I just read this for the second time. Nice work! Like AncientSion below I am a bit skeptical of their ability to enter a competitive market like Germany -- and wonder if they'd be better off sticking to optimizing the home market in Japan and Asia. That said, if it doesn't work out they can try somewhere else, as you say. One simple question: am I right to assume the fixed monthly franchise fees would have some kind of index to inflation?
Anytime Fitness probably wants a partner with a proven track record to expand internationally. I think both ventures can be pursued at the same time. Most domestic stores aren't fully occupied and are operating above breakeven, so every additional member signup goes straight to the bottom line. So the optimizing part for the home market is generating operating leverage.
Answer your fee question: There are 3 components. Membership fee, royalty income, and supervision fee. Initial Franchise fee at the time of opening a new franchise location is 3.6mm per club. Recognized over 10 years so 360,000 yen per club per year is recognized. Don't quote me on this, I am not sure after 10 years is over whether they will charge another franchise fee or not? I'd have to look into this, if you figure it out do let me know.
Next is fixed royalties, system usage fees and marketing fees for 350-400k yen a month (the royalty income component is 90k yen per month regardless of store size). This may get renegotiated after 10 years are over.
In terms of supervision fee:
JPY 3mm for first club, JPY1.5mm for second club, and
JPY300,000 from third club onwards) When clubs renew their contracts at the 10 year mark, they pay another 300,000 yen opening supervision fee. This could be bumped up within reason.
I believe it is highly unlikely any profitable franchisee will cancel being a franchisee over some small bump in any of above fees given it is fixed and not variable to revenues. Anytime fitness does have some pricing power in that regard.
Thanks for the detailed response! I noticed they just renewed the Japan master franchise agreement for another 15 years. Upon digging a bit more myself, I really like this idea. This year should be interesting - hopefully we get a good read on how the German locations are doing, how merchandise sales are going and what their intentions are in Singapore/SE Asia going forward.
So it took me a while to read through this twice and do some research on my own and think about the value proposition. Im using the gym myself for ten years now, so i have some first hand experience on whats going on as well as the Zeitgiest.
Since you focus on growth opportunties in germany, i can comment on that. Germany has actually quite the buzzing gym scene. As you mentioned, considerable chunk of the population is at least paying, if not training. I wasnt able to find updated numbers, but especially younger ppl are attracted to the gym. Numbers from 2021 indicate that 40 - 45 % aged 15-20 hit the gym. I would assume this number is more or less the same still. This is also the the group of ppl mostly attracted to the 24h opening and the cheap price, so its really the most relevant target group i would say. According to google there are about 10k gyms in germany, and there are a lot of franchises operating already.
I did check the german homepage of fast fitness and they are asking 25 to 30 €, which is basically what a lot of the really big german value franchises are asking as well (FitX, Clever Fit etc). They follow the same concept, mostly, i.e. no swimming, no sauna but you can get in a good workout + shower and they also offers daily excercise courses which i assume FFJ is/will as well.
I would say the german gym market in the "value" segment is definitely highly competetive and right now i dont see how FFJ stands out. Doesnt mean they will fail and the 8 % target does seem plausible since people switch their membership regulary to see what the other gyms are offering etc. But i also dont see any new competitior dominating because they really follow the same concept (long opening hours, clean and modern place, cheap price in exchange for being on your own mostly, i.e. no proper license-d trainers needed nor wanted).
The reasons for the high gym-user penetration is germany is...social media. Some years ago, pre covid, a bunch of teens discovered that they could upload their training videos from the gym to youtube and these guys made out like bandits. They formed companies to sell there own apparell and supplements (whey etc) and these guys become millionares within a few months. And that is what started the fitness craze in germany and why its still on today still. Nowdays they call themselves "Athletes" and they get sponsored by the big fitness diet brants (Weider, ESN, MyProtein ++).
