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Anytime Fitness Australia founder talks expansion and competitive markets

Sasha Karen
23 February 2017 34 minute readShare
anytime fitness justin mcdonell expansion competitive markets

Co-founder of Anytime Fitness Australia Justin McDonell reveals how he brought the international brand into the local market and beat stiff competition to reach 450 locations in under a decade.

Justin McDonell, Anytime Fitness Australia

While a business model may work well overseas, there’s no telling how well it will work here in Australia. Justin McDonell, co-founder of Anytime Fitness Australia (pictured right), faced this concern in 2008. Since then, Anytime Fitness Australia has grown to 450 locations nationally, with ambitious plans for ongoing growth.

“The franchise relationship, it’s like a marriage. There’s good and bad times, but generally, it should be good,” says Justin.

Justin shares how he launched and grew the Anytime Fitness franchise in Australia and helped adapt the 24-hour gym concept to the local market, his plans to diversify the business using multiple sub-brands, and how the prominent business has achieved such rapid expansion in a highly competitive industry. Find out all this and more on this episode of the My Business Podcast.

Enjoy the show!

Podcast transcript:

Phil Tarrant: G'day, everyone. Welcome to the My Business podcast. It's Phil Tarrant here. I'm the editor of My Business. Been hosting this thing for, I think, coming up to about a year with my colleague and friend, Adam Zuchetti. How you going, Adam?

Adam Zuchetti: Good, Phil, good. And yourself?

Phil Tarrant: Good. It's good to be back for another instalment of the podcast. And I'd like to thank everyone for all the great feedback that you're sending us, both via social media and email about the sort of stuff you'd like to hear. So we try to include that where we can. And keep those questions coming, we'll do a Q and A session pretty soon.

But our guest today is someone who I've been looking forward to meeting for quite some time. I think the industry that this guy works within is probably one of the most buoyant, in terms of energy in the Australian marketplace today. I don't think you can walk down any street these days without seeing one of these types of facilities. I've got Justin McDonell in, and he's the franchisor of Anytime Fitness. How you going, mate?

Justin McDonell: Yeah, I'm good. How are you?

Phil Tarrant: Good. Thanks for joining us. Anytime Fitness, I think everyone probably has seen your logo somewhere-

Justin McDonell: Hopefully.

Phil Tarrant: -on the side of a, in front a shop. Do you call them shop, gyms?

Justin McDonell: Gym. Yeah.

Phil Tarrant: In front of a gym on pretty much any high street. I know there's one here. We record in North Sydney here, and there's one here on Walker Street, by memory?

Justin McDonell: There is, yeah.

Phil Tarrant: Okay. The gym business has changed so much so quickly. If you were going to try and explain that wholesale shift in terms of the business model of gyms and the way in which gyms position themselves and provide a service to the community, how would you sort of frame that really quickly?

Justin McDonell: Gyms have changed from having weights and aerobics to treadmills, cardio. Then I think the biggest change was probably in the '80s with direct debit membership. Gyms used to open selling lifetime memberships, but it was the lifetime of the gym, not the lifetime of the member. Then it become more professional with businesses, so they're more expensive to open these days. Then, I think Fitness First was probably the big game changer for Australia, coming in from the UK, opening big facilities and really raising the standard. They probably got a bit complacent, and then come along us. And we've 450 locations, and we'll grown to about 500 when we're at capacity.

Phil Tarrant: So you're at 450 locations across Australia now?

Justin McDonell: Yeah. So we launched in 2008. We launched in Gunnedah, which is a small country town.

Phil Tarrant: You launched in Gunnedah, did you?

Justin McDonell: Yep.

Phil Tarrant: I like Gunnedah.

Justin McDonell: Been there a few times.

Phil Tarrant: Went to a B&S ball there once. It was great fun.

Justin McDonell: It's a town of about seven and a half thousand people, so quite small. We launched in a lot of country towns, and then sort of hit Sydney and really sort of dominate the market now. We're the biggest player in the marketplace, which is great.

Adam Zuchetti: Was that a deliberate tactic, to go for sort of regional locations first?

Justin McDonell: We weren't too sure how big we'd grow, so we looked at really lower-rent bases. We got some good property deals out there and we thought if it works in the country towns, it'll work in the bigger cities. Our price point back then, I think we were $45 a month. We were at much cheaper than the competition, and were probably a little afraid to pay the higher rents of what we do today. So, a North Sydney location or Sydney CBD, we're paying commercial rents and making it work.

