Strategies for a fit network

Gyms in India bank heavily on its result oriented services, reasonable charges, good equipment, trained staff and convenient locations. Gyms are flooded with members in the peak hours and there is a steady growth in membership and revenue year on year of 8 to 10 percent in the cities. Maximum Gyms are located in the growing resident population. People who have medium to high consumption and lifestyle habits and their demographics further aid the gym business as a majority of them are young. Gyms are also banking on the high corporate density in the area.

Franchise to grow

Nowdays, franchising model is the easiest way to become an entrepreneur. You get many instant benefits. You will receive business plans, procedures, policies, and rules ready made from the franchisor. Therefore, a large part of your installation and initial setup work is already done for you when opting for a franchise centre. Franchising in India is growing at an impressive rate of approximately 30 per cent per year. Presently, there are 1,200 franchisors in India, of which 25 per cent are of international origin. The franchise market in India has the potential to grow to $20 billion by 2020. Some of the successful companies that operate through franchises in India are Thomas Cook, Cox & Kings, Kuoni, SOTC, Raj Travels for travel and tourism, Euro Kids, Kidzee, Apple for pre- school, Café Coffee Day for food and beverage and Apollo Hospitals for healthcare and Gold’s Gym, Vivafit  etc in the fitness sector. As yet in India the fitness industry is unregulated, and even scarier is the total lack of self regulation in the industry.

Lack of education of general public about the benefits of exercise, health and fitness is a major block. The current fitness trend is now faced with the challenge of improving the health of future generations and to encourage a lifetime of healthy habits. There has been a shift toward gentler, more introspective exercises that also contribute to improving cardiovascular health while increasing flexibility and muscular strength. Gyms must provide highly customised fitness products and experiences that suffices today’s consumers.

Lack of education with staff

Today there are around 100-200 personal trainer certification models online. Unqualified programs compromise the integrity of the industry, creating problems for qualified personal trainers, health clubs and the general public.
The unplanned and unregulated opening of gyms of all types shapes and sizes, which are not equipped or staffed to provide a safe and fun exercise environment. A lot of such gyms open with a lot of fanfare and positioning but immediately start reckless discounting as they are not able to build a healthy membership base and cash flow. Also providing parking space and the chaotic traffic are the main challenges for the setting up gyms in metros.

The franchise model for gyms is not taken off as some of the other brands because of certain factors.

• Relatively Low Margins: The franchisee has to bear both the cost of sales and labour costs to contend with in an environment that is very price sensitive. The net margins are not nearly as high as other businesses.
• Expensive Real Estate: In the metropolitan centres of India, retail space continues to be extremely expensive.
• Resistance on Fees & Royalty Payments: Indian franchisees believe that the U.S. franchise/royalty payments are high.
• Lack of Legal Framework: India does not have a comprehensive franchise law to regulate this industry sector. The applicability of multiple laws to a franchise transaction poses problems of complexities and ambiguities in agreements and is also time consuming for U.S. companies to decipher.
• Regional Approach to combat Indian diversity: Local companies prefer to appoint master franchisees on a regional basis (north, south, east and west), as India is a large geographical landmass with a diverse mix of population.

Follow the guidelines

At Gold’s Gym we strive on a few models to make sure a franchisee benefits. Relationship building is a sure way to make a franchisee model succeed is maintaining a healthy relationship between the franchisor and franchisee and structuring innovative deals in franchising. We provide complete assistance in setting up and training. Right from identifying the location to set up interiors to training of gym staff on the latest international training modules in health and fitness, the management software and constant up gradation of knowledge to the benefits of the users, customer service, as well as the conduct of day-to-day operations. To make the model a success, the franchisee must adhere to certain guidelines as planned by the franchisor. Training and SOP’s can make or break a franchise so uniformity in policies is important. Every outlet must be uniform in look and feel; standards and policies to make it a success. In one way we feel that franchising is not taken off as it should but on the hand we see many benefits for both seller and buyer. 

For franchisors, the primary benefit is the ability to use other people's money to expand the brand more rapidly than they could either on their own or through investors or lenders.

The initial franchise fee and ongoing royalties they collect allow franchisors to build their brand without sacrificing control to outsiders. The fees and royalties are used to fund operations at corporate headquarters, train and support franchisees, market and advertise the brand, improve the quality of goods or services, and build the brand in the marketplace.

For franchisees, benefits include: a higher chance of success than in a sole proprietorship; shorter time to opening; initial training and ongoing support; assistance in finding an optimal site; the selling power of a known brand; lower costs through group purchasing; use of an established business model; national and regional advertising campaigns; customer lead generation through websites and centralised call centres; and a network of fellow franchisees to provide advice and moral support through  annual conferences and franchisee meetings.

Challenges ahead

The biggest challenge for the franchise industry in India is that the Government has not recognised it as a small business facilitator, unlike the United States. However, on December 16, 2009, the Government of India announced a liberalised policy, which removed the cap on the royalty payment and government approvals. Prior to this change, businesses were required to obtain approval for payments in excess of $2 million on one time fees and 5% on ongoing fees. With these hurdles cleared, more U.S. franchises are now seeking opportunities in India. And one that we have successfully taken forward is our brand Gold’s Gym. Gold’s Gym India started its operations in 2002, when the first Gold’s Gym India branch was set up in Mumbai. In a few years this number grew, and today Gold’s Gym has cut out for itself 84 gyms in India with another 15 under construction and ready to start in this year.  Of these 68 are franchisee-owned gyms with 12 franchisees that have opted for multiple facilities after seeing the success in one. Gold’s Gym India is planning to further expand its presence across India. The company is eyeing tier II and tier III cities to tap the country’s growing fitness market.

About G Ramachandran

G Ramachandran is the Promoter & Director, Gold’s gym India.  He is a mentor capitalist with impeccable entrepreneurial spirit and financial expertise. At Gold’s Gym, G. Ramachandran is spearheading the global fitness leader with his new vision and fiscal stratagem. In his past avatar he is a qualified Chartered Accountant and has done his article ship from Price Waterhouse Coopers. Has over 20 years experience in Investment Banking, Consulting, Business Process and Organizational Development. He had an incredible track record with Ernst & Young, JM Morgan Stanley, Citibank, Reliance Capital & The Times of India Group to name a few.