If you’re a franchise owner, this is a great time to consider selling your business. Economic conditions are right and the cost of borrowing money is still low so that means buyers are plentiful. However, is the time right for you personally? The answer depends on several factors.
If you’re an owner of a fitness franchise, there’s no question it’s been a tough few years. Many clubs in many states closed for an average of 2 – 5 months during pandemic lockdowns in 2020 and faced capacity restrictions for months after reopening. After ten years of consistent revenue growth, the fitness industry lost $29.2 billion in revenue from March 2020 through June 2021. Over a million jobs disappeared.
According to the Global Health and Fitness Association, there were over 40,000 fitness facilities in 2019. As of July 1, 2021, 22% of gyms and studios had permanently closed their doors. People tried online apps to continue their exercise habits, but much like Zoom calls, the novelty faded fast. By mid-2021, consumers said they missed the gym and wanted to return. In fact, the pandemic changed the way people valued health and fitness and moved new consumers to join clubs and start exercise regimens.
If your company survived all this, you deserve a lot of credit. Many franchisees even took the time during lockdowns to tighten business operations, remodel facilities, and put new procedures in place to make members feel safe working out. And you’re probably seeing positive signs of growth and member retention. But we’ve talked to some owners who think their business isn’t sellable now because of this recent history.
We think they’re wrong. Fitness is back, and if you’ve been considering moving out of the industry or retiring, this year might be a good time to think about selling. Strategic buyers and lenders in the fitness space have methods for factoring in the effect of the pandemic on a fitness franchise’s overall value. You may not have to wait a year or more to get a good sale price for your franchise.
Angelo Medici, Senior Vice President and Head of Fitness Center & Managed Service Provider Financing at Live Oak Bank, says fitness franchises that survived the pandemic are seeing a resurgence. “They’re benefiting from the emphasis on health and fitness that is important to many people after a crisis,” he says. “And since not every company survived the pandemic lockdowns, the competitive landscape is also better for some of these fitness centers. Finding the right partner for your sale is essential. Because we understand the industry well, we also have the ability to offer creative financing options that can be based on factors such as future growth.”
But some owners concerned about their business’s value may be determined to handle their sale themselves, hoping to save the broker’s fee. In fact, we’ve had owners decide to go it on their own with a prospective buyer, only to come back months later to ask for assistance. What sounds like a great offer initially can be eaten up by fees, costs, and clauses hidden deep in the sales contract that may take a long time to discover and renegotiate.
Some owners are also tempted to take the first legitimate bid that comes in, especially if it’s from a buyer with fitness experience. But there’s a reason savvy buyers swoop in with a pretty good offer before others get a chance to weigh in. They know (as do experienced business brokers) that competition will benefit the seller by driving up the sale price and requiring better terms from buyers.
We’ve written before about the value an experienced broker can bring to the sales process. We’ve seen plenty of franchisees who relied solely on their franchisor to help them sell and who wound up languishing on the market for months, even years. They’re often amazed at the results we get and how quickly we connect them with qualified buyers. Part of our job is to keep sellers from making mistakes or accepting terms that can cost them much more than a broker’s fee.
We’ve been in the business of helping people buy and sell franchises for over 15 years. That means we have strong relationships in the industry based on trust – and getting great results. We’ve developed a proprietary software system and a database of thousands of buyers for almost any kind of franchise.
Even in an industry like fitness that’s been through tough times, there are buyers who are motivated to invest and lenders who are willing to make the deal happen. Anytime Fitness, the fitness franchise we have the most experience with, is ranked number two by number of locations on the Franchise Chatter blog for 2023. The franchisor also made the top 10 list in Entrepreneur’s Franchise 500 for 2022.
As more and more consumers prioritize well-being and self-care, they’ll be looking for personal training, group classes, and facilities that feel clean, safe, and supportive. Industry watchers expect fitness franchises to get back to their 2019 level of over five percent growth in 2023, so buyers will be seriously considering the sector over the next year.