Phil Tarrant: There's a million questions I want to ask you, because I'm really intrigued by the business that you're in. And I guess I'll frame my questions by what is the business that you're in? It's not gyms, I imagine. It's something else?

Justin McDonell: We're in the franchise business. We've got a couple of customers. Our main customer is looking after our franchisees. So we've got 250 franchisees, and then they operate the clubs. We've obviously got the customers as members. There's 450,000 members, but we really focus in our corporate office on looking after our franchisees. If they're happy, making money, then they'll look after the members.

Phil Tarrant: So you said you were at 450-odd stores, you're looking for 500. So you're nearing that goal. Imagine what you do and the way that you run your team has changed quite a lot over the years in terms of it was all about finding people to, I guess, purchase a franchise through to franchise management. How has that transition taken place? Has it been an easy transition from being, I guess, salespeople, to managers of small businesses, really?

Justin McDonell: Yeah, it's been quite a fast growth, and we've had to adapt and change as we've done that. So we run a licence under a US parent, so they've been going for about 15 years. And then we were their first international business. We launched the business, there was two of us working. We've now got a team of 70 people. Through that growth, I wore a few different hats. And kind of got to a point where we now have a CEO who runs the main operations. My skillset's not on running 70 people. Probably a bit more smaller, sort of, business mindset. I focus more on strategy, and I quite like looking under the bonnet with the figures as well, so. Definitely running the team has been our biggest challenge. We were just literally need more people, kept putting them in, and then wonder why they weren't keeping up with our growth. We're getting much more structured around people management, development. That's when we brought in Arthur as our CEO 18 months ago to kind of help us cement that and grow the team.

Phil Tarrant: So what's the backstory? How did you end up owning a major gym franchise?

Justin McDonell: My mom and dad had gyms when I was kids, so we used to get picked up from school and literally go to the gym. I would either do cleaning or help out at reception. It was literally $5 for a casual visit, so whether it was aerobics or doing the weights. Then when I was about 19, I was doing a business degree, and mom and my sister and myself opened up a gym out in Windsor, out in the Western suburbs of Sydney. Kind of learned quite a lot through that. We got some business consultants in. We went through that for about four or five years, ended up owning a Fernwood franchise, so it's a women's only health club. Had that for about two ... Sorry, about five years, then kind of got out of the business and didn't know what I wanted to do.

So I went skiing and had a bit of a time off. Then my sister had a health club in Sydney CBD, so combined with her and we opened up another women's only club. Then we really wanted to grow into a bigger organisation and weren't too sure how to grow. We were good at operating a business, but didn't really have, probably, the skills with the marketing and all of that to make it grow. Looked in a magazine and seen Anytime Fitness as a growing franchise globally. They had 700 locations. So we went across, met with them. After about 12 months of research and back and forth, going to the States, kind of decided to launch it in Australia.

We had a target in our development schedule to reach 300 locations. We weren't sure if we could do that. No one had ever really done that. Fitness First, I think at their peak, had 95 locations. So we kind of took on the rights and we thought, okay, we've got to test it in the market and we've got to find franchisees who want to back this idea as well. Really focused. In the first few years it was really hard work, trying to prove concept. People would say, "Why do you want to go to the gym 24 hours a day? It won't work in here, security." We kind of ignored all those people and just kept growing.

Jetts had also launched in the marketplace. They're an Australian competitor. They launched about a year before us. And by the time we opened our first location, I think they had about 10 or 15 open. And we were just so determined to get in front of them and beat them. I think they're sitting on about 250 locations now, so we've kind of smashed their targets. But that was a real driving force in the early days, to get bigger and better than them.

Phil Tarrant: I quite like, and I just got, like, an insight into your psyche there, when you're talking about competition. Nice smirk on your face. I'm wired the same way. I love competition, I think competition is good for any business.

Justin McDonell: It is.

Phil Tarrant: You need strong competitors. It's the only way, keeps you on your toes and driving forward. And you know, I like to win as well. And I can see that you ... You really enjoy the idea that you moved past your competitors. And you've built a large organisation that, outside of it being a good business, and a profitable business and making money, and employing Australians, and all that sort of stuff, you're actually creating something which is probably improving people's lives as well. I imagine that's sort of the X-factor of what you do, as well.

Justin McDonell: We've got two components. We focus on the franchisees, and some of our franchisees were literally working in a job, bought a franchise, put all their live savings into it, and now they've got a lifestyle where they can have a bit of freedom and choose to go to work, or the business can run itself. So we've seen that. And then you've got the member success stories of people losing weight. And taking facilities into country towns that had really crappy facilities beforehand. And in the marketplace we're at an affordable price, so much cheaper than the big box, so we're opening up to a bigger audience of ... In the community.

