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Bally Turns to Franchising to Promote Growth

CHICAGO -- After a two-year moratorium on expansions, Bally Total Fitness is now trying to double its number of gyms through franchising. The fitness chain has 412 company-owned centers and 20 franchises, compared to Gold's Gym, which has 580 franchises. Bally added 152 clubs between 1997 and 2002 after its initial public offering in 1996, and then Bally CEO Paul Toback slowed growth to increase the profitability of the existing clubs. According to Crain's Chicago Business, Bally will focus first on second-tier markets such as Madison, WI, or Louisville, KY, then on selling company-owned clubs to franchisees and finally offering franchises in major metropolitan areas. The initial fees will range from about $25,000 to $30,000 per center. Royalty fees will be about 3 percent of gross revenues and national marketing fees will be 3 percent.

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