Every few months I like to throw in a blog article about franchising since HOTWORX is a rapidly expanding franchise now approaching 700 open locations. This article delves into the importance of franchise location development as a means to increase the equity value for franchisees and to provide convenience for the growing customer base of fitness studio goers.
In the competitive world of franchising, market development is a critical component for success. Franchises thrive not only by maintaining consistent quality and service across locations but also by strategically expanding their market presence. Effective market development ensures sustained growth, brand recognition, long-term profitability, and neighborhood convenience for all customers.
The United States population has grown by almost 100 million people since 1990 from 250M to 342M now. All the while, the percent of the population that has a health club membership has doubled during that time frame from less than 10% to 20% of the U. S. population now. As a fitness franchise CEO, I believe it is my job to expand the brand outward to those who have never practiced fitness consistently. I believe it is the duty of any health club owner to expand the awareness of exercise to those who need fitness in their lives, which is everyone. We all should strive to live longer lives with a higher quality of health and movement. The HOTWORX franchise has always had the strategy to develop approximately one location for every 100,000 people in the general population. Take the Memphis, TN market area. Memphis is one of the first markets to develop for HOTWORX and currently there are ten HOTWORX locations serving 1.35 million people. Eventually there may be development of two or three more locations in that market to reach the 1/100K strategy, but the ten locations are serving the population well right now. This strategy has guided the franchise in the right direction over the past seven and a half years since the opening of the first location in 2017. The company has no plans for deviating from that development strategy.
With that said, here’s why market development is essential for a franchise brand.
1. Expanding Customer Base
Market development allows a franchise to reach new customers and broaden its audience. By entering new neighborhood markets, fitness studio franchises can tap into a previously inaccessible set of customers. This expansion is vital for increasing the brand's customer base, which directly contributes to higher profits and workout convenience.
2. Enhancing Brand Recognition
Consistent market development efforts help a franchise establish a strong brand presence in various regions. As the franchise grows and opens new locations, the brand becomes more recognizable. This widespread recognition fosters trust and loyalty among consumers, as they become familiar with the quality and consistency associated with the franchise.
3. Vertical Integration of Tailor Made Services and Location Support
With a larger market presence, franchises can benefit from economies of scale allowing sophisticated operators to develop and deploy systems such as software technology that is made specific for the brand. HOTWORX has developed its own software for franchise management and a POS system that can scale on a nationwide and international basis. The all important consumer app operates as a native system that has been developed by the HOTWORX IT department, and there are many more vertically integrated technologies that support the HOTWORX franchise system.
4. Staying Ahead of Competition and Benefiting from Them
In the franchising industry, staying ahead of competitors is crucial. Market development allows a franchise to establish a strong foothold in key regions before competitors do. By being proactive in market expansion, franchises can dominate new territories and build a loyal customer base, making it difficult for competitors to gain traction. In the case for HOTWORX, it has been super important to establish market dominance in order to maintain its first to market advantage with a “first ever” concept and patented fitness equipment technology. HOTWORX has actually benefited from the massive proliferation of fitness brands such as Orange Theory, F45, the Exponential Fitness brands, Anytime Fitness and Planet Fitness to name a few. I would also argue that the expansion of home fitness brands, such as Peloton, has benefitted the health club industry too by increasing the overall awareness of fitness. More awareness and increasing population has greatly expanded the industry, and it will continue to expand as more people actually adopt a fitness lifestyle. For example, our original HOTWORX location in Oxford, MS, a small town of 27k population, has 19 health clubs and 21 if you want to count the two massive fitness centers on the Ole Miss campus. This past year, Planet Fitness opened in Oxford, and rather than losing customers, the active customer count actually went up significantly at HOTWORX. New competitors and new locations of the same franchise brand can create this boomerang effect if existing locations focus on their own operations and execution of the franchise playbook.
5. Diversifying Revenue Streams
Entering new markets diversifies a franchise’s revenue streams to shore up the financial base of the entire system. This diversification is particularly beneficial in mitigating risks associated with economic downturns or market-specific challenges. When one market faces difficulties, other markets can help to stabilize the franchise's overall financial health.
6. Strengthening Franchisee Relationships
Market development is not only about geographic expansion but also about fostering strong relationships with franchisees. Supporting franchisees in new markets with training, resources, and marketing assistance is crucial for their success. When franchisees thrive, the overall brand benefits from their positive contributions and growth. The HOTWORX franchise places a top priority emphasis on the profitability of the franchise locations. It is the job of the franchisor to focus on ways to constantly improve the net income of all of the studios. The franchise relationship is a two way street. The franchisor is the coaching staff charged with the duty of teaching the system and motivating franchisees to take massive, consistent action to deploy the playbook! The franchisees are the players out on the field of operations charged with the duty of executing the franchise playbook at the highest possible level!
Conclusion
Market development is a cornerstone of success for franchise brands. It drives growth, enhances brand recognition, improves convenience for the customers, and ensures long-term profitability. By expanding their reach, leveraging economies of scale, staying ahead of and benefitting from competition while fostering strong franchisee relationships, franchises can build a robust and resilient business. In the dynamic world of franchising, market development is not just a strategy—it's a necessity for sustained success.
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