According to the 2018 IHRSA Profiles of Success report, the health & fitness club segment posted revenue growth of 5.8% and membership growth of 2.8%.
A total of 115 firms, representing 12,289 clubs, participated in the IDS. As this report will show, club performance results varied by segment. Clubs part of a chain reported greater revenue growth (+7%) than independent clubs (+2.8%). On the other hand, independent facilities posted a retention rate of 72.4%, while clubs part of a chain indicated a retention rate of 66.7%. The smallest segment of clubs generated significantly less revenue per individual member ($479.70) in comparison with larger clubs ($975.30).
Based on data gathered in the annual Industry Data Survey (IDS), the 2018 IHRSA Profiles of Success provides benchmarks and other operational and financial data for select leading clubs. Included are key metrics such as revenue, membership growth and retention, traffic, payroll, non-dues revenue, and EBITDA. Club reinvestment and profit center analysis as well as income statement and balance sheet data are also provided.
For a copy of the complete report visit the IHRSA Store.Read More
OCTOBER 12-14, 2016 CHICAGO, ILRead More
Several private-equity firms have been aggressively investing in boutique fitness chains, including yoga, spin and barre studio fitness centers. These moves illustrate the growing popularity to investors and consumers alike, of workout classes that aren’t tethered to traditional gyms and monthly membership fees.
In 2015 Boston-based Great Hill Partners purchased YogaWorks, which operates 29 yoga studios in California and New York, from Highland Capital Partners. Great Hill paid approximately $45 million for the company, according to people familiar with the deal.
Also last year, CorePower Yoga received an investment from private-equity firm Catterton Partners, which enabled them to add about new 20 locations. CorePower Yoga now operates about 100 yoga studios around the U.S.
“Right now we are seeing a shift away from traditional gyms towards more specialized programs, as consumers want their workout routines to be more fun and engaging,” said Sports Club Advisors partner Rich Jackim, who added that his firm’s research indicates that yoga and boutique fitness class attendance is up 12% over a year ago. Sports Club Advisors is an M&A firm that puts together deals in the health, fitness and sports club sector.
Jackim said buyers like boutique fitness clubs that offer unique programming and have strong brand recognition. For example, YogaWorks, in addition to its studios, also runs a yoga school that has trained thousands of yoga instructors worldwide, according to its website.
Private-equity firms often buy companies to serve as “platforms”, which they then grow aggressively by making a series of add-on acquisitions over 4-6 years, before selling or taking the company public. With Great Hill’s acquisition of YogaWorks, Jackim said he expects to see a consolidation in the yoga sector over the next five to six years. Right now, the yoga sector is highly fragmented with between 7,000 and 9,000 yoga studios in North America, most of which are independently owned and operated.
Investors are also racing to close deals in other areas of the fitness sector in addition to yoga. In April last year, private-equity firm Catterton Partners, the firm that invested in CorePower Yoga also invested in the indoor cycling studio, FlyWheel. Flywheel’s main rival is SoulCycle, whose parent, Equinox Fitness, is owned by a private-equity group called Leonard Green & Partners.
Flywheel also offers a ballet-inspired class known as FlyBarre that’s similar to one offered by Pure Barre, which is backed by South Carolina-based buyout firm WJ Partners.
According to Sports Club Advisors the number of new locations that boutique fitness chains have opened has increased by 450% between 2010 and 2015. That makes boutique fitness chains the fastest-growing segment of the $22-billion-a-year U.S. health-club industry, according to the mergers and acquisitions firm.
“We’re seeing a good response from the private-equity community when successful boutique fitness clubs are finding a financial partner to provide growth capital and accelerate their expansion plans,” said Jackim. “There is significant capital available for proven fitness industry entrepreneurs, the challenge is finding the right partner and negotiating the right terms.”
Sports Club Advisors is a mergers and acquisitions firm that advises clients in the sports, fitness and leisure industry.Read More
Ever wonder what professional athletes do when it’s time to retire before they’re 40? With the competitive drive to win, combined with lots of free time and, usually a very healthy balance sheet, for many the answer is to pursue a second career as an entrepreneur or in private equity.
In this post we take a look at a few professional athletes who have retired and made the cut to get into the exclusive world of private equity. Among those who have made the move are one of the greatest goalies in NHL history, a two-time NFL MVP, and a member of the 1992 Dream Team to name a few.
Gary Fencik—Partner, Head of Business Development at Adams Street Partners
After a rewarding career as a safety for the Chicago Bears during the ’70s and ’80s, Gary Fencik was a member of one of the most powerful defenses in NFL history. Now he’s in charge of business development for a private equity firm with more than $27 billion in assets under management .
Steve Young—Co-Founder, Managing Director at HGGC
As an NFL quarterback, Steve Young was a two-time MVP who won three Super Bowls with the San Francisco 49ers. After retiring in 2000, he earned a law degree, tried politics and helped launch a successful private equity firm. HGGC has more than $2.4 billion in assets under management with a portfolio that includes tech companies like Selligent and Serena.
