- Tech & Gadgets
- BRW. lounge
Published 22 February 2012 15:59, Updated 23 February 2012 05:02
The quality of a franchise is perhaps best judged not by those franchisees who are brought into a business but by those who are rejected.
The fastest-growing franchise in the country, Jetts Fitness, has turned away “thousands” of potential franchises, says founder Brendon Levenson . Many can’t afford the high start-up fees but about 60 per cent of those who can still fail in attempting to secure a Jetts franchise.
Levenson says much of Jetts’ success is due to a focus on quality over quantity. “Growth for growth’s sake is not a great strategy,” he says.
Jetts began in 2007 with one gym on the Gold Coast. It has since grown to 155 gyms (129 in Australia, the rest in New Zealand) and there are plans for about 100 more. Last financial year Jetts turned over $43 million.
Jetts’ point of difference from more established gym chains is that it offers a low-cost, no-frills service and members are not locked in to long-term contracts.
Franchises cost between $450,000 and $700,000, about half of which goes towards setting up the gym. The cost is high compared with that of most other franchises but the returns are strong. Levenson says the average annual return on capital is about 30 per cent. This is despite most franchisees needing to work only 5-10 hours a week on the business.
The average franchisee is aged over 30 and comes from a middle management or small business background. Typically, they do not have a history in the fitness industry. “That’s the way we like it,” Levenson says. “We like franchisees to be business owners [and not] work in the business.”
About 65 per cent of franchisees have opened more than one gym. “There are very few franchisees who don’t want to open more,” Levenson says.
Jetts’ management burden is reduced by
good-quality franchisees opening multiple
gyms, he says. This also ensures the business
has more surety about service quality and its income stream.
Much of Jetts’ success has been a product of offering disenchanted customers an alternative service that better suits their needs. Most chains, such as Fitness First and Fernwood, offer full-service gyms for a full price. Customers are also typically locked in to contracts.
“Prior to Jetts, I had done plenty of market research but it wasn’t until we started opening gyms that we got a real sense that people weren’t overly happy with the other offers out there,” Levenson says
The low-cost model favoured by Jetts relies on having the gyms unstaffed for most of the day. Members gain entry with a swipe card and this makes the business reliant on technology.
In setting up the business, Levenson sought to develop his own proprietary software. But by the time the network had grown to about eight gyms, the decision was made to replace it with an off-the-shelf product. The additional costs were mitigated by acquiring the rights to the software by a licensing arrangement.
Levenson says his decision to buy the rights
to software from an established provider is symptomatic of many of the decisions he
has made in establishing the business. “What
we have done is to focus on what we know best,” he says. “We partner with experts for
the other stuff.”
Despite its gyms often being unstaffed, Jetts’ insurance costs are lower than those of standard gyms, he says, adding that the extensive use of video camera surveillance reduces the risk for insurers of unscrupulous personal injury claims.
Only one of Jetts’ gyms is company owned. Many franchisors will have to establish several company-owned stores to prove a concept to potential franchisees but Levenson says the soundness of Jetts’ plan has helped ensure that this has not been necessary.
So far, there have been no closures of franchisee-owned stores.
Many of the initial gyms have been in outer suburban areas. Levenson says the business
can continue to grow by opening gyms in
or near large cities. Additional overseas expansion is also planned.
The strong appetite for low-cost gyms has led to an increase in close competitors for Jetts. Another franchise, the US-based Anytime Fitness, has been growing quickly but has not been in the Australian market for long enough to qualify for the BRW Fast Franchises list this year.
Levenson is confident Jetts can continue to win the support of new customers. “The essence of our brand and what we stand for is streets ahead of any competition,” he says.