enough resources to scale your fitness franchise or understanding that a sales process takes a period of time. So you need to generate a certain amount of leads. What we normally see is in our 50:1 franchise prospect kind of sale ratio, it’s not unusual and you’ll see that with higher-priced brands.

You may even see a higher ratio with maybe a lower price kind of a business and brand. Well, if you need to generate that amount of prospects, you need to use your marketing money well. So on a broad spectrum, but also having a specific marketing plan that’s going to really drill down on the franchise profile you’re looking for. Sometimes we can be too broad stroke and advertise here, here, and here.

You might be hitting some of the audience, but your audience profiles are probably down here. [Unclear31:24] in the details. So focusing on, right, I need to focus on this individual, this profile type, where does that lead me to. Well, that leads me into certain marketing channels and that’s probably where you need to be.

So having enough money initially. I’d normally say to generate a franchise, it’s not unusual to commit about 3000 pounds to generate about 50 prospects of the right profile type and individuals who have the money to invest in your brand. And of course, if you’re trying to scale multiples, if you said over the first year, you want to try and scale between four and eight, well, very quickly you can work out what kind of financial commitment you might need to find that kind of right kind of profile.

Alex: Okay.

James: Yeah. Does that make sense? Was that the first part of the question?

Alex: Yeah. That makes sense. I’d be curious to know how people react to that 50:1 ratio. Do they think that’s super high? Do they think it’s low? I mean do you meet some people who think one in 10 is going to sign up?

James: Yeah. You’re probably right. So I’d probably meet both sides. They probably think sometimes it’s lower. But in reality over franchising a lot of different businesses over the years, it’s probably where it ballpark kind of sits. Just to explain why. So if you’ve got a franchise inquiry, first of all, we need to go through a sales process. Give them a disclosure of what your business is about. You know, if you’re going to buy that book on the shelf, it’s probably the dummy’s guide of your business and it’s pretty much what you need to kind of disclose to them. It’s all the financials and everything.

Alex: Yeah.

James: Then you need to walk them down a path and that’s the path confidence of that your business is right for them. How are they going to work in that business? What kind of role are they going to take? Spoke about owners’ operators versus investors types. Normally a cheap based, lower level based branding in relation to financial input, we’ll have owner-operators normally behind that.

But where you’ve got business that may need half a million or up to a million pounds’ worth of investment, you normally see franchise types that are owner investors, or investor types. It may be multiples of them. So you may have three or four owners owning one franchise brand. That’s not unusual because they’ve collected lots of money together to be able to give the opportunity.

Then this all falls back again, down to your franchise profile is who you really looking for? Who do you really want? So that kind of process. And then moving into a franchise agreement. A franchise agreement is different than an employment contract, of course.

There are some legalities in it and it works both ways. There are commitments for a franchisor. So what they need to commit to that franchisee. Then there’s the franchisee, what are their obligations with the franchisor. Normally we always suggest that should go through franchise law solicitors.

They may have that for a few weeks. So the sales process from inquiry to sales, the quickest really is six weeks. But normally we find about three months is the sales process for somebody to come into the franchise sector as a franchisee.

Alex: Okay. And this is one I guess I’m more curious about from a personal perspective who have had these conversations with people who are trying to scale their own fitness franchise business and their growth plan it seems a little ambitious. Now, would you say like being too ambitious or thinking that you’re going to have 500 locations in three years? What would you say to someone who has that plan?

James: I would say that’s great to have fantastic ambitions. I would never knock the attitude for that. The realities are slightly different.

Alex: Yeah.

James: Yeah. From experience, I think the most that I’ve been involved in one year in opening physical locations was about 48 locations in one year and that had a team of about 40 to 50 people behind that plus franchisees. So, you know, nothing’s impossible.

I’m not going to say it is impossible, nothing’s impossible. It’s all about resources and how are you going to force yourself to get up to those kinds of numbers? I would normally say I’ve had lots of conversations like that. You know, I want to get three to five, but in reality, I look at it in five levels.

The first level is your first baby steps and that might be four to eight franchisees. Your next level is; I normally find you double. If you’ve got four and then maybe you’re moving up to eight or even 12. And then you’re looking to try to double again. And if you can go through these first three levels, you’ve probably got a really solid foundation of this franchisor.

