Forgive my paraphrasing in the headline the lyrics ("I'm already gone, I just got here") from an old Jerry Jeff Walker song, but recent results from my Fitness Business Council national poll of 535 clubs—over 20 percent of them small studios—leads me to believe that the vaunted studio boom, which began a little over two years ago, may already be past.
Results from my 2014 Year-End Fitness Facilities Business Results Survey (available by e-mailing me) indicate that studios are, if not in fact already in trouble, headed there on a collision course.
The survey results indicate that studios in 2014 generated an average pre-tax profit margin of 6 percent. That sounds fine until you compare it to the overall club average of 8 percent and until you contrast 6 percent with the 12 percent studio average of less than two years ago—a 50 percent decline in profits.
Forty-seven percent of the operators who responded to the survey for 2014 said they either generated no profits or were able to produce on average less than 4 percent pre-tax (which for most businesses really means about 2½ percent post-tax). Surveyed studios finished last with lower-than-benchmark numbers in 12 of the 14 ranking categories.
Only one in three studios produced increases in individual client sales and total sales. Interestingly, the lowest percentage of businesses showing increases in one-to-one personal training sales (35 percent) came from—you guessed it—the studio sector. And a mere 29 percent of studios claimed higher profits in 2014 versus 2013. The across-the-industry club average was 46 percent of facilities increasing profits.
At this point, should we be calling the undertaker for studios? Obviously not. But we do have to discover possible causes for such poor performance in so many business aspects. Perhaps it's that studios as an industry sector have not had much time in the game. Not so, according to respondents, who average 13 years in business.
Maybe there has been too much flight to studios as a business model? This is a more plausible explanation, as it parallels what has occurred in the larger club sectors of our industry.
Not unlike the general club industry, which has been overbuilt and undersupplied by enough interested consumer members, it seems as though a studio has popped up on every corner in most larger markets. My rural town of Taos, NM, boasts not only two full-service clubs and one 24/7/365 gym, but three studio operations.
Or possibly it's just that the bloom is off the rose, and now studio operators have to get down to the business of running businesses. Competition in this sector will most likely increase, as we witness a bunch of studio franchises appear in various parts of the country.
What do you think is happening to the studio market? Share your opinions in the comment section below.