Phil Tarrant: With the business, how much of a challenge is ... So, outside of- And I'll chat to you about it later, outside of the selling of franchises and how you've gone about doing that. In terms of the challenge of owning a fitness franchise, I imagine a big part is location and therefore it's lease negotiation and management and securing it, and stuff like that. Do you get really involved in that? I'd imagine it's a property business, in some ways. Because people who are franchisees wouldn't buy a premises, you might have a handful of them, so they're renting premises. That must be a critical thing to get right. A critical success factor for a franchise to succeed. Is that pretty fair?

Justin McDonell: Yeah. Early days we focused on selling, and then we sold some territories, went, "Oh, we've got to get the property open." So we actually set up a property department to try and facilitate that. We have certain criteria we look for in a building: Size, access to parking, ceiling height, security. And then, obviously, securing the right deal as well. We don't want franchisees paying too high a rent. Especially in the early days, we were all really protective around that. So we had a property team set up to help them build through that, and we've now got a construction team as well. They'll work with preferred builders, we do in-house planning. Making sure our product is consistent and the franchisee just focuses on the people side of the business, and not worrying about finding a leasing agent or a builder. So we assist them with that, and we still do.

Phil Tarrant: For a lot of people who chose to become self-employed, so a small business SME, for a lot of them the choice of a franchise is something that appeals. For a lot of people, it'd be you're buying yourself a job, right? You're buying something which is established and you get a lot of support to grow and evolve it. What are those couple of things that you've seen good franchisers do? And not just people in the fitness game, but franchisers all over, whether it's fast food or whatever. What makes a good franchisee? What's that set them apart?

Justin McDonell: The franchise relationships, it's like a marriage. There's good and bad times, but generally it should be good. A good franchise system has really good marketing. They're fulfilling a niche in the market. We sort of had a hole where people were not as happy with Fitness First as they should be. After Fitness First, there wasn't any great competitors. So we literally come along and offered a good product and an affordable price, so I think we filled a hole in the marketplace. Then we're providing good marketing to the franchisees, and a good product. So I think it's product consistency. Our clubs, when they're at year five, need to- We call it refresh, but they need to literally refurbish their-

Phil Tarrant: Just gut it and fix it, yeah.

Justin McDonell: -whole facility. Which, franchisees don't overly love it, but from a consumer experience, it makes it so much better for them. So we're looking at longevity of the product. And I think as a franchisor, you'll do that. As a small business owner, you'll probably get complacent and not do that. We launched new websites, new member apps. So I think we drive a lot of that. And we can afford to do it on the scale, whereas a small business, they just don't have the funding to do it.

Phil Tarrant: And the franchisees ... So, if I went to your annual awards ... I imagine you probably do an annual award, franchise awards?

Justin McDonell: We do.

Phil Tarrant: You do?

Justin McDonell: Yeah.

Phil Tarrant: So, the guy or girl, or company, or franchise location that wins it year in, year out, is always top two or three, what's that set them apart?

Justin McDonell: Generally, the high-performing franchisees generally have three to five locations. They're totally invested in the business. That's their key focus, whereas other guys, still successful, but they might have a full-time job as well. So they focus all their energy into it. They probably focus on the customer service component as well, making sure, I know it sounds basic, but the club is clean all the time, it's really well maintained. Then the manager in the club is really focused on the members. It's not just ... We are a keycard entry club, but we are staffed from, say, 10 a.m. to 7 p.m. So making sure we're waving to the members and we know who they are. Engaging with them. If they're not coming, giving them a call or texting them, so. Engaging with the customer's probably the key thing.

Phil Tarrant: 450 franchisees is quite large, so what's the secondary market of your franchise operations? Do you get a lot people who want out, and what are the reasons why they want out? How easy is it to transition that to a new owner?

Justin McDonell: We have about, I think it's just under ... I think it's about 7 per cent of our clubs for sale at any one time. Which, as long as it's under 10 per cent we're quite happy with that. Owners sometimes get to the point of we want them to refresh, they don't really want to reinvest, so it might be a time for them to do that. We've had business partnerships split up, so parting of the ways. Some of them think it won't continue forever so we should cash out now, whereas we don't have that same opinion. We'll just keep growing, so, different factors in that. But, sort of a low, under 10 per cent turnover is kind of okay.

Phil Tarrant: Yes.

Justin McDonell: Gives us a chance to refresh.

Adam Zuchetti: What would you say is the average age of one of your franchisees?

