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The Gym Industry's Cutting Season · What the Flux

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  Speaker 1: Thank you. This is What The Flux. I'm Larissa and
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  Speaker 1: it's Friday the 28th of August. Here are the three
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  Speaker 1: biggest news stories today. For our first story, major banks
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  Speaker 1: CBA and NAB are predicting another round of interest rate
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  Speaker 1: hikes this year after the Consumer Price Index hit 3.5%
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  Speaker 1: in July, a smaller fall than expected. For our next story, Qantas,
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  Speaker 1: Australia's largest airline, has revealed annual underlying profit has dropped
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  Speaker 1: nearly 14%. Fuel price hikes have cost the airline 610
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  Speaker 1: million dollars. And for our final story, Meta, Facebook's parent company,
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  Speaker 1: has agreed to pay US $ 18 billion and add stronger
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  Speaker 1: child safety measures on Facebook and Instagram as part of
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  Speaker 1: a settlement to end a trial over teen social media addiction.
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  Speaker 1: In this series, Going Deep, we'll be doing bite-sized explorations
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  Speaker 1: into the most interesting industries, businesses, and economic events in
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  Speaker 1: Australia and around the world. For today's episode, we're looking
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  Speaker 1: at Australia's gym economy, one of the biggest and most
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  Speaker 1: surprising fitness markets on the planet. In particular, how a
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  Speaker 1: Paddington studio grew into a billion-dollar global franchise, then imploded
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  Speaker 1: on the New York Stock Exchange. Brett and Justin explore
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  Speaker 1: how Australians became one of the most gym-obsessed nations on Earth,
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  Speaker 1: what the F45 story tells us about the limits of
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  Speaker 1: boutique fitness, and whether the Pilates boom is the next
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  Speaker 1: big thing or the next big warning sign. Over to you,
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  Speaker 1: Brett and Justin.
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  Speaker 2: Thanks, Larissa. Hey, man, it's early 2015. You're doing bicep
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  Speaker 2: curls in the gym? And suddenly you start to hear
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  Speaker 2: whispers of this thing called F45.
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  Speaker 3: I remember F45 started in a single Paddington studio in 2012.
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  Speaker 3: Functional HIIT training or high intensity interval training. And it
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  Speaker 3: was about 45 minutes.
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  Speaker 1: Yeah.
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  Speaker 2: Every session was different. No meatheads and just two or
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  Speaker 2: three trainers running the room.
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  Speaker 4: It was tiny. It was sweaty.
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  Speaker 3: And it worked exactly because it was nothing like a
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  Speaker 3: traditional gym.
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  Speaker 2: Yeah. There was a pretty smart format. It was circuit
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  Speaker 2: based and you didn't need a massive floor.
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  Speaker 3: By 2015, F45 had 240. 50 Australian franchises. By March 2021,
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  Speaker 3: it had nearly 2,250 studios across.
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  Speaker 4: More than 60 countries. Yeah, it was going berserk.
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  Speaker 3: In July 2021, F45 listed on the New York Stock
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  Speaker 3: Exchange at a valuation of 1.4 billion US dollars.
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  Speaker 4: Unicorn status alert.
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  Speaker 1: Mm-hmm.
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  Speaker 2: Territory reserved for big tech companies like Canva and Atlassian
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  Speaker 2: that write code and not fitness programs.
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  Speaker 4: Now, the CEO's name is Adam Gilchrist.
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  Speaker 2: Not the Australian cricket champion Adam Gilchrist. The now sporty,
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  Speaker 2: wealthier one.
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  Speaker 3: He's sitting in a Bloomberg interview next to Mark Wahlberg,
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  Speaker 3: who bought a stake in 2019 through a deal reportedly
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  Speaker 3: worth $ 450 million.
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  Speaker 2: And then at the time, Adam Gilchrist said, we want
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  Speaker 2: to sprint past Planet Fitness in the US and be
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  Speaker 2: bigger than McDonald's.
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  Speaker 4: Very bold.
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  Speaker 2: And in Australia, F45 set a new trend for high
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  Speaker 2: intensity interval training all around the country. But it didn't
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  Speaker 2: just unlock new HIIT classes. It unlocked a whole new
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  Speaker 2: wave of boutique studios and workouts around the country.
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  Speaker 4: All right, so now we're in 2026. Where are we at?
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  Speaker 2: Well, Australia has roughly 8,000 gym and fitness businesses today,
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  Speaker 2: generating nearly $ 4 billion in annual revenue.
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  Speaker 3: Around 15% of the Australian population holds a gym membership,
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  Speaker 3: which is ninth globally behind Sweden and Norway at 22%
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  Speaker 3: and the US at 21%.
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  Speaker 4: But Bayman, it's not just the membership. It's the value
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  Speaker 4: of it.
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  Speaker 2: Aussies spend around $ 95 a month on gym memberships, which
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  Speaker 2: is roughly $ 28 more than Americans.
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  Speaker 3: Boutique fitness studios like the F45s or Pilates studios, CrossFit's,
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  Speaker 3: now account for 21% of the industry.
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  Speaker 4: Which is up from almost nothing a decade ago.
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  Speaker 3: So, Jazzy Boy, here's where it goes from inspiring origin
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  Speaker 3: story to a very expensive downfall for F45. F45 IPO'd
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  Speaker 3: in July 2021, but by July 2022, exactly one year later,
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  Speaker 3: it was already issuing profit warnings, it was slashing franchise sales,
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  Speaker 3: and it was slashing new franchises down from $ 1, 500 to
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  Speaker 3: just $ 350 to $ 450.
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  Speaker 4: And the CEO stepped down.
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  Speaker 1: Yep.
