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Ah, January—the month where gym memberships spike and resolve to eat kale lasts about as long as a snowflake in Vancouver. Yes, it's that magical time when we all pledge to get fit, and fitness centers gleefully welcome a flood of newcomers. If this sounds familiar, it's because we kicked off 2024 with a similar tale. But just like those well-intentioned resolutions, some stories are worth repeating—especially when the plot thickens with opportunity.

This year, we’re revisiting Canada’s fitness centres industry, a sector flexing its muscles with steady growth and evolving trends. From boutique studios to digital fitness platforms, there’s more to this market than treadmills and dumbbells. Let’s dive into why fitness centers are still one of the strongest players in the business world. 💪

SPONSORED

Hey Mainstreet Memo-ers (yikes) 👋 

This is Morgan Tate, one of the writers of Mainstreet Memo.

Do you hate the concept of work-life balance? 

If you’re an entrepreneur, you probably do. Heck, I launched 4 companies in the past 2 years—I’m about as balanced as a peg-legged pirate 🏴‍☠️.

And yet, I’ve built 4 companies and set a personal record in my 10K run this year. Curious how I pull it off?

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INDUSTRY BREAKDOWN

Canada's Fitness Landscape: Flexing for the Future 🏋️‍♀️

The fitness industry in Canada is flexing for growth, with projections showing a 171% increase by 2028. This isn’t just about treadmills and protein shakes—it's the rise of the digital fitness boom, growing at a jaw-dropping 33.1% annually. Meanwhile, traditional gyms are still holding their ground, growing at a steady 7.21% annually as Canadians balance virtual workouts with in-person experiences.

But it hasn’t been all smooth sailing. In 2023, the growth rate for gyms and health clubs dipped by 2.3%, highlighting how the industry can feel the pinch of economic fluctuations and shifting consumer habits. That said, the numbers still show promise: in 2019, the average Canadian gym had 974 members, each contributing about $468 annually to revenue. That’s nearly half a million dollars per location, proving that well-managed fitness centers can be serious moneymakers.

Whether it’s a boutique studio catering to yoga lovers or a fully equipped gym keeping cardio enthusiasts on track, the financial viability of fitness centers is as solid as a deadlift PR—if you play your cards right.

Industry Trends

The fitness industry is ever-evolving, adapting to new technologies, consumer preferences, and societal shifts. Here are some key trends shaping Canada's fitness landscape:

1. Digital Fitness Revolution

• The pandemic-induced digital transformation has left a lasting impact on the fitness industry. Virtual workouts, fitness apps, and online coaching have become integral components of fitness routines, catering to individuals seeking flexibility and convenience. 

2. Holistic Health Approaches

• There's a growing emphasis on holistic health, encompassing not just physical fitness but also mental well-being, active recovery, and social connection. Fitness centers are increasingly offering programs that address these aspects, reflecting a broader understanding of health. 

3. Inclusivity and Diversity

• The industry is striving to create inclusive environments that cater to diverse populations, ensuring accessibility and representation for all individuals, regardless of age, ability, or background. 

4. Technological Integration

• Advancements in technology are enhancing the fitness experience, from wearable fitness trackers providing real-time data to sophisticated gym equipment offering personalized workouts. This integration is elevating the effectiveness and appeal of fitness programs. 

The Finances

Investing in Canada's fitness industry presents a compelling opportunity, given the projected growth and evolving consumer preferences. Here are some financial considerations for potential investors:

• Market Size and Growth: The Canadian gym and fitness industry has experienced a decline at a compound annual growth rate (CAGR) of 3.8% over the last five years, with projected 2024 revenue reaching $4.5 billion. 

• Revenue per Member: In 2019, there were on average, 973.59 members per gym in Canada, with each person bringing in about $467.87 in annual revenue. 

• Digital Fitness Growth: The online/digital fitness sector is expected to grow at an estimated rate of 33.1% per year, indicating a lucrative avenue for investment. 

• Traditional Gym Growth: While slower than digital fitness, traditional gyms are still expected to grow at an annual rate of 7.21%, presenting steady opportunities for investors. 

Buy or Bust?

Thinking about investing in the fitness industry? Let’s cut to the chase—it’s a buy, and here’s why. The Canadian fitness sector is lifting more than just dumbbells; it’s lifting revenue potential. With the industry projected to grow by 171% by 2028, and digital fitness platforms flexing their tech-driven muscles, there’s never been a better time to jump in.