Justin McDonell: It's probably a male, 25 to 44. In that sort of bracket. We have some husband and wife couples, but generally it's more male dominated. Our Adelaide market's probably one of our stronger markets and they've really ... They get on really well, the franchisees, but they've got that competitive nature-

Phil Tarrant: That's good.

Justin McDonell: -which kind of pushes them along, which is good.

Phil Tarrant: What takes up most of your time, other than doing podcasts and marketing stuff? Franchise development?

Justin McDonell: I try and focus on the future and where we're going. So looking at what technology's out there. Because we the US parents, making sure ... Looking at what they're doing. I travel to the US quite a bit as well. So constantly looking at what's the new trend, and trying to localise it into the market. Just looking to the future. I like numbers, so I'm on the ... This morning I had a finance committee meeting with all the accountants. I don't overly love all of that, but looking under the hood and seeing where we're going, and looking to the future.

Phil Tarrant: When you secured the franchise rights for Australia, you said there was 700 globally with the parent, the corporate parent.

Justin McDonell: Yep.

Phil Tarrant: What is the total collective global brand now, in terms of franchise locations?

Justin McDonell: They've got over 3,000 open and they're in 26 countries. Our growth has exceeded any other country's, so we're the big-

Phil Tarrant: You're the sort of darling of the-

Justin McDonell: Yeah, that's right.

Phil Tarrant: Yeah. When they're out selling franchisor opportunities, they're saying, "Look at this guy down in Australia. Look what he's done"?

Justin McDonell: Yeah. That's what they use. Japan's, I think, the next biggest, at about 180 locations. Then it's the UK at 110, and then most of the others are kind of 50 or below, so they're still growing.

Adam Zuchetti: But you said that you were the first coming out of the US or North America.

Justin McDonell: Yeah.

Adam Zuchetti: Was it difficult to do that, to take a franchise that had been established and successful in one country and bring it to another one, sort of untested?

Justin McDonell: A little bit. Because we were in the industry, we kind of felt comfortable with that. Back in 2008 when we launched, you just literally had to have a website and you'd kind of be okay, whereas now you need it mobile optimised and the consumer's buying differently. So I think it's more challenging. We've just launched a couple of new brands, Massage Envy and Orangetheory Fitness. We're finding adapting the technology's probably a bit more of a challenge than what we did with Anytime. Anytime, as long as the website worked, it was kind of okay. So we didn't really change too much. They had solariums, or tanning. We didn't think that was right for the market, so we didn't adapt that. But literally you could walk into our club or one in the US, and they'd look the same.

Phil Tarrant: You happy with the deal that you cut with the corporate parent when you did it all those years back then? Cheeky question.

Justin McDonell: That's probably the slowest part of the negotiations. Coming through with the last two brands we've had, that's been the slowest. But you get to a point of due diligence on the product, think that's good, think that'll work in the marketplace. And then probably getting that deal right is probably taking a six or nine month process. They want to take more and we want to give less.

Phil Tarrant: So how long's the brand been in the Australian market now?

Justin McDonell: It'll be ... It's nine and a half years.

Phil Tarrant: Nine and a half years.

Justin McDonell: Yeah.

Phil Tarrant: So it's quite established. Obviously it's got its roots down. What is the one thing that you think was absolutely critical to its success?

Justin McDonell: I think making sure the franchisees made money and they were successful. If they weren't making money and the clubs didn't have enough members, we wouldn't be so happy. In franchising, if the franchisee is making money, they're happy. If they're not making money, they're blaming the franchisor.

Phil Tarrant: It's a tough business, because you pick up any of these, like, a franchising magazine, and there's literally hundreds, if not thousands of different franchise options for people to buy. Franchising can be a great solution for people looking to become a business owner. it can be a horrible solution for people looking to become a business owner. I think a lot of people think it's an easy way to become a business owner. They expect everything to come on a plate. We do a lot of work right across industries like mortgages or real estate, or ... All these franchise models exist. And when you look at their top performers, they're just hungry business people who are able to compliment their skills and capabilities with a really strong franchise brand. Whereas, on the flip side of that, you've just got people there saying, "Where's my leads? Where's my leads? Where's my leads? This is s**t, it doesn't work. Where's my leads?" And it's a perpetual problem. How do you go about balancing those two things?