Ideally i would suggest that instead of expanding outside of Japan, FFJ should hire or sponsor some actual influencers / athletes (females) in Japan to promote the "healthy" fitness lifestyle and increase market penetration in japan. which seemingly is a huge laggard.
The whole thing is aimed at young people in the first place, so those 40 to 50 year old white collar worker that is tired every everything (understandibly) isnt the target audience anyway.
I realize japanese culture isnt based so much around how you look and its different from western mentality and thats probably a huge part of the lacking market penetration. Then again. the US exports all their bad habbits to Japan in the past well, right ?
To sum it up im really curious why FFJ believes its easier to take customers off their competitiors in germany / outside of japan instead of tagging people in Japan. All those skinny japanese boys or young men would probably be better off hitting the gym. They need to market it better !
Thanks for reading this twice and providing me with additional insights.
40-45% aged 15-20 hitting the gym is a really good stat. This tells me the 13% penetration rate is likely going to increase as this age group ages, assuming the younger generation maintains this trend.
Depends what you mean by daily exercise courses. FFJ offers personal training at some locations in Japan, but not all. They really focus on lowering labour costs. They don't offer circuit training, you're just free to do whatever you like at their gym.
That is an important insight in regards to existing competition. In Japan, working out was mainly provided by comprehensive sports clubs. FFJ with its 24hr concept and convenient locations, was a unique offering. It may very well be true that there is too much competition and too little differentiation for FFJ to expand in Germany. FFJ will need to figure out how they will compete. On convenience, price, operating hours, customer service, quality equipment, etc.
In Japan, filming in gyms is strictly not allowed. Or else it would be nice to get a few fitness influencers to engage netizens to work out. Maybe they can have hours in the day carved out in their directly owned stores to allow free access to fitness influencers to film.
A large portion of those that sign up to workout in the US are there to lose weight. Not everyone comes out of the gym looking like a bodybuilder. As you've seen on YouTube, a lot of the bodybuilder-type physiques are created with the help of steroids. I think what makes penetration hard is that Japanese people get enough exercise from walking in their daily routine so they are, as you mentioned, on the leaner side. Another thing that makes it more difficult is that Japanese women might not necessarily require men to look like the muscular types in the West. Japanese women also put an emphasis on style, so if you are skinny, but dress well, you can be attractive without looking like Chris Hemsworth.
What could be helpful is targeting those that are too skinny. Given how fast nooby gains can rack up, an amateur can build a lean and toned body.
Another thing is that in the West, the fitness club is the new night club. It blew me away the first time I saw someone openly ask a girl for her number and was successful. I thought that type of fake content only existed in YouTube videos based in California/LA or Miami. In Japan, this is unlikely to change given women dress very conservatively at the gym, most people want to be left alone at the gym, and most people are introverted.
Thanks for the input, lemme know if you find anything new later on.
Yeah, I understand the main difference is the completely different mindset / mentality.
Still I think that there is a opportunity here in terms of adding influencers. Idol culture is big in Japan, I'm sure there is some overlap to be had.
I'm curious how FFJ is promoting? Are they running tv adds or is it mouth to mouth, or maybe companies are sponsoring their employees to go to the gym by subsidzing it ?
I added this to my watchlist and will probably buy at some point. I'm kinda intrigued by a public listed gym company just because I experienced this completely insane growth in Germany and the big chains in Germany aren't/weren't listed afaik.
Ad spend and marketing budget is another competitive advantage FFJ has over its competitors.
Franchisees must contribute to an "advertising and promotional reserve." In FY2024, they spent 620 mm yen on advertising, which works out to 0.54 mm yen per store of ad spend. No competitor can compete on this level of ad spend.
I agree, they can definitely collab with anime, sanrio, idols to create limited time key fobs, merch. I also think they can just pick a time slot in the day where the gym isn't used much and allow influencers to record. They can do an invite only thing where maybe once biweekly fitness influencers can record to their hearts content.
Yeah, you can't take part in the upside of "Anytime Fitness" besides in Japan. It's privately owned everywhere else in the world.