And then level four and five is what I call kind of outrageous kind of numbers, if you can push up to above 50 and onwards, then you are probably on good track to do that. Those five levels can happen quickly. It doesn’t have to be each year. They can just be five levels that you’ve set yourself based on what resources you have to be able to scale a business.

Alex: Got you. And as far as data, like the data perspective, what kind of information are you guys providing at Franchise My Business that you feel is really important to position your new franchisors for the best growth?

Data Provided by Franchise My Business for Growing Fitness Franchisors

James: Yeah. Good question. So we look at data a couple of ways. So we obviously see what sells and what doesn’t sell across various different sectors. We work with probably about 23 different franchisors in different sectors. And we can probably give you an idea of what your prospect levels are going to be like.

We can give you an inkling of the cost typically what it’s going to be like across those sectors and what you’re going to kind of generate through franchising. So we have the data in relation to proof of what a franchisee will cost. In relation to your data, it works both ways as well.

So bring your data into franchising and using that to underpin your franchise sales. So it’s kind of a marriage. We kind of expect you to be the expert in your business because it’s your business. We’re kind of the expert of franchising, and we kind of try to marry those up together to ensure there’s a really strong proposition.

Almost look at Franchise My Business as that kind of a back of the house support. So when I said about having 40 people, of course, that’s great but that’s a lot of costs. You can look at Franchise My Business in relation to resources to be able to get house resources to kind of push that franchise elements forward.

Alex: Nice. Okay. And I think any topic or any webinar in the fitness industry right now, it’s almost obligatory that we need to ask about how COVID has impacted things. How have you felt the pandemic has impacted the franchising side of the fitness industry specifically?

The Impact of COVID on the Franchising in the Fitness Industry

James: Okay. So surprisingly going through the lockdowns, we had seen an actual increase in prospects. We did through the lockdown. The reason for that was I think obviously a lot of people had time to think about their own lives and we have seen an impact slightly in relation to performance. There was a backing off. And then what we’ve seen, we’re almost back up to pre-COVID levels, not too far away now. So it’s been strange in a way.

So we’ve had strange enough in a positive way if I can say that. We’ve had more inquiries. People are suddenly taking the time to think about their careers and think about, well, you know what? Do I need a second career? Do I need to own something? Do I need to be a bit pragmatic about what my future looks like?

Our franchise profiles are really interesting, probably average age between 30 and 45. It’s always that kind of age group and that’s not unusual. So I think the franchise arena fitness has changed a little bit. You know very much the consumer is thinking about the safety, but they’re thinking about the experience. So experience works a couple of different ways. One, they want an online provision.

They want a handhold provision and they want something they can work out at home or outside. Likewise, they also want the experience still. They still want to experience something with a trainer or inside a facility. So the consumer is looking at it where before maybe pre-COVID, they might be looking at one or two angles and now they’re multiple angles.

What would happen if COVID comes again, or do I have at-home exercise available? Do I have virtual freedom? Maybe they don’t use it, but it’s nice to have. It’s reassurance. Plus, you’d be surprised how many consumers in the franchise industry will not blend their offerings. So you spoke about these USPs, well, rather than just the four walls, if you need to have a virtual offering to your consumers or your franchisees and there has to be development within that. So I think it’s really important now.

So going back to your question, COVID has changed the landscape of fitness from a consumer’s perspective, but there is comfort in understanding that these pre-COVID levels have almost got back to quite quickly. Confidence is coming back. But what’s happened the markets opened up, I believe, you’re seeing the home workout marketing really explode during these periods.

Alex: Yeah. Definitely.

James: I don’t see why franchising and the gym industry or fitness industry as such can’t grow the market because of this and I think it is. I think the next couple of years are going to be really interesting especially from a digital perspective. You can involve technology within your workout.

Heart rate monitoring is really important, tracking your maps, tracking your workouts, suddenly understanding your dietary requirements and what they mean to a consumer or a franchisor. Plus, we’ve always kind of felt that it’s been a face-to-face discussion, but guess what? We doing it obviously Zoom today. A lot of Franchise My Business inquiries, if I told you in the last 12 months, most of the business has been closed and franchisees have been closed over Zoom.

I’ve never met them personally, but it’s just shown how the world’s changed a little bit over the last 18 months or so.

