Fitness Industry ‘Decimated’ by Pandemic with Bankruptcies Expected in Months Ahead [Interview]

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The return to fitness centres across the country is taking place but make no bones about it the industry may have forever changed due to the lockdowns and restrictions it experienced during the past two-years plus because of COVID-19.

Blake MacDonald, President of Orangetheory Fitness Canada, said the pandemic “absolutely decimated the fitness industry” but his brand is poised to grow in the coming years.

Blake MacDonald

“The fitness industry has been probably one of the hardest hit. So there was a couple of things. Number one was obviously the constant closures and the constant restrictions that were being placed on us – distancing restrictions, indoor masking, all that kind of stuff. It really took a toll on our membership bases,” he said.

“Fitness is an interesting business in that we’re not like a restaurant where you open the doors and people just come in. We typically run off a membership base which is recurring membership and it takes awhile to build those members up. So if you’ve lost a whole bunch of members because you’ve been closed for six months, or you probably lost most of them, you kind of have to start from scratch. You only have a smaller percentage of those that actually come back when you reopen. You have to build it back up every month and you try to get back to where you were.

Orangetheory Fitness launches 100th virtual studio in Canada on the strength of its Orangetheory Live platform (CNW Group/Orangetheory Fitness Canada)

“This last round of closures which was really January, February of this year, we came out of that probably in the worst shape we’ve been as an industry. A lot of fitness facilities were at 50 to 60 per cent of their pre-COVID member numbers or even less than that. It’s been a slow build. I think what we saw with the summer is a lot of people were not anxious to get back into the gym. They were anxious to travel and to live their lives and do all the things that they didn’t get to do for the last couple of years. It was a very slow summer but we’re now seeing a huge return to the studios at the end of August and September. But in the interim, the industry has lost probably somewhere between 30 and 40 per cent of its competition. A lot of studios and big box gyms have just gone out of business. They’ve folded up operations and I think there’s a ton more carnage to come. We expect another 20 to 25 per cent to go bankrupt within the next six months based on the fact that a lot of the assistance that was provided by the Canadian government was provided in the form of loans and those loans are now coming due. The principal and interest payments are now becoming payable. Most operators in this industry are not in a cash flow positive position on a monthly basis, they have not built their membership levels back and a lot of people are just running out of money.”

Currently, Orangetheory has 112 locations in the country with another five in development scheduled to be open by the end of the year.

The first location opened in Canada in October 2012 in St. Albert, near Edmonton. The first franchise location was in 2014.

MacDonald and his business partner own the rights for Canada and are majority partners in 30 studios and the rest are individually franchised.

Image: OrangeTheory

During the pandemic, he said, there was a big feeling that people’s exercise habits would shift to working out at home. Online concepts like Peloton took off. Many people flocked to them immediately. But MacDonald said people found out that they missed going to the gym – the social aspect, the community, a fitness professional.

“The industry, we believe, we’re very bullish on the fact that we will get back to where we were pre-COVID. (Recently), the brand in Canada hit 70 per cent of our pre-COVID membership levels which is about 77 or 78 per cent of our pre-COVID revenues,” explained MacDonald. “So we’re definitely on our way back to recovery within the Orangetheory brand itself.

“The only thing that’s really changed with the industry is if you’re going to be a bricks and mortar operator you need to offer more than just equipment rental. You’re not just selling memberships for people to come and use it. You need to provide them an experience that is superior to what they could get working out from home. 

“That’s why we’re very bullish on how Orangetheory will perform in the next two to three years. We think we have the best workout in North America and quite honestly the best coaches and we think we’ll be big winners in this thing and we’ll be the ones that can offer that premium Ritz Carlton member experience.”

MacDonald said the age demographic of members has shifted younger.

While the industry has been very hard hit, and some brands have lost perhaps 50 to 60 per cent of their locations, Orangetheory is not one of them. MacDonald said the company has had very limited turnover of its locations with only a few closures across Canada and those have been flipped around and are being reopened by new franchisees.

“I think we’ve come through this a lot better than the rest of the players in the industry and that’s why I think we’re also positioned to be one of the top growth brands going forward,” he said.

“We’re in growth mode again and I think we’re very much on our way back. There was a time between 2017 and 2021 where we were opening 20 or more locations per year. We expect to get back to that level of growth and expansion within the next couple of years here.”

Mario Toneguzzi
Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He is the Senior News Editor with Retail Insider in addition to working as a freelance writer and consultant in communications and media relations/training. Mario was named as a RETHINK Retail Top Retail Expert in 2024.

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