I just read this for the second time. Nice work! Like AncientSion below I am a bit skeptical of their ability to enter a competitive market like Germany -- and wonder if they'd be better off sticking to optimizing the home market in Japan and Asia. That said, if it doesn't work out they can try somewhere else, as you say. One simple question: am I right to assume the fixed monthly franchise fees would have some kind of index to inflation?
Anytime Fitness probably wants a partner with a proven track record to expand internationally. I think both ventures can be pursued at the same time. Most domestic stores aren't fully occupied and are operating above breakeven, so every additional member signup goes straight to the bottom line. So the optimizing part for the home market is generating operating leverage.
Answer your fee question: There are 3 components. Membership fee, royalty income, and supervision fee. Initial Franchise fee at the time of opening a new franchise location is 3.6mm per club. Recognized over 10 years so 360,000 yen per club per year is recognized. Don't quote me on this, I am not sure after 10 years is over whether they will charge another franchise fee or not? I'd have to look into this, if you figure it out do let me know.
Next is fixed royalties, system usage fees and marketing fees for 350-400k yen a month (the royalty income component is 90k yen per month regardless of store size). This may get renegotiated after 10 years are over.
In terms of supervision fee:
JPY 3mm for first club, JPY1.5mm for second club, and
JPY300,000 from third club onwards) When clubs renew their contracts at the 10 year mark, they pay another 300,000 yen opening supervision fee. This could be bumped up within reason.
I believe it is highly unlikely any profitable franchisee will cancel being a franchisee over some small bump in any of above fees given it is fixed and not variable to revenues. Anytime fitness does have some pricing power in that regard.
Thanks for the detailed response! I noticed they just renewed the Japan master franchise agreement for another 15 years. Upon digging a bit more myself, I really like this idea. This year should be interesting - hopefully we get a good read on how the German locations are doing, how merchandise sales are going and what their intentions are in Singapore/SE Asia going forward.
So it took me a while to read through this twice and do some research on my own and think about the value proposition. Im using the gym myself for ten years now, so i have some first hand experience on whats going on as well as the Zeitgiest.
Since you focus on growth opportunties in germany, i can comment on that. Germany has actually quite the buzzing gym scene. As you mentioned, considerable chunk of the population is at least paying, if not training. I wasnt able to find updated numbers, but especially younger ppl are attracted to the gym. Numbers from 2021 indicate that 40 - 45 % aged 15-20 hit the gym. I would assume this number is more or less the same still. This is also the the group of ppl mostly attracted to the 24h opening and the cheap price, so its really the most relevant target group i would say. According to google there are about 10k gyms in germany, and there are a lot of franchises operating already.
I did check the german homepage of fast fitness and they are asking 25 to 30 €, which is basically what a lot of the really big german value franchises are asking as well (FitX, Clever Fit etc). They follow the same concept, mostly, i.e. no swimming, no sauna but you can get in a good workout + shower and they also offers daily excercise courses which i assume FFJ is/will as well.
I would say the german gym market in the "value" segment is definitely highly competetive and right now i dont see how FFJ stands out. Doesnt mean they will fail and the 8 % target does seem plausible since people switch their membership regulary to see what the other gyms are offering etc. But i also dont see any new competitior dominating because they really follow the same concept (long opening hours, clean and modern place, cheap price in exchange for being on your own mostly, i.e. no proper license-d trainers needed nor wanted).
The reasons for the high gym-user penetration is germany is...social media. Some years ago, pre covid, a bunch of teens discovered that they could upload their training videos from the gym to youtube and these guys made out like bandits. They formed companies to sell there own apparell and supplements (whey etc) and these guys become millionares within a few months. And that is what started the fitness craze in germany and why its still on today still. Nowdays they call themselves "Athletes" and they get sponsored by the big fitness diet brants (Weider, ESN, MyProtein ++).