Alex: Yeah, I think that’s a lot of different sectors as well. I mean, in my day job I feel the same way. I meet a lot of people only digitally. Maybe I’ll run into a minute event or something like that, but I think the business trip as well, having them come down to London to visit you, or you go somewhere else to visit them, maybe you can just like skip a lot of that.

And do only one or two, like kind of finalizing meetings to just make sure that the relationship is solid there. But I think, a hundred percent, we see that in our side of the business as well, that things have just changed as far as how you meet and how you communicate and how you close deals.

James: Yeah. A hundred percent. I think being really informative and going into more detail at the front end with a client now and he can visualize that. So if he has to visualize that gives them confidence and then you have the testimonials and the experience of your business beyond that. Seems to be winning and people accepting and buying like that.

I think it is a really good experience for everybody. Makes everybody work a little harder, I think, which is good. But makes you think about the details. So which is great as well.

Alex: Yeah. Nice. And one of the final topics, I think there’s been a lot of threads of this already, so we may not need to revisit it in its full depth, but it’s all about growth and managing franchises at scale. So we’ve talked about, I think it was your five pillars of how people can grow. 

So, you know, imagine you’re discussing with an existing franchisee who has maybe two to five locations and they want to take that up to 20 to 50, if there’s anything else like I said, I think we’ve discussed some of this already, but what kind of advice do you have for someone who’s in that position who’s ready to really step on the gas and make the business really start to expand?

Advice for businesses who want to scale their franchise

James: Sure. If you have a couple of units out there already and really want to kind of kick start the next step, well, first of all, it’s just looking down in your business. What has worked, what hasn’t worked, and being really honest about those. The next step is building up layers in relation to how you’re going to get out to the audience. You know what your audience is now.

You’ve tried a couple of things and it’s really, really homing in and being very narrow-focused on those channels. Start with something that we can do for sure with you. So we can focus on those channels. We’re going to get you results and getting results needs all that wonderful kind of data that you have in the experience of people in your business. We kind of bring that together.

Then we go quite hard at it, in relation to the prospect numbers. So if we look at those ratios, we put a plan in place so that if you’ve got three or four units, you want to get up to 20, we can talk and we can give you a very clear idea of how much it’s going to cost you. What kind of resources we would need to put into this, you would need to put into this so we can get those up to 20 units within a timeline that you’re looking to achieve?

You’ll find that there are lending institutes with a very clear plan. We can support those conversations. We can say some of those high street banks are speaking about, very close relationships with which we can help navigate those conversations and just give you a stamp of approval from Franchise My Business of what the plan looks like, where that money is going to be spent if you’re looking to borrow money to stretch you and hit those targets.

Alex: Nice. Yeah. And once they start to reach a larger scale, just using a name that I think most people in the industry will know, let’s say like Anytime Fitness, once they start to reach this scale, what would you say starts to change as far as the business operations are concerned?

James: Yeah. So you’ve probably been generalizing quite a lot up to probably 21 units. You need to kind of specialize. So how your business kind of runs, you will need to get specialists in certain areas. Give you an example.

Maybe business performance, performance of the businesses is key so then getting a return on investments who may be specialists in those areas. You also find that core products and delivery, you may have been generalizing that to a point, again, you want to specialize in those key areas because they’re going to drive certain initiatives for your business so you can start scaling up again. I probably would say interacting with your franchisor is really important.

So that would include having franchisees come together, talking about what works, what doesn’t work. Taking that as ammunition to be able to go again is really important. Getting feedback because it’s not a perfect world. Getting feedback on what marketing initiatives work. What got the best feedback? What are your consumers saying? So having a broad stroke or a plan.

Let me put a kind of map in place and that helps those individuals that want to specialize because then the franchisees are just going to get the best kind of advice getting enforced and support to ensure that the business is deliverable.

The last thing I’d say here is it’s really important to be really consistent with a franchisee from a franchisor and Franchise My Business with a franchisor in what that plan is going to be. You must have that plan and he must have those touchpoints about either that those balanced scorecards or the overall metrics and what the business is going to perform on.

