Can A Free Business Model Work In The Fitness Club Industry?
DENMARK – Equinox Fitness in Denmark isn’t your typical fitness club and doesn’t have a typical leader. Kristian Brandt, the club’s CEO, had never worked in the club industry before taking on his current job. But he credits his success to his inexperience.
“I asked a lot of stupid questions because I didn’t know all the details,” says Brandt, who worked in real estate for 15 years. “But every once in a while, I come up with a good idea.”
In fact, his ideas have increased Equinox’s (no relation to the American chain of clubs) membership base by what he estimates to be 30 percent over the past 11 months.
It’s his biggest idea that has turned more than a few eyeballs; membership at Equinox Fitness is free.
“There’s a lot of publicity about this new way of thinking,” said Brandt. The free membership has turned into a powerful marketing tool for the club, creating a buzz that has positioned Equinox as one of the leading health clubs in the area. Along with attracting attention, boasting a monthly cost of $0 eliminates one of the most common excuses people use for not belonging to a health club – ‘it’s too expensive.’”
So now the important question: If there are no membership fees, how does this club make money?
Technically, membership isn’t totally free. There is an initiation fee of $240 (CDN). As well, you actually have to show up. Members enrolled in the free membership option are required to exercise at the club at least once a week or they are required to pay a fee for that month.
On top of the initiation and non-attendance fees, the club goes to great lengths to maximize their non-dues revenue sources. “Our challenge is to make sure members spend money on our other products,” said Brandt. The club does this in two ways. First, the structure of the free membership agreement ensures the members frequently patronize the club. Then, the club features a café and sells protein shakes, personal training sessions; and apparel.
This strategy seems to be working. Since the inception of the free membership less than a year ago, membership numbers are through the roof and personal training revenue is up 80. And interestingly, the revenue per member at Equinox has gone up since the inception of the free membership.
“It’s dangerous and often fatal to put free on top of an existing business model – things fall apart,” says Seth Godin, blogger and best-selling author. “There are ways to make it work, though. For example, Lululemon doing giant free yoga classes in New York City. The more people come, the more clothes they’ll sell. And CrossFit, publishing its workouts online.” The more people do the workouts, the more personal trainers CrossFit licenses and the more money it makes.
Source: IHRSA
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