John Treharne pioneered the Budget Gym model with The Gym Group back in 2007. They now have 62 gyms live with have a further 18 due to launch this year. However, far from approaching saturation, John believes the budget market is just getting started. We met with John to learn the secrets of his success so far, how he intends to differentiate The Gym Group over the next 5 years and why he feels the market still has so much more scope for expansion.

There have been lots of ideas you’ve initiated at The Gym Group, but if you had to put your success down to just three factors, what would they be?

The specific tactics change from one month to the next but the cornerstones have always been:

- Low cost - we were the first budget gym and while we are constantly looking for ways to develop our offering, the provision of affordable fitness will always be our first priority. - Convenience - we want to make fitness as convenient as possible. For example, our 24 hour access is hugely important to those working shifts, be they doctors, nurses, taxi drivers or hospitality workers. Convenience is also the reason why we’re launching multiple gyms in certain towns/cities, as we know that alongside price, proximity is the factor that will most determine which gym people choose. - Flexibility - we don’t believe in tying people in to long term contracts. If a student wants to take a break over the summer then they can do so, or if a member wants to train outside in the spring and summer and then reactivate their gym membership in the Autumn and Winter, then that’s fine too.

People talk about the budget sector eating into the mid-market, but for me it’s always been more about opening the market up. We want to make fitness a part of as many people’s lives as possible.

How much scope for expansion is there left within the gym sector?

A huge amount. People often think the budget market in the UK is nearing saturation, but you only have to look at the US and Germany to see that’s not the case. In those markets 50% of the gyms are now budget and that’s continuing to expand, where as in the UK it’s just 10%. The market is still in its very early stages.

For example, take McFit. In Berlin they have 30 gyms alone. Berlin is similar in size to Birmingham so just think how many you could have in a city the size of London!

The same applies to smaller cities and towns. In Brighton and Southampton we’re just launching our second gyms and expect the member cannibalisation to be minimal. As long as they’re more than few hundred metres apart then they’re in almost entirely different local markets.

There also seems to be a growing trend around group fitness such as Les Mills. Do you think there will be new trends in the future and how do you decide which of these trends are accommodated by your gyms and which aren’t?

We’d be incredibly naive if we thought the market wasn’t going to continue to change, but for us it isn’t about reacting to specific trends, it’s about a philosophy of testing and measuring. We don’t make any assumptions or allow individual opinions to shape our strategy. Right now, for example, we’re testing live Les Mills classes, virtual Les Mills classes, and a combination of the two. When we have the necessary data we’ll then make a decision with how to proceed nationally.

The trouble of course with classes is the space they occupy. We recognise that members value classes, but in practice they only tend to be used for four or five hours a day so we have to be extremely selective and ultimately let the data tell us what to do.

There are lots of other examples of things that sound great but just don’t work in practice. Cardio theatre systems, for example, always sound brilliant but our research has shown that 90% of people would rather use their own devices. It’s the same for complex functional training rigs, which are part of a big trend at the moment but would require so much one-on-one support that it simply wouldn’t be reliable or scalable. Our entire business is built on the notion that everyone can use the equipment safely and effectively with minimal help, so it simply wouldn’t fit with our model.

What role does technology play within The Gym Group?

It’s massive. Since day one we’ve placed technology at the heart of our strategy and as we’ve scaled it’s only become more important. You can’t maintain quality across 62 sites without a heavily systemised and technology driven approach.

Here are just a handful of examples:

- Members can only join online. There is no offline joining process.

- We don’t have any admin staff. Our custom built CRM does it all for us.

- We have every single one of our members email addresses. No data is lost.

- We use sensors on each piece of kit for two weeks after initial installation to measure usage. The gym design is then adjusted accordingly to optimise the member experience.

- Social media is our primary communications tool as it can be centrally controlled and is infinitely scalable. We have two marketers working on it full time and now have the largest Facebook following in the market. Not only is this essential for customer service, but pivotal to brand awareness and word of mouth recommendations, which account for 50% of our new member sign ups.

How important is culture and recruitment within such a technologically advanced organisation?

Just as important as anywhere else. Technology is no substitute for great people and great culture.

We take recruitment particularly seriously, especially for the site manager positions as they are entirely responsible for the financial performance of their gym. I personally interview the short list to ensure that they are someone who will respond to that level of autonomy positively. It’s a hard trait to find.

At all levels recruitment and culture is a priority. A fact recently recognised by our silver award for Investors In People; something yet to be achieved by any other health club or gym in the UK!

What do you see as the next big step for the budget gym market?

Again, it comes back to technology. We have a great brand relationship with our members so the question now is how can we extend that beyond the gym to improve their lives further and grow our retention rates?

We’re currently exploring the development of an online platform. We already do a small amount such as tailoring email content around the specific goals of the individual, but there are so many other avenues to explore particularly as wearable tech becomes more mainstream. For example, if a member goes for a swim why can’t their Apple watch track that and record the data in their Gym Group hub?

Another example would be private healthcare. Right now there are some high end gyms that track your gym attendance in order to make you eligible for private healthcare discounts, but they do it in a very manual and cumbersome fashion. Again, this could all tie in with the online hub which would automatically track their attendance and send that data to the relevant provider.

Whatever it evolves into, one thing we are sure about is that the price, if there is one, will only be small as again this is about benefitting as many people as possible. From a commercial perspective it’s not about creating an additional revenue stream but about increasing retention.

If you had one piece of advice for the owner of a new, single site gym, what would it be?

Don’t do it because it’s your passion. If your sole driver is because you love the gym then forget it. Yes, it’s a nice bonus, but you are creating a business and you have to be ruthlessly objective about every decision. The moment you start basing decisions on emotion and impulse is the moment you will start making mistakes, and in this business where cash flow is such a huge challenge, even a small mistake could be fatal.

Before every new move, you must ensure the facts and figures really stack up. 62 sites may sound like a lot, but we’ve rejected literally thousands to get to those 62. Research may not be glamorous but it’s at the heart of smart business strategy.