What’s new in the health, fitness and beauty sectors in franchising

Australians spend an estimated 8.5 billion on health and fitness services and equipment annually. While Australians spend a whopping $22 billion on beauty products a year a large share of that on men’s grooming products. Meanwhile we are told over 65% (over 12 million) adult Australians are considered overweight or obese! Now that’s a big consumer market!

These sectors employ a huge number of people and both sectors are likely to see growth over the next 2 years, some say in the order of 10 to 15%. Apart from the revenue and returns to those in the sector, the benefits these businesses bring by way of employment and supporting a healthy lifestyle, mental health and wellbeing
cannot be underestimated.

Rather than looking at statistics though, I prefer to hit the streets and see what’s going on in our own backyard particularly off the back of the last 2 years when retail business was destroyed with online shopping and Covid lockdowns.

It is interesting to see that the businesses re-populating the suburban shopping strips are mainly in these sectors such as shop front gyms, Pilates studios, brow bars, to sports massage and even cryotherapy and floating sensory tank therapies. Chapel Street Prahran, once the mecca of high fashion and eclectic retail stores is now reopening with all of the above starting no doubt at lower rents than previously and with
added rent-free periods.

I can hear the thud of doof doof music and the encouragement of the trainer to “push it harder” coming from the gym as I get my N Tran pork and salad sandwich for lunch. I also marvel how it is that the gym is full of people working out at 1.00 p.m. on a Wednesday but of course the world has changed, and we now have work at home days and flexible work patterns that have opened up opportunities for business.

The number of health and fitness brands coming into the local market is staggering and does raise concern of an oversupply in some sectors such as personal training and boutique gyms. I guess while an F45 is attractive to some, others would prefer a Jett’s, a Boxing Fit or a personal fitness trainer at home.

The pandemic taught business to be quick and reactive to stay alive and this was mostly due to their need to be online and be able to offer a safe and hands free environment and be able to provide the service remotely if needed. Consumers are also more health conscious than ever. They want more than just the exercise and training they want real time data and feedback to measure their improvement which requires the use of Apps and the latest technology.

The biggest challenges over 2022 continue to be finding and keeping staff, adapting to post pandemic work expectations and flexible work patterns for staff and finance. Finding the suitable franchisee who has the funds to set up a gym is an issue for franchisors due to the Banks tightened lending policy. Franchisors need to make their offer more affordable and attractive in a competitive market and also offer a model that more readily shares the risk in the business unlike the old standard franchise models that have caused so much of the disputes and aggravation in the franchise sector that led to the numerous parliamentary enquiries.

Sanicki Lawyers have been working with our Franchisors on the shared equity (“Branchise”) model which address the funding issues as the franchisor and franchisee each contribute to the capital start up costs and the franchisor will hold equity (usually a majority share) with the franchisee in the business. This means both parties have” skin in the game” to ensure the success of the business.

Our most recent Franchisor “Aesthetik Dental” just rolling out, is an exciting equity share franchise model taking dentistry to a whole new level, offering state of the art technology with franchises available to dental technicians who want to be part of the new age in dental care.

There is growth and opportunity for home care and health services and also ensuring your business can provide an online alternative to providing services. The Health and Beauty franchise sector in Australia includes not only sport and fitness but also hairdressing, hair removal, nail services, health and beauty products, spa and well-being. Australia’s health and wellbeing sector have also had to adapt to recent changes brought on by the pandemic which include changed expectations from consumers, rapid digitisation, an increased focus on healthy behaviours and prevention.

Franchisees need to do their due diligence on the proposed franchise they are taking up and seek independent legal and financial advice from a specialist franchise lawyer before committing.

The cost of setting up a gym and leasing equipment can be very costly and you do need to do your financial analysis to ensure you can take a wage, cover your fixed overheads, staff wages, occupancy costs then cover the franchise fees before you make any return on your investment. If you are a franchisee and your objective
advice from your accountant is that the numbers do not work, then we suggest you walk away and consider other options as once you take up a franchise there is no easy way out without crystallising a loss.

Seeking specialist legal advice from Franchise specialist Lawyers and advisors will help you to make an informed decision and help you to reduce the risks. Every new business and franchisee will go through the usual business cycle or J Curve that is – great excitement – opening success– a leveling out – and then the challenge of maintaining their revenue and relevance in the market as other competitors come into the market. New franchise systems need to continually work on their points of difference and attraction to the consumer who are inundated with so much choice.

So, whether a franchisor or a new franchisee sit back and objectively ask yourself what is it that differentiates your business from all of your competitors?