Kerry Kittles—Associate at Ledgemont Capital Group
The former NBA wing took a bit of a different path to Wall Street. Rather than founding his own office, Kittles went back to get his MBA at Villanova (the same school where he played college basketball) before catching on as an associate at Ledgemont. Kittles is also an advisor to Fantex, a platform that lets users trade stock in the brands of professional athletes.
David Robinson—Co-Founder at Admiral Capital Group
A 7-foot-1 NBA champion, Robinson retired from professional basketball and jumped into the private equity field by co-founding Admiral Capital Group, an investment group focused on real estate but with investments in companies like online ticket marketplace ScoreBig and sporting goods retailer Academy Sports + Outdoors.
Detlef Schrempf—Partner at Coldstream Capital Management
A native of Germany, Schrempf spent much of his basketball career in the Pacific Northwest and now works for Bellevue, WA-based Coldstream Capital. After joining the firm in 2007, the former three-time NBA All-Star has worked primarily in business development; sourcing new deals for his PE firm.
Muhsin Muhammad—Managing Director at Axum Capital Partners
Instead of catching passes, Muhammad, a former NFL wide receiver, is now sourcing deals, making investments and helping manage a portfolio companies at Axum, a private equity group based in North Carolina. During his pro football career, Muhammad was probably best known for his 85-yard catch in Super Bowl XXXVIII which is still the longest touchdown in Super Bowl history.
Mike Richter—Founder, Managing Partner at Healthy Planet Partners
Many consider Mike Richter, a member of the U.S. Hockey Hall of Fame, to be one of the best goalies in history. Each year the NCAA awards the best goalie in men’s hockey the Mike Richter Award. Mike has been busy in retirement, earning a degree from Yale, getting involved in politics, and starting his own environmentally focused private equity group called Environmental Capital Partners.
Zoltan Mesko—Former Intern at Graham Partners
Zoltan Mesko, the Romanian native and former New England Patriots kicker has an interesting story. During the 2011 NFL lockout, the University of Michigan graduate worked for the private equity firm Graham Partners. Mesko took what he learned there and now that his playing career is over, is working at IBM in its Business Intelligence & Predictive Analytics division.Read More
The fitness, sports and health club sector has been attractive to buyers and investors for a long time. As proof, valuation multiples for health and fitness clubs tend to be higher than for traditional retail or leisure-related businesses and are currently at an all-time high.
Based on conversations with hundreds of buyers, we have distilled the top four reasons buyers and investors find the sports, fitness and leisure sector to be so attractive.
- Low Volatility. Historically, the fitness industry has been resilient during economic slowdown. While many retail and hospitality businesses experience significant contractions during a slowdown, the health & fitness club sector has proven to be more insulated from macroeconomic factors. To be specific, when the U.S. economy is strong, same-store sales at many established clubs have increased at an average of 4% to 6% per year; and when the economy is weak, same-store revenues at most clubs continued to increase a rate of 2% to 4% per year. However, major economic setbacks like the 2008–2010 recession still had a material impact on the fitness club industry, albeit to a lesser extent than other retail and leisure related businesses.
- Growing Market. Overall fitness club membership has been increasing steadily for decades. This trend is expected to continue to increase as an aging population realizes the importance of exercise and there is increased awareness that physical inactivity and obesity are a growing healthcare challenge.
- The Business Model is “Scalable”. To buyers this means that once the business model is proven on a small scale, it can be expanded easily and working capital requirements do not increase significantly. So for example, once you have proven your club is profitable with 1,000 members it’s relatively easy to grow to 5,000 members without a requiring proportional investment in working capital.
- Above Average Cash Flow. The fitness club sector generates attractive “free cash flow” compared to other businesses. Free cash flow can be defined in a number of ways. Usually it’s defined as cash flow after all operating expenses (including rent and/or debt service), interest expense, taxes, maintenance CAPEX, and working capital investment. Using this definition, free cash flow generated by most retail businesses is between 2% and 6%. However, in the fitness club sector, average free cash flow is more typically between 5% and 12% range, with some well-run operations exceeding this range.
- Recurring Revenue Model. The most common reason buyers say they like fitness clubs is because the business model generates “annuity-like” revenues. In most retail, sports, and leisure-related businesses, once a customer pays for a product or service they have no further financial commitment. However, in the fitness club industry, when a member joins a club they agree to pay every month, irrespective of variations in season or club usage. Despite the fact that a significant percentage of members (35% to 45%) continue to pay only for a relatively short time (three to 11 months), a significant number of members (40% to 50%) continue to pay their monthly dues month after month, and year after year. Buyers particularly like the fact that many well-run clubs have 50% or more of their members who have been members for three years or longer.
Right now it’s a seller’s market. There are relatively few well-run clubs available for sale compared to the level of demand. As a result, valuations for health & fitness clubs are up 25% over where they were three years ago. To understand the value of your club, request a Free Opinion of Value today.Read More
The Bay Club Company Acquires Manhattan Country Club as part of its expansion program.