Justin McDonell: I think we try and vet the process in making sure they understand exactly what they're getting into. People will say, "Can you change this part of the franchise of the agreement? Can you change that?" And we say, "That's the agreement. Understand what you're getting into." This is the relationship. We provide you the framework and the tools. Some things you can flex a little bit, and other things you can't. If you want to change the design or the logo, we're not interested in doing that. If you want to tweak the customer experience and make it better, that's okay. If you want to tweak some local marketing or try some different things with programming or training, we'll let them. But certain things they just cannot change. They should just focus on running the business, and focusing on that.

Phil Tarrant: Who sold the first ... I don't know if sold is the right word, but who sold the first 50 franchises for you?

Justin McDonell: The first territory we sold was a guy who ... Steve Rollings, is his name. He was a pizza franchisee previously. He'd actually inquired with the US parent before we'd actually even bought the rights. We met with him early on, and he was an entrepreneurial guy. Still got some ... I think about five or six clubs now. So he was the first lot. Then we brought on board ... Helen is our franchise sales. And that's kind of evolved into ... We've a team of four people in franchise sales now. So the Anytime brand, we do no marketing and we're getting 150 inquires a month. Early on we were struggling to get 40, spending lots of money. So that's great. And then the guys filter that through and we run with other two.

Adam Zuchetti: Of those 150-odd, how many are actually successful out of it?

Justin McDonell: You work through, and it's about a 3 or 4 per cent conversion rate.

Phil Tarrant: Is it people who you feel as though have what it takes to succeed in franchising underneath your brand?

Justin McDonell: Yeah. Just going through the process, we're quite open with what we disclose to them. We're happy to share as much information, but it's a two-way street. It's them researching us as well, talking to franchisees, meeting with us. If they don't like us, that's okay as well. It's a two-way street.

Adam Zuchetti: What's the typical time period between someone initially coming to you and actually signing them up? Because there's obviously a lot of due diligence on both sides, a lot of investigation and relationship building.

Justin McDonell: It's typically, from the inquiry to signing an agreement, about three to four months. We have had three years on some cases, but generally it's three to four months. People make that investigation and go through that process in that time frame.

Phil Tarrant: We feel like we're peppering you with questions.

Justin McDonell: That's okay.

Adam Zuchetti: It's interesting.

Phil Tarrant: Because there's so many different ways you can take a chat around franchising. It's the sales of it, it's the management of, it's the outs. What are you guys going to do? Is this going to be something you're going to build up and just keep improving over time, or is this something that you have an out with?

Justin McDonell: We've set up a company called Collective Wellness Group, which is where our Massage Envy brand and Orangetheory Fitness sit. We're looking for, potentially in the future, two more brands as well in the wellness and franchising space to leverage into that as well. Anytime's done extremely well with the population size. We're kind of at that point of we can still open more clubs, but it's not ... We can't be putting two or three hundred more in. So looking at brands that compliment that. Massage Envy's a membership-

Phil Tarrant: So, essentially vertical integration. Using your distribution to monetise it more effectively.

Justin McDonell: Yeah. So we're set up like a shared services business with our franchise sales, finance, accounting, and property as well, to facilitate the growth for the new brands, and yet having a team dedicated to Anytime Fitness as well.

Phil Tarrant: I've got some mates that are in the gym game, and ... The business stuff, we'll occasionally talk about what they do and how they do it. One in particular who was in the gym game 20 years ago, and a guy who recently got out. They used to lament quite a lot about how rapidly the industry's changed by, they call them disruptors, guys like you, who have come in and changed the paradigm. I guess, given greater flexibility, given greater choice, it's a price point difference. And you've really ... You've put a lot of these guys out of business, or you've made them change so quickly that they need to reflect or have some of the same tenets of your business. I imagine you probably didn't make a lot of friends along the way there. But the nature of business is that you need to disrupt yourself, or be disruptive.

For you guys, moving forward, who's going to ... What more innovation, or what else can people in the gym industry do to keep delivering something which is unique to a marketplace which can get fatigued by it?

Justin McDonell: There's always something new in the fitness industry, that some things stick and some things don't. You've got Step Reebok, that's still around today. There was slide, which didn't last. CrossFit was quite big for quite a while, and still big but it's more consolidated. Yoga, there's some big chains, but that's largely fragmented as well. So it's looking at what's next. The big thing in the US is more boutique-type products. Orangetheory Fitness is one of those. High-intensity training.

Phil Tarrant: So, what is that? Orangetheory Fitness. So it's high intensity, where you just do something really fast for a short period of time, and then do something else?

