Crunch Fitness franchisees have brought in a lot of private equity money in recent years. CapitalSpring is the latest investment management firm to join the ranks by taking a controlling stake in Primetime Fitness Partners, owners of nine Crunch gyms in Michigan.
The deal, finalized in mid-December, follows the announcement in October that 16-unit Crunch franchisee Undefeated Tribe sold a majority stake in the business to VMG Partners. The financial terms of either of those deals were not disclosed.
Crunch Fitness Franchising CEO Ben Midgley
“Over the years we’ve been getting more and more private equity investors in the franchise, which is a positive inflection for a franchise company, right?” Crunch Fitness Franchising CEO Ben Midgley said. “We’re at about seven private equity firms at this point, and we have at least 20 private equity firms hunting around the network for more deals. They are going to allow us to scale and grow to the size we want to get to.”
Midgley, a former Planet Fitness CEO and a founding partner of Crunch Fitness Franchising in 2009, said the brand’s goal is to add 100 new locations per year. He said the company ended 2023 with 460 locations in 49 states and six countries. The Portsmouth, New Hampshire-based company landed at No. 116 on the Franchise Times Top 400 rankings with 423 locations worldwide at the end of 2022.
With private equity support from CapitalSpring, Midgley said it’s “very realistic” for Primetime Fitness Partners to eventually open 50 to 75 new locations in the Detroit and Lansing, Michigan, area through acquisitions and organic growth. Primetime entered the Michigan market in 2017. Its CEO is Kevin Laferriere.
“With a group like CapitalSpring behind us in Michigan now, I see no reason why we can’t add seven to eight stores a year there,” Midgley said. “They have the capital, sophistication from an operational standpoint and they know how to do their debt financing and negotiate build outs to help us grow that territory.”
Wade Daniel—a partner at Nashville, Tennessee-based CapitalSpring who was closely involved in finalizing the Michigan deal—said the investment was attractive for the company for a lot of reasons.
“We like the fitness industry, and we like high-value, low-price brands within the fitness industry. We also like strong management teams, and we had a good connection with the team there,” said Daniel. CapitalSpring has raised over $2.8 billion in capital and manages a portfolio of over 100 partners, many of them within the restaurant sector.
Related: Crunch Fitness Wins Franchise Times Zor Award as Top Brand to Buy
Despite competing with other well-known fitness franchises in the so-called High Value Low Price, or HVLP, gym segment with brands like Planet Fitness and Blink Fitness, Midgley said there is plenty of runway for Crunch. The brand, which private equity firm TPG bought in 2019, charges members $9.99 to $29.98 per month, depending on the number of services they sign up for.
The CEO said that because so many of Crunch’s members sign up for personalized and group training, the average membership cost is $25 per person with clubs averaging about 6,300 members. He said Crunch clubs “are doing about $2 million in annual revenue.”
The investment required to open a Crunch health club ranges from $668,000 to $6.67 million, depending on the club model franchisees choose. Average monthly revenue for clubs open 1-2 years was $227,993 in 2022, according to the brand’s Item 19.
“The demand is certainly there for Crunch to keeping expanding,” Midgley said. “The biggest challenge for us right now is finding the right real estate leases that will accommodate our clubs that start at 30,000 square feet and go up to 60,000 square feet. It’s not just hard for our franchisees, it’s hard for landlords because they have to finance their centers and as you know rates are high in the 7-8-9 range. It’s a bit of a vicious cycle.”