Chicago will once again witness the unveiling of an innovative sports resort this summer. Midtown Athletic Club is gearing up for the grand opening of its new expansion, one that’s completely different to anything people have seen in the state – or anywhere else in America. This July, the six-level fitness center on the border of Lincoln Park and Bucktown will launch a boutique hotel within the facility, which highlights its $75 million transformation into a luxury sports resort.
Usually gyms open inside hotels, not the other way around. Thanks to Evanston-based firm, DMAC Architecture, Midtown Athletic Club expanded from 150,000 square feet to 575,000 square feet. It also helps that this famous tennis club’s features are redesigned by no less than V Starr Interiors, a company owned and operated by future hall of fame inductee, Venus Williams.
V Starr Interiors is drawing up plans for one of Midtown Athletic Club’s four new suites, as well as multiple Olympic-size swimming pools and outdoor decks. One of these open air facilities can and will be transformed into an ice hockey rink during the winter. They also plan to redecorate its tennis lounge – a sport that Venus Williams and Midtown Athletic excel at.
These improvements only add to the legacy of Midtown Athletic Club in Chicago and in the tennis industry overall. Midtown has always been a leader in the world of tennis clubs, with many of its locations integrating innovative technologies into training and playing. All 16 indoor tennis courts at Midtown Athletic Club offer a service called PlaySight. According to tennis site Play Your Court who cover the Chicago area, this is a camera and kiosk system that records each game, providing accurate line-calling, fast live-streaming, and on-the-spot multi-angle video replays. Furthermore, guests will feel like bona fide pros, considering that Midtown offers the most cutting-edge technology to its members and guests to utilize.
Recently, Midtown Athletic Club gave a select few a taste of some of its new amenities. In addition to a boutique hotel, the sports facility expanded its fitness program, giving members a bevy of options available all over the club’s first three levels. There will be a studio for strength and conditioning workouts, a 40-foot soccer pitch, and an NBA-level basketball court. It will also have a boxing gym and a Cycle Journey studio, as well as two golf simulators and three squash courts.
Part of Midtown Athletic Club’s expansion focuses on the development of young athletes. They’ll soon provide specialized fitness options for kids who want to learn the basics of whatever sport they choose. Best of all, the facility plans to have Venus Williams curate their signature tennis program, providing real life inspiration to novice players.
All in all, Midtown Athletic Club truly is a one-of-a-kind sports facility. It covers everything from sports training, to fitness and conditioning, to relaxation and leisure.
Midtown Athletic Club will open on July 15, 2017.Read More
Nebraska Elite Sports and Fitness Acquired by Genesis Health Clubs
Genesis Health Clubs, Wichita, Kansas, acquired Omaha-based Nebraska Elite Sports and Fitness Complex. The 108,000-square-foot, standalone facility features a cycling area, yoga studio, swimming pool, steam room, running track, full-service day care and volleyball and basketball courts.
The acquisition of Elite Sports and Fitness is Genesis’ 10th health club acquisition in Nebraska and its 41st in the region, making Genesis the most active buyer of health clubs and fitness centers in the Midwest.Read More
Topspin Partners Acquires Texas Family Fitness
Private equity group Topspin Partners acquired a majority stake in Texas Family Fitness. Texas Family Fitness is an operator of high-amenity, high-value health clubs in the Dallas suburbs. Topspin named former Gold’s Gym International President Aaron Watkins as CEO of Texas Family Fitness.
Topspin Partners acquired the interest in TFF from owner and founder Trevor Rogers. Mr. Rogers retained a significant ownership stake in the company and will remain on the company’s board of directors, providing strategic guidance on its growth and expansion strategy.Read More
WME|IMG Acquires UFC for $4 Billion
WME|IMG has acquired UFC, the world’s premier professional mixed martial arts (MMA) organization for $4 billion. WME|IMG will serve as UFC’s operating partner, focusing on accelerating the sport’s popularity around the world. The deal highlights the power and reach of the 23-year old UFC which shows its fights in 156 countries and generates some of the top grossing pay-per-view television programming.
WME|IMG joined forces with private equity groups, Silver Lake Partners and KKR to fund the deal. MSD Capital, L.P. and MSD Partners, L.P., will provide preferred equity financing.
Dana White, who will remain president of UFC, said in a press release, “No other sport compares to UFC. Our goal has always been to put on the biggest and the best fights for our fans, and to make this the biggest sport in the world. I’m looking forward to working with WME|IMG to continue to take this sport to the next level.”
As part of the transaction WME|IMG will now own 50% of UFC GYM, with the other 50% owned by New Evolution Ventures (NeV). UFC GYM has over 100 locations in the U.S. and internationally and is the first major brand extension of the UFC brand.
WME|IMG specializes in talent representation and management; brand management, activation and licensing; media production, sales and distribution; and event management and production in 30 countries.Read More