Justin McDonell: More circuit-based. So imagine 12 treadmills, 12 rowers, some TRX, dumbbells in a class format, and then you wear a heart rate monitor. It's really getting you in different zones of intensity, taking your heart rate up and then down. That's the concept of that. There's things in the US such as Soul Cycle, which are purely indoor cycling classes. There's lots of different boutique fitness, and the reports we've seen is people belong to, say, an Anytime at a more affordable price, then they'll go to the specialist yoga class, then they might do a cycling class as well. So, more broadening of the different brands. Personal training's a huge area as well. People always coming up with different outdoor boot camps. You've seen all the Tough Mudder and all of those. There'll be something else that'll come up as well, so.

Phil Tarrant: It's really intriguing, this. So you know what your product is. That's probably, in terms of cost it's, you're not the most expensive. You're probably medium to the lower end of the scale. And your clientele are people who will use a gym at a particular point in time, on a particular day, how many times a month. So you know who that is. You don't want to be like some of the other gyms out there, which probably cater to a different type of person. But are you looking to forge relationships with these complimenting fitness or lifestyle-type offerings to serves your customers better? So you say, "Okay, if you want to do cycling, there's these guys down the road who do a really good job." How do you go about doing that?

Justin McDonell: Most fitness industry tries to push into the older demographic. And by older, I mean probably over 40, which is not old.

Phil Tarrant: Real old. Yeah.

Justin McDonell: Yeah. But generally, the fitness industry attracts 18 to 35. That's the key audience. Clubs have tried to develop bigger offerings to appeal to that. Virgin Active are a good example of having juice bars, childminding, lots of-

Phil Tarrant: And that's not you guys.

Justin McDonell: That's not us. So what we've attracted is the 18 to 24 year old male and-

Phil Tarrant: Who just want to look good down at Stereosonic.

Justin McDonell: Yep. So we appointed a marketing company 12 months ago, and we did a full data breakdown of current and ex-members, and they discovered that that's who we're attracting. We're also attracting a female in their late 20s. What we've done is look at how many more people are coming into the marketplace, and all that marketing is really aimed around those people. We're not trying to diversify into the 50 year old personal training client, who you might yield much more income off. We're just really going for our key audience. If you look at our website, it's quite young. I look at it and it's not as appealing to me, being mid-40s, than probably a 24 year old. So we've really gone for that younger market, whereas most gyms are probably going for the older.

Phil Tarrant: How sticky is that customer base? Because, I'm sure people in that age bracket probably attracted by your price point. Probably looking to save a few bucks, but still getting the benefits of being able to work out and get the body they want. As they go through the journey of life and professional development, probably making a few more bucks and stuff. Does your membership start to tail off at a particular point? Those guys might move to a more Virgin Active-type offering. So it's all about always generating new business, or is it ... So is the membership stable? Or is it increasing?

Justin McDonell: Our statistics are similar to the industry's. So doesn't matter if offer really high or low service, it seems to be the same. Personal training clients will have a longer attention and stay, but they're such a small percentage of your membership base, it's not the key audience.

What we're finding is people sign up and stay based on convenience. Because we've got so many locations, that flexibility of training between all the different clubs is quite appealing. From my house, I can go to three clubs within 10 minutes. I actually mix it around for a variety. As well, if you're travelling, you don't need to be paying for more. That's a huge selling point, is that convenience. The quality of our equipment is equivalent to what you're getting in a Virgin Active. So price point, there's no reason. The same treadmill is in a Virgin Active club as our club, or ours might even be a bit better in some cases. It's more convenience, really.

Phil Tarrant: Oh, okay. It's probably a little bit off topic, but if I'm a personal trainer, how does that game work? Would they run their own business and just use your locations to run their own little business out of? Do they have an exclusive relationship, or they're like a business within business in many ways.

Adam Zuchetti: Contract, or something.

Phil Tarrant: How does that work? Yeah.

Justin McDonell: Yeah. Our main business is really the membership base and getting the reoccurring direct debit income. We're just really starting to play with personal training and how we make that financially viable for the club and the franchisee as well. We've launched a product called Roar30, which is small group personal training. That's rolling through some of the clubs that have ... They're a bit bigger in space. So it's an affordable personal training. That can be done ... Clubs can either contract the PT directly or do an employee model. We haven't really even put that into our business model as part of our income source, so that's something we're playing with at the moment on how we make that work for everybody.

Phil Tarrant: I guess it's like any business. If you have the connectivity, you have relationship, you have the trust, and you can influence the way in which people make decisions, you can really diversify your income and your revenue by adding more services or support, or you can ... The whole wellness industry-

Justin McDonell: Yeah. It's huge.

