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Business Insights Q&A - John Treharne (The Gym Group PLC)

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This is a recording of the 1 hour webinar with John Traherne, the CEO of The Gym Group plc.

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Trends in the number and size of health and fitness clubs operating in the UK over the last 10 years, including organic business growth and takeovers

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Horizontal integration in action - Virgin grabs Esporta | tutor2u Business

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► Subscribe to the Financial Times on YouTube: http://bit.ly/FTimeSubs The Gym Group, one of the UK's low-cost fitness chains, has set the offer price on its initial public offering. Lex's Robert Armstrong and Jonathan Eley crunch the numbers of the changing fitness business model.

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Organic Growth Strategies for Success - Low-Cost Focus Pays for Pure Gym | tutor2u Business

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In just six years, low-cost gym operator has grown from a start-up in Leeds to becoming the UK's leading gym operator with over 500,000 members. This is a stunning example of how a low-cost, strategy of focus can win in a highly competitive and fragmented market.

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SEE IT FIRST: PureGym Liverpool Central!

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Check out the first images from inside PureGym Liverpool Central!

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Trends in the number and size of health and fitness clubs in the UK  over the last 10 years,
including organic business growth and  takeovers

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Budget gym operator Pure Gym has acquired one of the fitness industry's best-known high street brands, LA fitness, as it flexes its low-cost ethos in the face of costlier rivals.

Pure Gym said the sites used by its mid-market competitor would be given a no-frills makeover, which means commandeering back office space and closing pools and saunas to fit in more machines and members.

Commentators have described the takeover as illustrative of a split in the UK fitness market between low-cost clubs such as Pure Gym, which charge memberships by the month, and high-end gyms with annual contracts and specialist training.

The purchase brings the number of gyms under the Pure Gym umbrella to 141 with a further 16 expected to open this year. LA fitness launched in the early 1990s and was one of the fitness industry's founding gym brands. Founded in 2009, Pure Gym is majority owned by the US private equity firm CCMP Capital.

Until the Competition and Markets Authority (CMA) approves Pure Gym's plans, the businesses will operate separately. If the regulator decides that some of the LA fitness gyms cannot be changed to Pure Gym clubs for competition reasons, it is likely they will be sold on.

Pure Gym's chief executive, Humphrey Cobbold, said the model of monthly rolling memberships or paying for one-off visits will be put in place in the revamped LA fitness sites, getting rid of the 12- and 18-month contracts which had been typical up to now. Cobbold was appointed chief executive of the gym chain in January after joining from cycling retailer Wiggle. A fitness enthusiast, he hails from the Cobbold brewing family from Suffolk which in previous generations produced a governor of the Bank of England.

When an LA fitness gym is closed for its makeover, the members will be informed and will not be charged while the site is shut. When the gym reopens, their membership will be restarted on the monthly contract model, unless the member asks to leave.

"If they say 'I don't want to be a part of that gym' then we will say 'OK we will not take any money from you'," Cobbold said. The small number of customers who have paid their subscriptions upfront will be reimbursed.

When clubs have changed over to the Pure Gyms brand in the past, Cobbold said, typically more than half of the members transfer. Monthly Pure Gym membership costs range between £9.99 to £26.99, although the prices may increase for some central London clubs, Cobbold added, with typical LA fitness contracts costing between £30 and £65 a month.

The arrival of budget gym operators in recent years has put pressure on clubs in the mid- and high end of the market. Newcastle United owner Mike Ashley has also joined the fray with a commitment to open a chain of Sports Direct gyms, the first of which is in Aintree.

Ray Algar, a fitness industry analyst, said he expects low-cost gyms to continue building momentum but also for there to be a rise in the number of people attending specialist "boutique-style" studios, where experts run classes.

"I see the UK health and fitness market bifurcating or forking along two distinct pathways - self-service and supported. Many consumers have steadily been taking control of activities once outsourced to others - self-scanning our groceries, booking hotels and flight tickets - and enjoy the empowering feeling of serving ourselves," he said.

