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News report: Basic franchise
Basic-Fit – which has been scaling rapidly across Europe – is considering franchising to ramp up growth further afield
Rene Moos, CEO of Basic-Fit has signalled that the company is considering growth by franchising.
The operator currently has 1,402, locations, including 47 clubs recently purchased from RSG Group, the deal for which concluded on 27 March.
Basic-Fit is setting its sights on aggressive expansion, with plans to get to 3,000 – 3,500 clubs in its existing markets – the Netherlands, France, Germany, Spain and Benelux – by 2030.
Moos explained that franchising is then being considered for expansion outside Europe: “We’ve initiated a process to determine which approach to franchising would be most suitable to further enhance our company’s growth and return profile,” he said. “The franchise initiative will cover markets that are not geographically adjacent to our current operations and could possibly expand to enable us to enter other continents.”
Some of the biggest health club brands – such as Anytime Fitness and Planet Fitness – have grown through franchising, thanks to the access to capital and entrepreneurial energy it gives. Operators such as PureGym, which have traditionally owned and operated their own clubs, are also growing by franchising outside their core territories, so it’s a natural move for Basic-Fit.
Basic-Fit 2023 results
A record 202 club openings/acquisitions happened in 2023 and the company is optimistic about 2024, with plans to increase the club network to at least 1,575. The purchase of the RSG portfolio makes Basic-Fit market leader in Spain, with 200 sites and will lift the group membership to 4 million from the current 3.8 million. These 47 clubs will be rebranded from McFit to Basic-Fit ready for the important post-summer sales period.
In terms of current trading. Benelux and Spain are Basic-Fit’s best performing markets, said Moos in presenting 2023 results, while Germany has yet to make a meaningful contribution, but the company’s presence there will be increased over the next two years, with an accelerated roll-out in 2026.
2023 results
Moos also revealed trading results for 2023, saying that despite high inflation and energy costs, Basic-Fit lifted its 2023 revenues by 32 per cent to €1,047 million.
Underlying EBITDA, less rent, increased by 28 per cent to €261 million and mature club return on interest capital (ROIC) was up by 35 per cent. Underlying net profit increased by 55 per cent to €27.5 million.
Growth has been driven by expanding the club network, increasing memberships at clubs which were in their growth phase during the pandemic and an increase in average revenue per member per month.
Premium memberships (priced at €29.99 per four weeks) increased by 10 per cent, to 44 per cent of the membership base. Costing €5 more than the Comfort membership, the Premium membership allows people to bring a friend anytime they visit. The potential cannibalising effect of this is being monitored, but it has appeared to have a positive impact on revenue in 2023, due to the higher average yield per member.
Founding memberships were offered at the majority of new clubs in 2023, which give access to a single club at a life-time discounted price for a limited time before the club opens. This was found to reduce the time to cashflow break even. Memberships increased by 13 per cent, with the company achieving the aim of 3.8 million members by the end of the year, as previously mentioned.
Other club revenue increased to €29.5 million (from €24.3 million) with this coming from PT, physiotherapists, day passes, vending and advertising revenue on screens.
Challenges from 2023
The strong performance in 2023 came with some challenges, including weaker consumer sentiment in France, which continued to be slightly behind expectations going into 2024.
Costs were also significantly higher at the start of 2023, due to inflation and energy, which nearly doubled on a per-club basis. To offset this, the price of a Comfort membership was successfully increased from €19.99 to €24.99 and a deal struck with suppliers on energy prices, which stabilised the situation.
“With our new long-term energy price contracts, we expect the average energy-costs-per-club to decline by close to 30 per cent in 2024,” said Moos. “Barring any unforeseen developments, we expect revenue to increase to between €1.20 billion and €1.25 billion in 2024.”
At the end of the year, Moos reported that Basic-Fit had €215 million (£184 million, £235 million) in available liquidity, which paid for the acquisition of RSG Spain and will fund the continued rollout, while maintaining sufficient financial headroom for cashflow to cover operations.