Phil Tarrant: -is huge right now. And I wouldn't normally admit to it, but I read The Daily Mail if I ever sort of go, "I don't want to think about anything for a while." And I reckon 50 per cent of the articles on dailymail.com.au is around wellness, or whether it's mental well-being or physical well-being, or whatever well-being. The way in which the articles are massaged in there to drive people towards thinking about their health and taking control of their lives in a better way; are you guys behind that? Are you guys in there ... How do you influence trends? Because there's guys down the road here, what's it F35 or something?

Justin McDonell: F45, yeah.

Phil Tarrant: F45. And I go, "That's just popped out of nowhere." I read The Daily Mail, and everyone's talking about it. Celebrities are doing this. What's happening is smart, because they're influencing behaviour towards this sort of stuff. Is that something you guys are really conscious about? Trying to massage the way in which people think about fitness, and-

Justin McDonell: We want to make-

Phil Tarrant: -the leaders you've got to do it.

Justin McDonell: We want to make sure-

Phil Tarrant: Tell us your secrets.

Justin McDonell: -if you're Googling "fitness," we will probably come up there. Or Googling a gym. We haven't extensively targeted that in any smart way. But people are working longer hours, are sitting down in front of the computer, travelling, living longer, so they have to be fit and healthy to do the things they want to do. The baby boomers want to play golf and be better at it, so I think people are more educated into the benefits of movement and exercise. I think that's just helping us grow with that. And the benefits of doing weights, or strength training, you can only get that in a gym. So that's a huge advantage.

Phil Tarrant: Yeah. So I read a thing just yesterday about if you want to lose weight, you got to lift heavy weights rather than this, it's just a change. Every day it changes, right? Every day it changes. I don't know, I just go- I swim in a pool, that's what I do. Or surf and stuff. I'm not a gym-goer. But, yeah. I find it really intriguing. It's a really interesting business. It's a really interesting business. When you think about the future for you guys, what is it that scares you? What is it that keeps you awake at night?

Justin McDonell: I suppose being the biggest chain in Australia, there's always someone trying to take you down, if you like. Maintaining the quality of our clubs, making sure the franchisees are profitable. Now, club numbers, they're still consistent with their growth so we really monitor keeping the franchisees and the clubs open and continue to grow as well. Being competitive in the marketplace and not being complacent is the biggest-

Phil Tarrant: You use the gym every day yourself?

Justin McDonell: I go about three days a week. Three or four days.

Phil Tarrant: Enough, yeah.

Justin McDonell: That's enough for me.

Phil Tarrant: You a big gym man, Adam?

Adam Zuchetti: I've got my own gym at home, actually.

Phil Tarrant: Oh you do, do you?

Adam Zuchetti: But I don't use it as much as I should.

Phil Tarrant: Yeah.

Adam Zuchetti: I think that's-

Phil Tarrant: I think everyone says that.

Justin McDonell: Yes.

Phil Tarrant: That said, I look at our business and just on the level of the floor that we're on here. I reckon at least half the people go to the gym at lunch time.

Adam Zuchetti: Yeah.

Phil Tarrant: At least half.

Adam Zuchetti: There's a lot here, yes.

Phil Tarrant: Probably more. Yeah. So people are so much more in tune with it. I know some guys use Anytime, but from here there's, like ... There's Anytime, there's Fitness First, there's ... Oh, I don't know. There's heaps of, there's choice.

Adam Zuchetti: There's quite a few.

Justin McDonell: There's a lot of choice.

Phil Tarrant: It's competitive. It's a competitive game.

Justin McDonell: It is.

Phil Tarrant: And I can't see ... That level of competition in any other industry, you'd see consolidation, so that's happening in your space?

Justin McDonell: Yeah. The guy ... Quadrant Private Equity have purchased Fitness First-

Phil Tarrant: Yeah.

Justin McDonell: -Jetts, and Goodlife as well. They're merging. I think the brands will stay separate, but that's being consolidation. Their reports predict there'll be still growth year on year, about six and a half percent. Even all the market analysts are still predicting growth in the industry. We've got some software that we look at where the holes are in the marketplace, and we're still predicting quite a bit of growth just for us as well. There's still more housing estates being built and some areas just don't have as many gyms as they-

Phil Tarrant: When you look at population growth things, it's going to keep growing through the roof.

Justin McDonell: Yeah.

Phil Tarrant: Particularly in sort of Eastern seaboard locations-

Justin McDonell: Yeah. That's right.

Phil Tarrant: -like Northern Sydney, Brisbane.

Justin McDonell: And all the different gyms have a different segment market they appeal to. We don't have group exercise classes, so predominantly females prefer that. They might go to a Fitness First or a Goodlife for that.