"Low-cost gyms have tapped this phenomenon very effectively, attracting members seeking a narrow - machine-based - fitness experience and content to serve themselves. However, perhaps less conspicuous is the second pathway, which I describe as supported, where customers seek and pay for a more guided experience. This is where the very best specialist studios are to be found purposely engaged in helping customers reach a desired health and wellbeing aspiration."
Topics

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And stretch! Pure Gym flexes its no-frills muscle with LA fitness takeover

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Budget gym operator Pure Gym has acquired one of the fitness industry's best-known high street brands, LA fitness, as it flexes its low-cost ethos in the face of costlier rivals. Pure Gym said the sites used by its mid-market competitor would be given a no-frills makeover, which means commandeering back office space and closing pools and saunas to fit in more machines and members.

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Edexcel Paper 3 Research 2017 UK Health & Fitness

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Edexcel Paper 3 Research 2017 UK Health & Fitness -  2 of 2

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Edexcel Paper 3 Research 2017 UK Health & Fitness -  1 of 2

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Smart young firms are applying pressure to established companies - often with tech - across industries such as finance and property. The fitness sector is no exception to disruptive forces, as we constantly find out in our annual Future 50 initiative.

Barclays Business reported in January that the number of its customers operating a small health and fitness venture had surged by 37 per cent in just three years. And consumer spending is higher still, with 41 per cent growth between 2012 and 2015.

It is particularly interesting that small offerings are winning money from customers at a time when the traditional large gym chain sector has never had more variety or competitive options.

For example, 2009-launched Pure Gym has secured 650,000 members since launch and has enough capital to open 30 gyms a year. In May 2015, the rapidly growing firm struck a deal with LA fitness to acquire 43 locations and now boasts more than 120 gyms.

Its appeal lies with its 24/7 opening hours, low cost monthly fees of £9.99 upwards and no contracts to tie users in.

Set up in 2007, The Gym Group has a similar approach on a smaller scale - the pair actually planned on merging but the deal collapsed - and Sports Direct has also got in on the act with Sports Direct Fitness.

Comparatively, long-standing Fitness First has prices that vary between £24 and £80, while high-end chain David Lloyd prices are at such a premium that the details aren't listed on the website - instead, prospective customers are encouraged to enquire.

So how does one shake up such an industry dominated by such large opponents?
The power of the pioneer

Glynn Roberts is one individual who set out to change the scene a decade ago with Essex Boot Camp (EBC). The former Royal Marine commando had a goal of getting people into the great outdoors to provide "understanding that there are better, more enjoyable ways to train other than the gym".

"I started EBC almost ten years ago before boot camps were heard of and always knew it would become a popular way to train," he told Real Business.

He's quite right, of course. Many personal trainers across the country have launched boot camp operations, while gyms even provide classes with the boot camp tag.

However, the pioneering approach has seen Roberts and partner James Sweeney, a sports scientist, successfully grow EBC to support 2,000 customers a week.
The beauty of boutique branding
James Balfour is the co-founder of 1Rebel, a London-based enterprise billed as a "boutique" fitness chain.

Balfour told Real Business that he and business partner Giles Dean are particularly keen to steer entirely clear of the "vanilla design" found in chains, for a whole new beast.

Of course, Balfour is all too familiar with chains - his father Mike is the founder of Fitness First. He acknowledged his father's accomplishment in producing something that "developed an affordable market, which didn't really exist" and called it a "fantastic concept".

Having started his career as a stockbroker, Balfour didn't immediately set out to follow in his father's footsteps. He quit his post at 24, however, and decided to pursue a dream of climbing Mount Everest. Having accomplished the feat, it was then that he started a gym brand called Jatomi with his old man.

"We did a 'Fitness Second' and, using the Fitness First model, we opened big clubs across Europe, Turkey and SE Asia," said Balfour, who came to desire something different to an existing design.

He continued: "I saw the trends of SoulCycle in New York and Barry's Bootcamp, as well as the change in millennial consumerism. I wanted to offer something with a pay-as-you-train option, rather than making people sign 12-month contracts that look like mortgages, bringing together a group that would experience a community environment."
Read more on the fitness industry:
Balfour left Jatomi to start 1Rebel, which he said would be "much more relevant than dull, big box fitness operators which are letting people down". Thus the ambition to launch a "distinctive brand" the opposite of a "vanilla design with blue walls and wooden floors" commenced.

The referenced SoulCycle is a spinning club, while Barry's Bootcamp speaks for itself. Believing that consumers still want choice, 1Rebel comes with three options: Ride (spinning), Reshape (boot camp) and Rumble (boxing).