I think if you have those touchpoints and they’re very clear for everybody to see, there’s no ambiguity of relationship. Relationships are strengthened, and everybody understands what they need to do. It’s when there’s ambiguity there, you tend to trip up, and franchisees kind of deviate a little bit from the core product and start doing their own things because you’re not fulfilling what needs to be fulfilled as a franchisor.

And that’s why they started deviating. Be it marketing campaigns and things like that they shouldn’t have done if that makes sense.

Alex: Okay. Yeah, it does. You did remind me of one of our larger franchise clients in the US, they have an annual conference that they host for, I think all franchisees. There are about 180 franchisees under their portfolio.

So maybe that’s a good one to just highlight. How often would you say you should bring franchisees together or how often should there be this kind of group communication? Should it be annually? Should it be half-year or maybe it depends on the business model?

James: Yeah. Well, I guess it does depend a little bit on the business model. [Unclear50:21] a smaller franchise network, then I think more regularly is actually better, so at least twice a year or twice a year. If it’s a bigger franchise network, it’s got a few hundred or even a thousand franchisees and it’s not always possible, so I would normally put key personnel in those key territories or nominated franchisees nominated by the group that comes together, maybe three times a year for an enhanced session with maybe it might be only eight or 10 people, but they’ve been voted in or selected by a franchise network.

I would say there is a need to be a franchise conference, maybe not annually, but at least every 18 months to two years, which would be the maximum that I would wait. They’re greatly beneficial. They normally happen not over one day, a three-day event or longer, depending on the size of the franchise businesses. Normally a lot costs, a lot of expense that goes into those. We do them at Franchise My Business as well.

We’re franchisors actually bringing franchisors together to talk about different industries and ideas sometimes, and then that kind of works. So but yeah definitely have the events. It’s great for networking.

Audience Questions

Alex: Awesome. Okay. And one last, we had an audience question come in. It was just about to say like a book recommendation for anyone in this sector that you could recommend.

James: Yeah, that’s brilliant. I probably can recommend a few books. There is a franchise book, I can’t remember his name. I’ll send it to you after Alex but I’ll just describe what it talks about. It talks about the franchisees’ experience and what they go through is kind of the happiness curve, if you want to call it that. Every franchisee will have peak excitement normally when they sign up. They would go down below what I call the normal lines.

They’ll be quite emotional, unhappy because of spending money, maybe business isn’t performing, and they’ll finish up kind of midway. Every franchisee goes through this kind of curve and what will happen they might go through it multiple times. They may go through it very, very slowly. You as a franchisor will need to recognize where they are in kind of their happiness curve.

And the reason why you want to recognize that is you can work with them in different ways. They might be feeling pressure, stress. Think about their mental health. You want to kind of think about how you as a franchisor are going to interact with them when you know where they are. And that’s something I actively discuss with franchisors and their franchisees.

Where are they in that process? Where are they in their curve? Where are they at this point in time? That just helps you kind of manage them. I do have a couple of books. I will email them over to you though.

Alex: Certainly. Nice. I think one that I feel like it gets mentioned pretty much every week on the show, but it’s Atomic Habits by James Clear and when I hear you talking about super clear cut systems in order to really reach your goals, I think that’s one that always can be threaded into this kind of conversation.

So, you’re starting with the small systems in mind and focusing on those, and then that leads you into achieving these big ambitious plans that you have for the business.

James: Yes.

Alex: Okay. The final question then. Where can listeners who are interested in learning more about you and what Franchise My Business does, where can they go to find out more about the work you’re doing?

Conclusion

James: Yeah. The easiest place hit me up on LinkedIn, I guess to start off with, James Cotton, Franchise My Business. There is our website. Again, it’s www.franchisemybusiness.co.uk. So quite simple there. Those are the two most regular places, or you can email me just james@franchisemybusiness.co.uk is absolutely fine. I’ll get back to you fairly quickly.

Alex: Awesome. Well, hope anyone who’s listening in has gotten a lot of value from today in how to scale their fitness franchise and if they want to reach out to you, they now know where to find you.

James: That’s great. Alex, I appreciate your time. Thank you for that.

Alex: Likewise, James. It’s been a really good conversation. I appreciate your insights.

James: Thank you.

Alex: Great. All right. Well, this has been another week of FitNation’s Lunch & Learn. Thank you for tuning in, and we will see you next time.

James: See you!

Nan de Bruin

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