New Owners Want to Pump Up Gold’s Gym Franchise
December 9, 2007 by Sean Kelly
Filed under Business
(FranchisePick.com) It’s not just the 30 Minute Workout franchises that have been struggling to survive these days… the big gyms have been having their problems as well.
The fitness industry is growing. But while there are 9 million more gym members in the U.S. than in 2001, the number of health clubs has grown even more rapidly. And the average number of members per gym has fallen, from 1,893 in 2001 to 1,455 last year. This has put a strain on the big clubs like Bally’s, which declared bankruptcy earlier this year, and Gold’s Gym.
In the current issue of Franchise Times – (November-December 2007, Jonathan Maze tells how 80s icon Gold’s Gym is trying to get its franchise program in shape.
Gold’s Gym looking to bulk up By Jonathan Maze
Tom Davidson is 41, but he looks like he could still wreak havoc on the football field the way he did as a linebacker for the University of North Dakota in the late 1980s. So it’s not surprising that Davidson owns a Gold’s Gym—the chain of fitness centers that for years was synonymous with muscle heads.But even though Davidson is a fitness buff and an ex-jock, he represents a new generation of Gold’s franchisees—people who are in it because it’s a good business, not just a good workout. Davidson spent years trading commodities in New York and then stocks in Minneapolis.
When his employer, Dain Rauscher, relocated to New York, Davidson stayed behind and became a Gold’s franchisee, opening his first location in an abandoned K-Mart more than two years ago. “When I went to the first (franchise) convention in Vegas four years ago, most of the owners were gym rats,” Davidson said. “You could tell they were into working out and body building. But each year since then the ownership base has gotten a little more sophisticated; there are more business people.”
Gold’s is looking toward these investors to fuel the chain’s growth. The 600-unit company wants to capitalize on its well-known brand in an uncertain fitness market by adding 200 locations by 2010.
It has focused its attention on this growth after more than two years of at-times difficult negotiations with franchisees on a new agreement that will ultimately cost gym owners higher royalty fees. The franchisees, which for years paid an industry standard flat-fee per month in royalties, will now pay on a percentage of revenue—just like most franchise systems.
TRT Holdings, owner of Omni Hotels, purchased the chain in 2004.
Soon thereafter it proposed moving to a franchise agreement that required a royalty of 3-percent royalty. The Gold’s Gym club owners resisted. Gold’s and a Gold’s franchisee association spent more than two years negotiating the new agreement finalized last February. Franchisees can choose between the original 3% royalty, the flat-fee “legacy” agreement, the “Legacy 2″ sliding scale percentage-based royalty, or can opt to debrand and leave the system.
Many of the new industry members are “deconditioned” people (ie couch potatoes)who wouldn’t otherwise join a gym—which has not been the target customer for Gold’s.
However, Gold’s representatives say that’s not all bad, since they believe that members who have been successful with Curves or other smaller clubs will eventually “graduate” to a full service club like theirs.
WHAT DO YOU THINK? ARE YOU FAMILIAR WITH THE GOLD’S GYM FRANCHISE PROGRAM? SHARE YOUR INSIGHT; LEAVE A COMMENT.
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Would you please help me set up a gym in my place, people have to travel 120 Kilometers to access the nearest one. am in south africa