How booming gym franchise Anytime Fitness is beating the landlords

Fast-growing 24-hour gym franchise Anytime Fitness says its status as a mini-major and “traffic drawcard” means it can negotiate significant rental incentives of up to 25% for new retail leases.

Anytime Fitness has opened over 200 gyms in Australia since launching locally in 2008 and has added around 100 new franchised premises in the past 12 months, the most recent being on Mount Alexander Road in the Melbourne suburb of Essendon.

It is part of a fast-expanding sector of low-cost 24-hour/seven-day-a-week gyms with premises in malls, retail strips and in bulky goods centres.

While Anytime Fitness does not reveal the commercial terms of its arrangements, based on rents paid in advertised commercial listings, Property Observer estimated franchisees pay net rents of around $300 to $350 per square metre, before factoring in incentives.

Typical space requirements range from 300 square metres to 600 square metres, with a preference for sites 400 square metres or bigger. Sufficient air-conditioning for the space is also a key requirement.

In addition to being in prime and convenient locations, offering great visibility of its signage to passing traffic, the gym group seeks sites close to local supermarkets or other major retailers that are well aligned with the convenience aspect of the model.

Matthew Rodrigues, internal operations manager at Anytime Fitness Australia, tells Property Observer there is “always some room for negotiation with landlords”, but it won’t pay rates outside of market conditions.

He says the gym franchise is classified as a mini-major in most shopping centres, acting as a traffic drawcard and “providing significant and ongoing visitation to the centre”.

“As a result of this, Anytime Fitness requires incentives to allow them to build their membership base and ensure the longevity of the business.

He says incentives include rent free periods, cash contributions or some refurbishment undertaken by the landlord “beyond a warm shell”.

“While they vary across the country, in the most part we are achieving incentives of between 10% and 25% of the initial lease term,” he says.

Rodrigues says that in most instances, once a new territory for a gym is chosen, a territory brief will be sent to the market, announcing Anytime Fitness’ interest in a particular area and its property requirements.

“The territory brief will request property submissions for consideration by the leasing managers.

“Sites will be assessed on their merits, and negotiations will commence on prime or preferred candidates,” he says.

The gym group also has a number of freehold properties within the portfolio and has also partnered with a number of developers on custom-built facilities.

Expansion plans are currently focused on Brisbane, Perth and Melbourne as well as a number of regional centres.

Jetts is another fast-growing gym chain, with more than 150 branches.

Earlier this year established gym group Fitness First put 24 of its 97 Australian gyms up for sale due to debt problems at its UK parent company.

Another gym chain, Virgin Active, has three branches in Sydney and one in the Melbourne CBD, but has not added any new gyms to its network since 2009.

In September, Ardent Leisure Group agreed to buy Fenix Fitness Clubs for $60.9 million in a move signalling further consolidation in the health and fitness sector.

Anytime Fitness was introduced in Australia in 2008 by brother-and-sister team Justin McDonell and Jacinta McDonell Jiminez.

This article first appeared on Property Observer.