The cost of living crisis and the lack of innovation as an independent brand are behind the F45 training crisis currently affecting franchises, an expert has told 7NEWS.com.au.
F45 Training offers 45 minute high interval circuit training workouts through independently owned and operated “studios”.
At least 20 locations in Australia have closed in recent years, including at least 10 this year alone.
Catch up on the news with the 7NEWS app: download today 
Earlier this week, F45 Boral appeared in court to hear an application for a winding-up order – with Peter Helge appointed as liquidator.
Part of the issue is that gyms have a lower barrier to entry than other business franchises, RMIT senior lecturer in design, thinking and marketing Kevin Argus told 7NEWS.com.au.
This means there is less need for a competitor to break into the industry and go up against an already established business.
At the opposite end of the spectrum, a potential competitor to a franchise like McDonald’s would face a much higher barrier to entry due to the resources and brand recognition behind the business.
Gyms have “high competition and low barriers to entry,” Argus said.
To start an F45 studio, franchisees must cover the costs of the studio location including its renovation, as well as a franchise fee of $50,000 and the purchase of approximately $100,000 in equipment from “F45 HQ.” The studio also pays a monthly fee to the head office.
In return, the studio offers members F45-branded workouts and inclusion in its eight-week fitness challenge. It’s unclear how much the headquarters help with marketing.
The F45 model has also been criticized for not having as strong a retention area as other established franchises, creating a lot of competition between the brand’s own studios.
Gyms are often all “variations on a theme” and studios are guaranteed to be close to competitors that may be independently owned, Argus said.
“It’s a model where you’re really … relying on your own brand has a little bit more appeal and a lot more premium,” Argus said.
When the market is good, franchisees will benefit from their brand’s recognizable formula, Argus said.
“Users know what they can expect,” he said.
“It is centrally regulated.
“Increasingly it can be more attractive than an independent (gym).”
Argus said the market has faced less stable times such as the COVID-19 pandemic.
He said, gymnasiums are now facing significant economic conditions that affect middle and low income people.
He said there has been a “disorder” in how people spend their money.
While a franchise provides security during peak conditions, it can be a hindrance in extreme conditions, Argus said.
When times are tough, an independent gym may be able to adjust its offerings more easily than a franchised one.
“Independent businesses can do more innovation,” he said.
“How they engage customers, how it fits their current circumstances.
“When economic conditions affect the market, if you are not flexible (in how you respond) it is very likely (customers may leave).
‘Booms go bad again’
Constant trends in the fitness industry also have a big impact, Argus said.
“In the fitness industry, we see a lot of repetition. Boom cycles then things go bust.
While interest in health and fitness is high, the cyclical nature of trends such as high-intensity interval training, spin classes, Pilates and more means that a gym that specializes in a particular workout may face uncertainty.
“F45, they’re riding a wave of growth and interest in fitness,” Argus said.
This is driven in part by social media, where people are told they can “change their lives”.
“Interest is not the problem.”
However, some franchisees are reportedly borrowing up to 100 percent of their business expenses from banks at the height of this F45 wave and “relying on momentum”.
“No independent gym would do that,” Argus said.
“But you need a much wider reach and market to feed the number of established gyms.
“It looks good when you’re in this hip and boom (boom) …. Then come the interest-bearing loans.”
The current cost of living crisis means people on average incomes are now rethinking their spending, Argus said.
“They look around and can’t justify the cost of a premium membership,” he said.
There is nothing wrong with the product on offer, but in this context the customer “can only choose cheaper competition”.
Nothing functionally problematic with the F45
F45 Training has also suffered public brand damage due to scandals over paying celebrities David Beckham and Greg Norman to endorse their business.
However, Argus does not believe this is a significant issue affecting the F45.
“It affects investors more than consumers,” he said.
Customers are simply looking for the value the brand offers them, and there is nothing “functionally difficult” with what F45 offers.
Interest in the market is “deeply rooted in (the customer’s) personal and social self-esteem”, Argus said.
“It’s a market of people who are very interested,” he said.
The brand also offers its users community and “social connections”, which gave it a unique appeal.
“The group scenario means you all belong to one movement,” Argus said.
“They’re not the only ones doing it anymore.”
It will be “interesting” to see how the business adapts to the new market conditions, Argus said.
“They’re in an industry where I don’t think the appetite for what they have to offer is going away,” he said.
‘Grow up too soon’
At its peak, F45 training was worth $2 billion.
The founder of C3 Training – another popular group training gym franchise – Serkan Hunin told 7NEWS.com.au he had already had dozens of owners of the F45 branch approach him hoping to re-franchise.
“We’ve talked to a lot of F45 franchisees … and they all have the same story,” Honen said.
“They all say F45 grew too fast and when they expanded overseas they lost sight of supporting local franchises here in Australia.”
This year, F45 franchises in NSW Minto, Liverpool, Alexandria and Surrey Hills have entered the auction.
The Coogee venue informed members it was closing in May, although no ASIC notice has been issued.
The Endeavor Hills and Traralgon franchises in Victoria, the Davenport location in Tasmania and the Springfield location in Queensland also entered liquidation earlier this year.
A franchisee in Philip in the ACT was appointed as a rehabilitation specialist in April.
There are currently 257 locations in Australia listed on the official F45 Training website – including 89 locations in New South Wales, 64 locations in Queensland, 51 locations in Victoria, 32 locations in Western Australia, 13 locations in South Australia, four locations in the ACT, two locations in the Northern Territory and two locations in Tasmania.
This includes places like Phillip and Boral.
#Boom #build #Expert #weighs #F45 #Empire