Main Post Partners

As a regular investor in the fitness space since launching nearly 30 years ago, private equity firm North Castle Partners has been involved on both sides of the franchise model.

The firm now backs Crunch Fitness franchisee CR Fitness, a group with more than 80 locations in the United States. Jon Canarick, the firm’s managing director, is also an investor in emerging Florida-based franchise Yoga Joint and said his office looks for concepts that are scalable and have unique qualities.

“We want some level of differentiation,” Canarick said. “I say ‘some level,’ because differentiation can be hard to find. There’s a lot of things that are very similar, and many of them are successful. But there are different cues we still look for in terms of what we’re going to back.”

Canarick shared his views during a panel May 19 at the inaugural Fitness Finance & Growth Conference in Chicago, held by Franchise Times. He was joined in the session by fellow panelist Aaron Garcia of Main Post Partners, and moderator Dana Zukofsky, managing director of the advisory firm Aprio.

Main Post, founded in 2014, has also put investment dollars into the fitness space. Along with investing in a San Diego-based concept called Chuze Fitness, Main Post backs Flynn Group, a massive restaurant operator and owner of more than 140 Planet Fitness gyms.

When looking at the franchisee space, Garcia said operational standards are paramount.

“We will take a killer operator that’s building a team inside a franchise system to back their growth strategy,” Garcia said. “We also look at their track record and performance relative to the overall system. Showing that you can execute the playbook at the top level of the system. That’s the push point for us.”

Canarick had a similar view, and said it largely comes down to finding franchisees who produce consistent cash-on-cash returns. Because many franchisees operate regionally, Canarick said he’s also comfortable investing in owners who may have locations in only a couple markets. That’s not the case, he said, when considering fitness franchisors.

“We look at scalability and that it’s a proven concept in more than one market,” Canarick said. “Ideally, three or more. Having a few great studios in a single market, that’s still largely operating on the backbone and success of a great entrepreneur. “

“The consistency and performance across different geographies, we’re looking at all that stuff,” Garcia said. “We try to unpack the core drivers of the business. We get really excited trying to review data, consumer enthusiasm and what’s driving the attachment to the concept and how that’s translating into the numbers.”

While getting into multiple geographies is a good sign, Garcia added that franchisors should show they're capable of filling in existing markets.

“We’ll appreciate that you have infill opportunities in your existing markets, while showing you have the ability to go out to your customer and break into new markets, while balancing that risk profile for yourself,” Garcia said.

In addition to how things look at headquarters, Garcia said he wants to get in on the ground level, too, and see how owners are running studios or gyms.

“The operator is key to the success,” Garcia said. “That’s what we’re focused on. We have a playbook to help support and scale. But with a bunch of terrible operators, even with a great concept, that’s something much harder to fix.”

“Ultimately, bad franchisee P&Ls lead to the end of a franchisor. It ends very ugly, and it happens not that infrequently,” Canarick said. “So, we really want to know the success of the franchisees. What we don’t want to see is a franchisor with 50 locations open, 25 that are mediocre at best, and 400 licenses sold. That’s where I back off, and I actually don’t own or invest a lot in the franchisor space because I get a little skittish.”

Canarick also noted that franchising isn’t the best fit for every fitness concept. For example, from 2015 to 2025, North Castle invested in Barry’s Bootcamp. When North Castle entered the scene, the brand had 11 locations with two franchise units, and Canarick said they pulled back on the franchise effort.

“There wasn’t going to be 1,000 Barry’s across the country, because it really thrived in urban, young, wealthy environments,” Canarick said. “Well, there aren’t 250 environments like that. In terms of business, you can have an incredibly successful, relatively small business, and that doesn’t mean you have to build it to sell. Not everything necessarily is going to be a 100-unit business. We’ve seen that get in trouble sometimes in the franchise category.”

For brands able to make the step into franchising, Garcia said private equity firms will have additional considerations for concepts with larger gyms.

“With big-box type concepts, there’s more space for multi-service offerings,” Garcia said. “Those are more complex. But over time, we’ve seen things come and go, or have more interest. When we first began with Chuze Fitness, cycling was big and we had cycling studios inside the gyms. If trends shift, we control that footprint, and we have the ability to shift with it. As cycling declined, we were able to switch those spaces to strength training.”

The Fitness Finance & Growth Conference, presented by Franchise Times, runs through May 20 at the Loews Hotel in Chicago.

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