Global riches are a lure for many Australian franchise businesses, including gym franchise Jetts Fitness, but expansion requires rigorous planning and deep pockets. As founder of one of the fastest-growing franchises in Australia with an expanding export footprint, you could excuse fitness club king Brendon Levenson if he were to sit back and admire his success. Not a chance. As Jetts Fitness, a franchise of 24-hour gyms, prepares to build on a strong New Zealand export presence and open new clubs in Europe, Levenson appreciates there is no room for hubris. Indeed, he is treating Europe as a start-up business. “You’ve got to start all over again and understand the target customer in the new market,” he says. “You can’t just assume that because it works here that it will work somewhere else.” Levenson points out, for example, that whereas Australian and New Zealand gym users often want weights equipment to help them train for contact sports such as rugby union and league, Europeans prefer endurance training for cycling and soccer. His plan is simple: to take the best of the best from Jetts Down Under and localise it for the European market.
With 179 fitness clubs in Australia and 43 in New Zealand, Jetts has had a stunning rise since launching in 2007. It cleared $78 million in revenue in 2011–12 and is planning to open one club in Europe by November this year and another by May next year. Levenson says Jetts’ keys to success overseas are sending over senior executives from Australia to manage any foreign entries; understanding the relevant market; and choosing gym locations wisely.
With Europe, Jetts is about to trial two clubs to test market demand in the hope of setting up 10 more clubs in its second year. There are already low-cost gym players in Europe, but Jetts’ 24-hour model with no long-term contracts is a unique selling point. “The biggest challenge is understanding whether the market is really ready for this proposition,” Levenson says. “You can do all the market research you want, but until you get on the ground and get the doors open you really don’t know.”
Next stop Asia
In ‘Franchising Australia 2012’, the Asia-Pacific Centre for Franchising Excellence at Griffith University reports that most franchise systems that have expanded overseas are from the retail trade sector (36 per cent), with accommodation and food services (26 per cent) also prominent. International operators typically have mature systems—they have been franchising for a median of 16 years and have a median of 57 units in Australia. As it prepares to open its doors in Europe, Jetts is also considering expansion into Asia in 2015 and continues to conduct research into that market. Levenson says that despite the rapid trajectory of the business, management is “just taking baby steps” and carefully assessing one country and one club at a time. “[But] we see Europe and Asia as being our big growth opportunities over the next 15 years.”
‘Franchising Australia 2012’ estimates that there are about 1180 business format franchise systems operating in Australia. About 28 per cent of those franchisors are operating internationally. Michael Paul, Chairman of the Franchise Council of Australia, says the international appetite of our franchisors is growing again as countries rebound from the global financial crisis. “It is picking up and you’ve got potential entrepreneurs and investors in overseas markets starting to get more confident as their economies start to improve.” For franchisors considering targeting foreign markets, Paul offers a four-point checklist.
First, ensure your business is well resourced and has a strong cash flow before seeking to grow. “The mistake people make is that they think they can expand overseas cheaply and you can’t,” says Paul, who is also founder of packaging supplies and courier services franchise Pack & Send. In his case, Pack & Send had to make significant investment in point-of-sale technology and online training before going abroad.
Second, make sure you have a mature presence in the domestic market and have maximised penetration in Australia.
Third, take a proactive approach to export expansion. Simply responding to an overseas enquiry from someone interested in picking up the rights to your brand can lead to a hasty decision. In Pack & Send’s case, it engaged in two years’ research and planning before setting up stores in New Zealand and the United Kingdom.
Fourth, spend time in the market to understand its vagaries. To that end, Paul advises franchisors to take advantage of the resources, networks and experience of trade bodies such as Austrade.
Where to next?
Written by: Cameron Cooper
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