But let’s not sugarcoat it. The gym game can be tough—economic dips and changing workout trends can hit your bottom line faster than a sprint on a Peloton. However, for those who can balance in-person facilities with digital offerings, or carve out a niche like boutique yoga or active aging programs, the opportunity is huge. And with the average gym pulling in nearly half a million dollars annually from memberships alone, there’s real money on the table.

The verdict? Buy, but choose wisely. Whether you’re eyeing a traditional fitness center or a hybrid digital model, the key is understanding your market and offering something your competition can’t. With the right strategy, you’ll be benching profits in no time.

Check out these Fitness Centres for sale:

1. State-of-the-Art Fitness Studio in GTA, ON - $325,000

2. Well-Established Franchise Gym in Calgary, AB - $350,000

3. World Gym Location in Brantford, ON - $1,999,999

Interested in a particular industry? Reply to this email with the industry you are curious about and keep your eyes peeled in upcoming issues. 👀 

DEAL REVIEW

High Margin Fitness Studio

This business is a premier fitness studio with hands-off ownership, entering its 30th year of business in Victoria, BC.

Deal Facts 🔥

This fitness studio offers a rare opportunity for a hands-off owner looking to invest in a steady, well-established business. With 30 years of history, a strong brand reputation, and monthly recurring revenue, it checks many boxes for aspiring investors. However, its slight revenue decline and dependence on a manager raise some considerations for structuring the deal effectively.

Green Flags 🟢

• Established Reputation (30 Years): With three decades of profitability, this fitness studio has a proven track record, making it a trusted brand in Victoria’s fitness community.

• Recurring Revenue Model: The business benefits from predictable monthly recurring revenue, ensuring consistent cash flow for the owner.

• Diverse Offerings: Beyond fitness classes, the studio differentiates itself with a focus on health, nutrition coaching, and fat loss, catering to a broader clientele.

• Hands-Off Management: A competent general manager and four part-time employees run daily operations, making this a relatively low-effort investment.

• Location Stability: The studio operates from a well-situated location in Victoria, BC, with a lease in place and an option to renew, ensuring long-term operational stability.

Red Flags 🔴

• Declining Revenue: Recent revenue has dipped slightly, which may indicate a need for stronger marketing efforts or operational adjustments.

• Reliance on Management: The business’s success depends on retaining the current manager, whose departure could disrupt operations.

• Limited Growth Marketing: Past marketing efforts, such as print and radio, were less effective compared to digital strategies. A stronger focus on modern advertising channels is necessary to attract new clients.

• Seasonal Risks: Like many fitness businesses, revenue could fluctuate based on seasonality or economic downturns, requiring proactive planning.

Possible deal structure: To mitigate risks, especially given the slight revenue decline, we recommend structuring the deal with a combination of cash and seller financing:

1. 50% Cash at Closing: Secure this using a mix of buyer funds and financing through BDC or similar institutions for Canadian buyers.

2. 25% Seller Financing: Set up a seller note with interest-only payments for five years.

3. 25% Earn-Out: Tie $100,000 to performance metrics over 24-36 months, such as maintaining or growing revenue. For example, split into $50,000 payments annually based on agreed-upon targets.

Additional Considerations: Ensure the manager’s retention through a long-term contract or equity incentive, as their leadership is key to maintaining the business’s success.

Watch Our Video Breakdown

For a more in-depth analysis, check out this video deep dive of the deal by our Founder, Morgan Tate:

Want to learn more about this deal? Reply to this email with a “send me more details” and we will connect you with the broker!

TWEET HIGHLIGHT

The ultimate cheat code for turning small businesses into big paydays. It’s like a masterclass in flipping—but instead of houses, you’re flipping revenue streams. 🚀 Who knew the key to multiplying your wealth was as simple as buying, optimizing, and scaling? Bonus points for using other people’s money. 💸

Ready to play the game? Step one: start searching for that perfect small business to buy. 🎯

GOOD READS

Recommended Resources 📚

Below is a list of articles, books, and other resource we recommend for buyers or operators of small businesses!

1. Cross-Border Mergers and Acquisitions: How U.S. Companies Can Buy Canadian Businesses. This article from Falcon Law PC provides a comprehensive overview of the legal, financial, and regulatory considerations for U.S. companies looking to acquire Canadian businesses, highlighting the complexities and opportunities in cross-border M&A.

2. DHL's Discover platform discusses actionable growth strategies for small businesses, including market expansion and digital transformation, relevant to both Canadian and U.S. entrepreneurs aiming to scale their operations.

3. From small to scalable: real-life owners share essential steps for business growth. RBC's My Money Matters blog features insights from Canadian entrepreneurs on scaling businesses, offering valuable lessons on leveraging referrals and enhancing operational efficiency.

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