Andrew Heathcote Rich Lists editor

Andrew is BRW's Rich lists editor and is responsible for the Rich 200 and Young Rich flagship issues. He also reports on matters relating to wealth and investment for BRW and The Australian Financial Review.

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Top 3 Fast Franchises: Laser Clinics Australia, Jetts Fitness, Anytime Fitness

Published 28 February 2013 00:28, Updated 10 April 2013 09:43

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Top 3 Fast Franchises: Laser Clinics Australia, Jetts Fitness, Anytime Fitness

We’d like to know a little bit about you for our files ... Females now control the majority of household consumer spending, says Laser Clinics Australia founder Alistair Champion. Photo: Nic Walker

The rapid growth of Laser Clinics Australia is a product of successfully tapping into the “female economy”, according to its founder and managing director Alistair Champion.

According to oft-quoted research in Harvard Business Review, women are a bigger growth market than China and India combined; global consumer spending by women is growing at about $US2 trillion a year and is forecast to reach $US28 billion by 2015.

Local growth rates are equally strong, according to Champion. “Females now control the majority of household consumer spending,” he says.

Laser Clinics is in the beauty business. Its services include laser hair removal, laser skin treatment, and cosmetic injections such as Botox. About 90 per cent of its customers are women.

Average annual growth over the past three years was a stunning 246 per cent, with revenue hitting $20.1 million in 2011-12. That performance rocketed the franchise to the top of the BRW Fast Franchise list.

The business undertakes non-surgical services but has a commercial partnership with The Cosmetic Institute, which does liposuction, labiaplasty and breast augmentation.

It began in 2007 and, despite the fast growth, most stores have remained in or around Sydney. Store numbers grew from 11 to 17 in the year to June 30, 2012. None are company owned.

“Over the past five years we have really focused on building a critical mass in NSW,” Champion says.

“Geographic closeness was important to us as we didn’t want to be flying all over the country trying to manage interstate franchisees. So far we have expanded only as far as Queensland. We’re in no hurry for interstate expansion and we definitely don’t want to do it for the hell of it.

Geographic closeness was important to us as we didn’t want to be flying all over the country trying to manage interstate franchisees.

“We’re looking at opening 10 new sites in 2013 and looking into interstate some time during the year.”

Champion is mindful that his industry has a mixed reputation but believes there has been a shift in perception about what he calls “injectables”.

“It [Botox] did get a bad rap in the media after some cases of overuse,” he says. “That is changing. You need to be conservative in your treatments and our new marketing slogan is: Everyone will notice, no one will know.”

The unique nature of his business ensures that it has to be managed differently to the standard franchise, such as those in the fast food industry.

“In beauty you need a bulletproof system,” he says. “Services vary hugely from customer to customer. Sometimes you’re upsizing something they’ve never heard of before.”

Laser Clinics franchises cost upwards of $250,000 each. A large pool of potential franchisees has been attracted by word of mouth and through the company’s website.

Growth has come from diversifying its offering. ““Our original focus, laser hair removal, has become somewhat commoditised and the rise of competition has led to a price war. We needed something that was affordable but growing in popularity,” Champion says.“Injectables is a great space to be in and account for about 25 per cent of our revenue now. We also have return business because it’s not permanent.”

“In order to remain sustainable, we needed to diversify into different areas,” Champion says.

Jetts-set life

Marianna Papadakis

Jetts Fitness managing director Adrian Mc Federies.Photo: Eddie Safarik

After posting another year of explosive revenue growth, low-cost gym operator Jetts Fitness is setting its sights on international markets.

While the United States – perhaps the spiritual home of the gym – might be the obvious choice, managing director Adrian McFedries is wary.

Up to 13 per cent of the Australian population use gyms and the number is growing, but in the mature US market the figure is upwards of 16 per cent.

“We don’t believe the US is a market for a challenger brand like us. We want to go in as among the top couple of brands,” McFedries says.

“We are committed to taking the brand into other markets such as Asia and Europe.”

Jetts ranked second on this year’s Fast Franchise list, with average annual revenue growth of 219 per cent over the past three years. Revenue at the six-year-old company has grown from $3.834 million in 2008-09 to $74.496 million in 2011-12.

After starting with one Gold Coast gym back in 2007, Jetts now has 200 clubs – 159 in Australia and 41 in New Zealand – and 200,000 members.

The chain distinguishes itself from the larger operators – which have broader facilities, pools, classes and personal trainers, which significantly bump up costs for members – by offering lower weekly charges and one-off joining and access pass fees.