Phil Tarrant: We've got to finish. Is this still a family business? Have you still got your sister and stuff involved?

Justin McDonell: She's focusing mainly on yoga, so she's set up a yoga business and charity. She's moved on to that, which is good for her.

Phil Tarrant: Yeah.

Justin McDonell: Yeah.

Phil Tarrant: Nice. Adam, anything to finish out with, mate?

Adam Zuchetti: I guess you've, quite early on in the piece, were talking about that you are a franchise business, first and foremost. The skills and the requirements of a franchise business, are they quite transferrable across all industries? Or do you find that there are some really particular intricacies in the fitness and the wellbeing sector?

Phil Tarrant: I think definitely in franchising, we need to make sure that legally and compliance-wise we've got our ... Everything ticked off. We could end up in court quite easily. We've got to watch what we say and what we can disclose. We have to be quite good in that side of the business. Most of the skills, such as how to sell, that's transferrable across. Accounting. So it's probably more that legal compliance we need to really understand. And then with the marketing, making sure we're targeting the people who want to buy a business as opposed to, "Sounds like a good idea. I want to own a gym," or. There's a lot more to it than just that.

Phil Tarrant: If I own a pizza franchise, or a Subway franchise, or a mowing franchise, and I've been successful there, I can be successful running a gym franchise as well?

Justin McDonell: Yeah.

Phil Tarrant: That's transferrable?

Justin McDonell: We've got some Subway guys and some pizza guys as well. So, yeah. We've got different brands.

Phil Tarrant: Is that a great place for you guys to look for ... Would you prefer to attract someone who has franchisee experience outside of gyms as a potential franchisee? Is it more important to be good at franchising and love franchising, or is it more important to be into gyms and being fit?

Justin McDonell: Probably I prefer ... Like, our best franchisee, if you had to pick the ideal, would probably be a member of a health club. Probably not have run a health club. Then they either have sales or marketing background, or they're really good with their numbers, and then they hire a manager who's great with the people. So it's really understanding that customer side and the business side of it. If they've got an interest in fitness, it's definitely much better. If they're a fitness person, they might want a calf raise, whereas we kind of go, "You can do it on another machine there." We don't have the space, so we don't really want to having too much discussion on what we're putting in their gym. There's 3,000 around the world, so follow the model.

Phil Tarrant: That's good. We have a lot of aspiring business owners listening to the podcast. So if you want to get into the gym game, give you guys a call. What do you, just go to your website if you're interested in Anytime Fitness?

Justin McDonell: Yeah. Off our main website, there's a franchise tab. You can complete that-

Phil Tarrant: Okay.

Justin McDonell: -and fill in some details.

Phil Tarrant: That's good. Outside of that, I think it's important. I concentrate on fitness, just-

Justin McDonell: Good.

Phil Tarrant: -keeps me in fighting fit for the business life. So if you're not going to the gym or doing something, go and do it because you'll find you enjoy work so much better.

Justin McDonell: I agree.

Adam Zuchetti: So you're saying health body, health mind.

Phil Tarrant: Yeah. Absolutely. If you don't make time for fitness, you got to make time for sickness. There you go. That's my message of motivation for the day. Yeah, it was great.

Justin, really enjoyed it, mate. Thank you.

Justin McDonell: Thank you.

Phil Tarrant: Good chat. There's literally so many other questions that I could ask you about franchising, because I find it really intriguing, but we'll get you back and catch up when you hit that magic 50 more to go.

Justin McDonell: Okay. When we hit 500, I'll come back.

Phil Tarrant: Do a party.

Justin McDonell: Sounds good.

Adam Zuchetti: At the rate you guys have been going, that might be next week, though.

Justin McDonell: Maybe. Not quite.

Phil Tarrant: That's good. Thanks, Adam. It was good, mate. Remember to check out mybusiness.com.au, where we'll probably write up quite a whole bunch of stuff off this, I think. There's probably-

Adam Zuchetti: We will.

Phil Tarrant: -three or four clear things that come out there for me, that I think we can extrapolate on or expand on. Any questions for us, This email address is being protected from spambots. You need JavaScript enabled to view it.. You can follow us on all the social stuff as well. Remember to keep those five star rankings coming on iTunes. Been blown away with how popular this podcast has been, so keep ranking us highly. If you'd like us to cover anything that we're not, please do get in touch. Thanks again for tuning in, we'll see you next week. Bye-bye.

Anytime Fitness Australia founder talks expansion and competitive markets
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Sasha Karen

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