But, at £20 per class - unless you buy in bulk - 1Rebel is not particularly cheap and that's because Balfour is reaching for a premium audience with a brand he calls "edgy and luxurious", describing the club's design as "industrial luxe".

On the topic of small fitness ventures in the UK achieving a growth of more than a third across the past three years, Balfour believes that's because boutique studio classes actually come with "attractive" prices when compared to personal trainers.

He said: "Look at your typical Fitness First and we're not challenging membership margins, we're actually challenging personal trainers. A PT session costs around £60, but we're providing the results of a PT within a fun group environment.

Based in London, 1Rebel opened its first club in St Mary's Axe one year ago and followed up with a second location in Broadgate Circle. The quick growth has been achieved with capital from the founders and shareholders, which was bolstered further with £4.5m from Crowdcube investors across two rounds of £1.5m and £3m respectively in 2015.

Interestingly, Pure Gym co-founder James Jack was a key investor and contributed £300,000 during the second investment. But Balfour is adamant 1Rebel will use its small boutique format as a strength to "take market share from unfulfilling big box offerings."

With scaling in mind, the goal is to reach ten 1Rebel sites in the next five years at a pace of just two a year. The capital from the crowdfunding campaigns, along with organic profit, is set to pave the way for the growth.

As for the target audience, 1Rebel customers - known as the Rebel Army - tend to be likeminded; fitness and fashion forward, with eyes on the latest exercise trends.
Boutique, of course, is the latest trend and Balfour thinks there's still room for many players to join in.

"There can still be many more boutiques and, really, the fitness industry should go boutique. The current fitness industry is built around relying on people signing contracts and not turning up - if Fitness First is so proud of the product then why don't they tear up the contract to see who stays? The fact is they won't," he said.
Continue reading on the next page for the importance of originality in the industry, and the former England footballer out to make a fortune from a US-cum-UK fitness venture. By Zen Terrelonge

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David vs. Goliath: How boutique fitness sector is squaring up to gym chain giants - Real Business

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Smart young firms are applying pressure to established companies - often with tech - across industries such as finance and property. The fitness sector is no exception to disruptive forces, as we constantly find out in our annual Future 50 initiative.

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To purchase click here.
Number of UK Fitness Members exceeds 9 million for the first time
- 5.3% rise in total membership and 3.2% increase in market value -

- Total market value now estimated to be £4.4 billion -

- Pure Gym become the largest UK Fitness Operator -

The 2016 State of the UK Fitness Industry Report reveals that the UK health and fitness industry is continuing to grow. It has more clubs, more members and a greater market value than ever before.

The 2016 report highlights that the industry has experienced another year of impressive growth over the twelve month period to the end of March 2016, with increases of 1.9% in the number of fitness facilities, 5.3% in the number of members and 3.2% in market value.

For the first time ever, member numbers have exceeded 9 million. 1 in every 7 people in the UK is a member of a gym, an all-time penetration rate high of 14.3%.

The influential low cost market with its large membership numbers, online joining, 24/7 opening hours and low price points has continued to expand rapidly and drive the growth in the industry. The private low cost sector now accounts for 12% of the total number of private clubs, 13% of the private market value and a huge 32% of the private sector membership.

For the first time ever, a low cost fitness operator is the UK's number one. Pure Gym have added 60 clubs in the last 12 months taking them past the 150 mark and into the top position.
Summary of Key Facts

There are now 6,435 fitness facilities in the UK, up from 6,312 last year.

Total industry membership is up 5.3% to 9.2 million.

Total market value is estimated at £4.4 billion, up 3.2% on 2015.

The UK penetration rate is 14.3%, compared to 13.7% in the previous year.

224 new public and private fitness facilities opened in the last 12 months, up from 191 in 2015.

Commenting on the figures, David Minton, Director of The Leisure Database Company said: "This is a great set of results for the industry. The uplift in each core index shows the potential when technology, innovation and customer centric fitness products come together".
Notes
The State of the UK Fitness Industry Report is compiled from the most comprehensive review of the UK fitness industry, involving individual contact with all sites. The reporting period is the 12 months to 31st March 2016. The audit and resulting figures are compiled by independent leisure market analysts, The Leisure Database Company who have been monitoring the performance of the fitness industry for over 30 years. Further details of the report can be found here 2016 State of the UK Fitness Industry Report.
Further Information: The Leisure Database Company
The Leisure Database Company is a leading independent database specialist who provides key market intelligence and analysis across the industry. Established over 30 years ago, the company works with a wide range of fitness operators providing member profiling reports, new site analysis and latent demand estimates. 2016 sees the launch of 2 new services; LeisureDB Mobile Apps and the LeisureDB Social Media Fitness Index.