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  Speaker 2: Might I remind you as well, the share price fell
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  Speaker 2: from over $ 17 to just over $ 1 in 12 months. Yep, 92%
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  Speaker 2: of the share price wiped in 12 months.
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  Speaker 4: So what happened here?
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  Speaker 2: Well, the post-COVID land grab caught up with them. They
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  Speaker 2: had too many studios, too fast in markets that weren't
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  Speaker 2: quite ready for it.
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  Speaker 4: And just when things couldn't get worse for F45, they did. Yeah.
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  Speaker 2: F45 admitted they'd made accounting mistakes in 2021 and 2022
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  Speaker 2: financial statements, and they couldn't file their earnings report on time.
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  Speaker 3: When a public company says we got our numbers wrong
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  Speaker 3: and the share price is already at 53 cents, the
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  Speaker 3: New York Stock Exchange tends to get involved.
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  Speaker 2: Yeah. They issued a non-compliance notice in 2023 and by
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  Speaker 2: later that year f45 stock was voluntarily delisted from the
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  Speaker 2: new york stock.
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  Speaker 3: Exchange now the good news is that f45 is still
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  Speaker 3: operating around 1600 studios globally including 235 in australia.
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  Speaker 2: But the lesson it's pretty brutal the boutique fitness model
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  Speaker 2: scales beautifully up to a point.
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  Speaker 3: So if the hit boom is cooling down a bit
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  Speaker 3: and F45 definitely stumbled, what is growing in this industry?
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  Speaker 4: Pilates and reformer Pilates specifically.
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  Speaker 3: Class pass data shows that Pilates has been the most
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  Speaker 3: booked workout for three consecutive years.
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  Speaker 1: Yeah.
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  Speaker 2: We're talking reservations jumping six 66%.
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  Speaker 4: Over the last two years.
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  Speaker 3: Meanwhile, the big box players like Anytime Fitness and Jets
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  Speaker 3: and Fitness First are under a bit of pressure.
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  Speaker 2: Yeah. The traditional gym revenue has been declining. The industry
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  Speaker 2: is declining at 2% year on year over the last
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  Speaker 2: five years.
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  Speaker 4: So clearly the gym market is splitting in two.
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  Speaker 1: Yeah.
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  Speaker 2: On the one side, you've got your budget 24-7 gyms,
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  Speaker 2: no locking contracts right at the bottom.
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  Speaker 3: On the other side, you've got multi-service wellness clubs at
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  Speaker 3: the top. Weights and classes and Pilates and wellness and meditations.
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  Speaker 4: Mm-hmm. sound healing, all of it.
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  Speaker 2: And in the middle, you've got the traditional mid-market gym,
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  Speaker 2: which is kind of feeling the pain right now.
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  Speaker 4: So where to from here, meathead?
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  Speaker 2: Well, according to Ibis World, they reckon the Australian fitness
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  Speaker 2: market is going to continue to decline over the coming years.
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  Speaker 2: But there is an upwards tilt towards premium gym classes.
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  Speaker 4: The Pilates and yoga segment is the structural winner.
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  Speaker 3: 8.5% growth rate projected through to 2033.
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  Speaker 2: And when a market grows that fast, you can only
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  Speaker 2: imagine more studios open. But Bayman, clearly, boutique studios have
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  Speaker 2: identified that when Aussies buy a gym membership these days.
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  Speaker 4: It's not just about the exercise.
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  Speaker 3: They want a bit of community and social activity, some identity,
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  Speaker 3: and obviously something worth posting about.
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  Speaker 2: But B-Man, here's where I keep coming back to when
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  Speaker 2: I think about all this. On paper, we're a nation
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  Speaker 2: that takes fitness very seriously.
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  Speaker 3: But the research consistently shows around half of gym members
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  Speaker 3: visit less than once per week.
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  Speaker 4: Per week.
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  Speaker 2: So we're not actually a nation of fitness obsessives. We're
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  Speaker 2: a nation of fitness consumers, which is a very different thing.
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  Speaker 2: And the industry understood this before many of us really did.
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  Speaker 4: Yeah.
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  Speaker 2: F45 didn't sell you a workout. It sold you an identity.
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  Speaker 2: As their slogan said, team training, life changing.
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  Speaker 1: Yep.
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  Speaker 3: The slogan isn't about reps. It's about belonging. And that
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  Speaker 3: is a key part why it worked.
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  Speaker 2: Yeah. But that's also why boutique fitness has grown so
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  Speaker 2: fast and why the Pilates studio on your street can
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  Speaker 2: charge $ 40 a class and still has a three-week wait
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  Speaker 2: list for the 6am slot.
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  Speaker 3: The more interesting question now is whether the next generation
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  Speaker 3: of Australian fitness brands is smarter about how they scale.
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  Speaker 1: Yeah.
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  Speaker 2: The Australian fitness industry is real and the consumer demand
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  Speaker 2: is genuine.
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  Speaker 4: So hopefully the.
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  Speaker 3: Next era of boutique Aussie studios take lessons from F45
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  Speaker 3: before announcing plans to be bigger than McDonald's.
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  Speaker 2: Foxfam, we hope you enjoyed our deep dive on the
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  Speaker 2: growth and culling of the gym industry in Australia on Wednesday.
• 6:50
  Speaker 2: We're going to be doing a deep dive on AI,
• 6:52
  Speaker 2: but not the version you're probably thinking of. We're looking
• 6:54
  Speaker 2: at the version that actually keeps.
• 6:55
  Speaker 4: The world fed.
• 6:57
  Speaker 2: In this episode, we'll explore why agriculture is one of
• 6:59
  Speaker 2: the least digitized industries on earth, despite beating 8 billion people,
• 7:03
  Speaker 2: and whether the AI farming dream is finally real.
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  Speaker 4: Thanks for listening, and we'll see you on Wednesday.