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05/08/2020
FINANCIAL SPONSORS: Tips for fitness businesses for a successful post-coronavirus opening
As they wait out closures forced by the coronavirus outbreak, the top priority for gyms and fitness studios is surviving until they can open again. But there is also an opportunity to take this time to grow the long-term value of their businesses and gain a competitive advantage for reopening and beyond.
This second part of a two-part series on COVID-19’s impact on the fitness industry discusses how fitness businesses can set up for success when reopening. Revisit Part 1 for options for survival tips for addressing the immediate need for cash flow.
Part 2 – Optimizing for a successful reopening
Some states have already begun reopening certain types of businesses. At some point, gyms and fitness studios will open to customers again. In the meantime, here are several actions a fitness business can take to improve its long-term outlook and its value.
Monetize virtual workouts
During the lockdowns, some fitness centers are providing virtual workouts for their members through various channels, including Zoom and Instagram. Consumers are adjusting to the habit of working out virtually at home, and many have invested in gym equipment. While many people will return to in-person workouts, virtual workouts will become an essential service offering for many fitness businesses post-shutdown.
Before they get distracted by the task of reopening, studios need to assess whether an online offering makes sense for their business and, if so, how to make money from virtual workouts. Too many offerings are free, and this will hurt the industry in the long term. Fitness businesses also need to determine how to cost-effectively generate the type of online content that will keep members engaged (e.g., live vs. on-demand), and how to best present that content to match their brand.
Sustain and build the brand
A robust email and social media campaign should be an essential part of a fitness business’s lockdown strategy. Consumers have more time for social media during this pandemic and are hungry for content. The level of interaction a fitness business has with its customers during this time will impact its client retention and how quickly it can start back up once the crisis ends.
The business should provide engaging content from a workout perspective, but also emphasize community-building. If a business’s customer base feels like they are part of a community and have an emotional connection to the brand, they are more likely to be loyal through this crisis.
Improve cost structures
The shutdown has given businesses a chance to reset their cost structures. Management needs to make sure it keeps the business lean as they ramp up after the crisis.
Many fitness studios have already contacted their landlords to discuss rent during the shutdown. Savvy businesses will negotiate leases to ensure that their rent obligations in the short and medium term allow them to survive should operations be slower than anticipated. We are seeing a lot of businesses negotiating to reduce their fixed rent portion and increase their percentage rent portion.
Fitness businesses should be reviewing all expenses, operating and otherwise, to identify areas they could cut, renegotiate, or make more cost-efficient. Typical expense areas to focus on are administrative costs, IT, and repairs and maintenance.
Plan for the worst, hope for the best
We expect that, once lockdowns end, many businesses will operate under a “new normal.” While we don’t know what that will be, we do know that what businesses do during this shutdown will influence how they perform in the future. Now is the time to plan for success when reopening. Studios had already implemented increased cleaning and sanitization policies pre-lockdown, and they will need to keep them in place after. What class size is appropriate going forward? What promotions should I do to build membership? What if it takes a long time to reopen or ramp up attendance? The business should be asking clients what will make them comfortable to return post-lockdown to help answer these questions.
Businesses that use the COVID-19 shutdown as a time to focus on business fundamentals while making a solid plan for reopening will be in the best position to thrive in the post-COVID world.
Subject matter expertise
Daniel Teoh
Managing Director, Transaction Advisory Services
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This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.