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Press Release: 2016 State of the UK Fitness Industry Report

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To purchase click here . Number of UK Fitness Members exceeds 9 million for the first time - 5.3% rise in total membership and 3.2% increase in market value - - Total market value now estimated to be £4.4 billion - -&amp

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Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

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Canon Takes a Major Step into Health Care

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Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

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Technology is shaking up the fitness industry and making established gym chains work up a sweat.

New apps are challenging traditional membership structures and introducing more flexibility into the market.

For example, ClassPass is an app that allows you to book into fitness classes in over 30 cities around the world - including New York, London and Sydney.

One monthly fee - currently set at £79 - gives you access to around 8,000 studios across the world. And you can book classes up to four times a month at each participating gym.

"Our platform makes fitting fitness into your schedule really easy and flexible, as opposed to making a big commitment with little variety," says Payal Kadakia, ClassPass founder and chief executive.

"I feel we've inspired people to be more active by removing many of the barriers to working out and encouraging discovery."

Ms Kadakia, who launched the service two years ago in New York, saw a gap in the market for a gym app which gave you flexibility, and value for money.

"I was looking for a ballet class one day, and it was impossible to find something," she tells the BBC.

"I realised that other people might be experiencing similar issues, so I wanted to create a service that removed as many friction points as possible."

Flexibility

Similar services are cropping up around the world as start-ups see opportunities to challenge the perceived inflexibility of established fitness club memberships - most of which involve compulsory annual contracts.

In India, Devi Prasad Biswal and Avijeet Alagathi recently set up Book Your Game (BYG), an app that lets users book fitness classes on a per session basis, rather than having to sign up for full membership.

London-based Somuchmore offers access to 40,000 classes at 280 participating studios, gyms and spas, and demands a monthly membership that can be paused or cancelled at any time.

And MoveGB is a fitness service and app that partners with bigger chain gyms allowing you to visit them - without a monthly contract with the gyms themselves.

Expansion

But what's in it for the established studios?

"It allows studios to build up a new client base, especially if they're relatively small, have no budget for PR, and want people to start talking about them," says fitness industry marketing consultant, Natasha Richardson.

Studio Lagree, a pilates concept studio, founded in California, has attracted new customers after linking up with these fitness apps.

"Once clients in California experienced the transformation from the three classes a month, via ClassPass, they tended to buy more, through us, to fill out their fitness requirements," says Robert Lepone, Studio Lagree director.

This influx of customers allowed them to expand their concept and studios into different US cities, as well as the UK, opening their first London studio last October.

But while some studios benefit from the new clients ClassPass can bring in, others are unhappy with the revenue-sharing arrangements and have been leaving the platform, particularly some studios in London.

The danger is that if the offering becomes too narrow, ClassPass, and apps like it, may lose their appeal.

Working out

But established gyms and fitness studios are having to respond to the app generation.

"It's making chain gyms fight for their customers," says Ms Richardson. "A couple of years ago there was no alternative, but now that the boutique gyms are more accessible it's made them up their game."

Virgin Active is one of those gyms to do so. As well as adding a number of new classes in the last year, they have introduced Discovery Lab, where experts share their own experiences and ideas to bring new perspectives to classes.

For example, mountaineer Kenton Cool recently launched the Apex Altitude studio with Virgin Active, sharing his knowledge of altitude training.

Fitness First has followed suit with new freestyle training classes, as well as working closely with UK athletes to create classes around their training techniques.

Virgin Active's app allows you to book onto their classes, while Fitness First's CustomFit app gives gym-goers the opportunity to create personalised workouts, set goals and access exercises and videos from their mobile.

Personalisation

And it's not just gyms that are seeing the benefits of using technology to give customers a better experience.

James Crossley, a personal trainer and owner of Chelsea Fitness, has created the app PTN1, which allows personal trainers the ability to share workouts with clients.

"Gone are the days of scribbling down workouts on a piece of card," he says.

"The app helps with motivation, consistency and allows both you and the client to see development in your workouts."