Ideally i would suggest that instead of expanding outside of Japan, FFJ should hire or sponsor some actual influencers / athletes (females) in Japan to promote the "healthy" fitness lifestyle and increase market penetration in japan. which seemingly is a huge laggard.
The whole thing is aimed at young people in the first place, so those 40 to 50 year old white collar worker that is tired every everything (understandibly) isnt the target audience anyway.
I realize japanese culture isnt based so much around how you look and its different from western mentality and thats probably a huge part of the lacking market penetration. Then again. the US exports all their bad habbits to Japan in the past well, right ?
To sum it up im really curious why FFJ believes its easier to take customers off their competitiors in germany / outside of japan instead of tagging people in Japan. All those skinny japanese boys or young men would probably be better off hitting the gym. They need to market it better !
Thanks for reading this twice and providing me with additional insights.
40-45% aged 15-20 hitting the gym is a really good stat. This tells me the 13% penetration rate is likely going to increase as this age group ages, assuming the younger generation maintains this trend.
Depends what you mean by daily exercise courses. FFJ offers personal training at some locations in Japan, but not all. They really focus on lowering labour costs. They don't offer circuit training, you're just free to do whatever you like at their gym.
That is an important insight in regards to existing competition. In Japan, working out was mainly provided by comprehensive sports clubs. FFJ with its 24hr concept and convenient locations, was a unique offering. It may very well be true that there is too much competition and too little differentiation for FFJ to expand in Germany. FFJ will need to figure out how they will compete. On convenience, price, operating hours, customer service, quality equipment, etc.
In Japan, filming in gyms is strictly not allowed. Or else it would be nice to get a few fitness influencers to engage netizens to work out. Maybe they can have hours in the day carved out in their directly owned stores to allow free access to fitness influencers to film.
A large portion of those that sign up to workout in the US are there to lose weight. Not everyone comes out of the gym looking like a bodybuilder. As you've seen on YouTube, a lot of the bodybuilder-type physiques are created with the help of steroids. I think what makes penetration hard is that Japanese people get enough exercise from walking in their daily routine so they are, as you mentioned, on the leaner side. Another thing that makes it more difficult is that Japanese women might not necessarily require men to look like the muscular types in the West. Japanese women also put an emphasis on style, so if you are skinny, but dress well, you can be attractive without looking like Chris Hemsworth.
What could be helpful is targeting those that are too skinny. Given how fast nooby gains can rack up, an amateur can build a lean and toned body.
Another thing is that in the West, the fitness club is the new night club. It blew me away the first time I saw someone openly ask a girl for her number and was successful. I thought that type of fake content only existed in YouTube videos based in California/LA or Miami. In Japan, this is unlikely to change given women dress very conservatively at the gym, most people want to be left alone at the gym, and most people are introverted.
Thanks for the input, lemme know if you find anything new later on.
Yeah, I understand the main difference is the completely different mindset / mentality.
Still I think that there is a opportunity here in terms of adding influencers. Idol culture is big in Japan, I'm sure there is some overlap to be had.
I'm curious how FFJ is promoting? Are they running tv adds or is it mouth to mouth, or maybe companies are sponsoring their employees to go to the gym by subsidzing it ?
I added this to my watchlist and will probably buy at some point. I'm kinda intrigued by a public listed gym company just because I experienced this completely insane growth in Germany and the big chains in Germany aren't/weren't listed afaik.
Ad spend and marketing budget is another competitive advantage FFJ has over its competitors.
Franchisees must contribute to an "advertising and promotional reserve." In FY2024, they spent 620 mm yen on advertising, which works out to 0.54 mm yen per store of ad spend. No competitor can compete on this level of ad spend.
I agree, they can definitely collab with anime, sanrio, idols to create limited time key fobs, merch. I also think they can just pick a time slot in the day where the gym isn't used much and allow influencers to record. They can do an invite only thing where maybe once biweekly fitness influencers can record to their hearts content.
Yeah, you can't take part in the upside of "Anytime Fitness" besides in Japan. It's privately owned everywhere else in the world.