Located in CBDs and suburbs, the gyms are about 300 square metres, with all the usual cardio and weight machines but they don’t offer group classes, pools or steam rooms.

Jetts was one of the pioneers in this low-cost, 24/7 end of the gym industry, which McFedries says has created about 80 per cent of the sector’s growth in the past five years.

There are now more than 600 such clubs in Australia. And like the bigger end of the gym sector, which saw Fitness First shrink in the Australian market last year, the low-cost convenience segment is also heading towards saturation, according to McFedries.

With his previous experience in developing distributor networks and chains – including at construction and mining equipment company Caterpillar – McFedries came on to the Jetts scene when it had around 60 gyms.

Jetts has a more unusual franchise model, he says, with business owners needing between $500,00 to $600,000 to set up, but needing to dedicate only five to 10 hours a week in between their full-time day jobs.

Most franchisees are white-collar workers making their first steps in owning and investing in a business.

McFedries says the best indication the model is working is multi-club ownership: up to 90 of its 200 gyms were established by someone who already has one.

Jetts biggest challenge in the last year has been attracting talented people at a club level and at its head office, where staff grew from eight to 35 in 30 months.

“You need time, effort and patience in finding them. Club mangers determine members’ experiences. Getting ones with high energy, with the right attitude, is important.”

Any time works out

Leo D’Angelo Fisher

Anytime Fitness CEO and co-founder Justin McDonell and his sister and co-founder Jacinta McDonell-Jimenez Photo: Angus Mordant

Justin McDonell and his sister Jacinta McDonell-Jimenez were owners of a Fernwood women’s gym franchise when they decided to see what other business opportunities were available in the $3 billion fitness industry. The answer was 24-hour fitness clubs, a low-cost, no-frills alternative to full-service gyms.

After 12 months of market research, including five trips to the United States, the sibling entrepreneurs secured the master franchisor rights to the US-based Anytime Fitness franchise group for Australia and New Zealand.

Since launching Anytime Fitness Australia in 2008 – the pair sold the New Zealand business in 2011 – the network has grown to 230 clubs nationally, with 60 clubs added this financial year.

McDonell says becoming a master franchisor for Anytime Fitness – the US company’s first outside North America – instead of developing a business from scratch was the best business decision the siblings have made.

“We took a winning formula from the US, tweaked it slightly to the Australian market and had the advantage of a systemised business,” he says. “We are able to see what is going to happen to our business just by looking at our American master. It provides great insight to the future.”

Anytime Fitness clubs – and similar gym clubs such as Snap Fitness and Jetts Fitness– provide members with a flexible, low-frills alternative to full-service gyms. Fewer staff, fewer amenities (no swimming pools and saunas, for example), fewer services (no classes or massages), and flexible terms provide members with a straightforward offering.

For the most part, Anytime Fitness club members, who pay an average monthly membership fee of $55, basically want somewhere to work out when it suits them. Personal trainers are available at most clubs for those who want them.

“We offer quality equipment, clean premises and convenient locations, enabling members to fit an exercising regime into their busy days,” McDonell-Jimenez says.

The rapid growth in club numbers – and a membership of 220,000 – is ample proof of the 24-hour fitness club model. Anytime Fitness plans to have 400 clubs nationally by mid-2014.

“The most challenging thing for us has never been franchise demand; it’s been finding the sites to match the demand. The real estate has been the determining factor in how quickly we can grow,” she says.

Although growth-focused from the outset, the McDonells are mindful of the need to manage that growth so as not to be overwhelmed by it. A year ago they engaged accounting firm PwC to prepare a plan and new organisational structure to guide the business through this heady growth.

The result has been a shift from a sales culture to a more deliberate support culture, with a focus on having the managers and staff to support the growing franchisee base. The company’s Lane Cove, Sydney, head office has grown from a “very lean and mean operation in the early years” to a team of 30, including a franchise support manager and internal operations manager as well as professional staff covering property, legal compliance, accounting, marketing, information technology, and events and training.

Being a growth company, Justin McDonell says, requires a staff that thrives on change. “We have learnt that our staff need to be able to adapt and like change.”

Franchisees pay an initial franchise fee of $59,900 and a monthly flat fee of $991. The cost of establishing a fully operating club is borne by the franchisee and averages $350,000.

As the business has grown, so has the calibre of franchisees. McDonell-Jimenez says the business has got better at choosing the best candidates.

Franchisees are encouraged to own multiple clubs and more than 50 per cent of new clubs go to existing franchisees. Most franchisees have more than one club. This ensures that the best franchisees get to influence the culture of the club network.

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