And dedicated workout apps are flooding the market. Fit Gurus, for example, guides you through your workout, offering videos and an in-app chat facility in case you need to ask any questions.

Fitness expert and personal trainer Laura Williams says such apps mean that even the diehard gym hater can get a great workout without leaving their front room."

But there's nothing like a human trainer barking out orders and encouragement, she maintains.

"I've yet to find an app that closely scrutinises the exerciser," Ms Williams says, "or one that employs every last trick in the book during those last painful minutes of a workout.

"The people I train want human contact. They want to tell me about their day before we warm up, or have someone to hug when their jeans fit again."

Follow Technology of Business editor @matthew_wall on Twitter.

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The fitness apps giving gyms a class in flexibility

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Technology is shaking up the fitness industry and making established gym chains work up a sweat. New apps are challenging traditional membership structures and introducing more flexibility into the market. For example, ClassPass is an app that allows you to book into fitness classes in over 30 cities around the world - including New York, London and Sydney.

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1. Organic Growth provides a higher return than External Growth

John was asked - have you considered takeovers of rival gyms? The answer - not worth it. Organic growth provides a much higher return. Why pay a premium price of around £3-4m per gym when The Gym Group can instead invest £1.3 - £1.4m to open its own new facilities.

2. Focus on the What Customers Really Want

Extensive market research suggests that 70% of gym users only use gym equipment. So The Gym Group only offers gym equipment. No need for spas or pools.

3. The UK Budget Market Still Has Lots of Growth Potential

There are currently around 500 low-cost or budget gyms in the UK. Market analysis suggests there is potential for at least 1,000 facilities. So The Gym Group is remaining focused on the UK opportunity for growth.

4. Technology is at the Heart of the Business

Technology drives down costs, which enables the business to be competitive. The Gym Group has taken out nearly all behind-the scenes administrative work. Membership is managed by members online. Extensive data mining is done on gym usage (every machine is monitored in real-time) and customer relationship management is all driven using technology.

5. Location, Location, Location

For every gym the business opens (it has already committed to opening 17 in 2017) it rejects a further 30 possible locations. Extensive analysis is done to assess the suitability of potential locations, including population analysis mapped against their profile of likely gym members and a scoring system on the suitability of the potential building. A wide variety of buildings have been used to locate The Gym facilities, including former casinos, office blocks and spare space at a Sainsbury's supermarket which now attracts 2,000 gym member visits per day.

6. Three Low-Cost, Budget Chains Are Pulling Away from the Rest

The three leading budget gym chains (Pure Gym, The Gym Group and Xercise4Less) are increasing their market share by growing more strongly than the other rivals in the low-cost segment.

7. Returns on Investment Are Strong - and Quick!

It costs around £1.3m - £1.4m (on average) to fit-out and launch a new gym. Typically a new gym opens with around 3,000 new members due to strong launch promotion and break-even is reached within 3 months.

8. Strong Organic Growth Helps with Staff Retention and Promotion

A typical gym has two employees - a Manager and an Assistant Manager, supported by 10-12 freelance fitness trainers who provide 10 hours of free "floor time" to support gym users (e.g. with induction training. Many of those fitness trainers go on to join the business management training programme and several have are now running locations as managers. Strong growth and an emphasis on internal recruitment go hand in hand.

9. 24/7 Works

15% of gym usage is between the hours of 10.00 p.m. and 6.00 a.m.. Shift workers and others love the flexibility of 24/7 opening. The gyms are not "manned" by staff during those hours, but every square inch of space is monitored centrally by CCTV equipment and other security measures.

10. The Flotation Pain was Worth The Gain!

Floating The Gym Group on the stock market was a time-consuming and expensive process (the fees alone were £6m). However, the business raised £195m of new equity capital and this has had a significant benefit in terms of being able to obtain the best terms from landlords of new locations as well as funding the capital investment required for rapid organic growth.

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10 Things We Learned About the UK Gym Market Straight from the CEO | tutor2u Business

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John was asked - have you considered takeovers of rival gyms? The answer - not worth it. Organic growth provides a much higher return. Why pay a premium price of around £3-4m per gym when The Gym Group can instead invest £1.3 - £1.4m to open its own new facilities.

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Business Insights Q&A - John Treharne (The Gym Group PLC)

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This is a recording of the 1 hour webinar with John Traherne, the CEO of The Gym Group plc.