Brand: Snap Fitness
Headquarters: Chanhassen, Minn.
Product: Mini, franchised fitness centers
Launch date: 2004
Sales: In 2006, Snap did $5.6 million in revenue and $980,000 Ebitda; in 2008, those numbers rose to $31 mil in revenue, $10.2 mil Ebitda.
Competition: Most directly, Anytown Fitness, but really any exercise alternative
Distribution: 1,700 franchised locations, mostly in the U.S., but also in Canada, India and, soon, Mexico.
Claims: “Fast. Convenient. Affordable.”
Secret weapon: “The member experience”
New product: Online member benefits, such as meal planners and health coaches, at Mysnapfitness.com
Talk about your micro machines. Snap Fitness is a network of neighborhood gyms that cherry pick state-of-the art cardio and strength equipment from big box facilities. What it doesn’t have is the miles of aisles of treadmills and stationary bikes. It doesn’t have pools or Pilates classes either. What does it offer? A $34.95 per-month price tag for a personal membership with no long-term commitment.
Snap Fitness CEO/founder Peter Taunton has been working in the workout business for 25 years. He used to own America’s Fitness Center, a chain of six full-service clubs that range from 10,000 to 40,000 square feet, so he knows the barriers to entry. He sold that company seven years ago and never expected to go back.
As he looked for his next adventure, he wondered what drove gym membership. “It wasn’t the racquetball or group fitness classes,” he said. Instead, he came up with the idea for 2,500-3,500 square-foot gyms, which he estimated would interest 75 percent of his previous customers yet cost only a fraction of what his investment in America’s Fitness Center was.
“My ‘aha moment’ was when I put one in a town of 3,200 people,” Taunton said. The Snap concept worked well in large and medium towns, but tiny Cokato, Minn., was the real test. “It performed every bit as well as my metro market club did,” Taunton said, acknowledging that small-market costs were commensurate. “I came home and told my wife and kids, ‘I think I have a tiger by the tail here!” He was back in the health club business.
This was in early 2004, and by April of that year, Taunton had sold his first Snap Fitness franchise. Within the last four years, he has turned a 98-pound-weakling into more than 1,700 stores in stripmalls and other locations. Today, Snap is opening more than one unit a day and will expand into India and Mexico this year.
The secret to success? “Give people a good product and put it in their backyard,” Taunton said, and watch your overhead. At roughly one-tenth the size and cost of a mega fitness center, a Snap location needs far fewer patrons to turn a profit—as little as 250 members. This keeps franchisees flush and gym rats who hate to wait happy. “If you want steam rooms, child care, climbing walls and basketball courts, I’ll never be your answer,” he said. “But if you want to come in and work on state-of-the art-equipment, and get in and out,” it’s not a bad deal.
Snap Fitness prides itself on being economical and within two miles of 90% of members’ homes.
The small footprint and 24/7 aspect—an electronic key card system allows safe access to members—helps with traffic flow. Entrepreneur magazine has voted it the No. 1 health and fitness franchise in the country and identified it as the fifth fastest growing franchise.
Taunton couldn’t give an example of how the recession has negatively impacted pricier gyms, but he expects it to affect the sector, one that’s no stranger to churn. On the other end of the scale, cheapo gyms are springing up and consumers are getting what they pay for. There are $10-a-month deals that come with dubious management, less-than-stellar equipment and scenic drives. (According to the International Health, Racquet & Sportsclub Assn., gym patrons will tolerate about 10-12 minutes travel time, tops.)
Of course, obtaining a loan is not exactly a “snap” for everyone right now. Taunton does his best to convince banks that his business model and Middle America franchisees are a good bet.
“We’re going back to our bankers and saying, ‘You’ve got to find a way to get Joe and Mary Six-pack approved. We’re a successful company, we have very few closings, and from our standpoint, you have to separate us from everyday business USA,’” Taunton said. “We have those ‘Come to Jesus!’ meetings with them and I say, ‘You either have to find the money or you’re going to force me to get into the banking business.’”