Marketing, 2nd Edition
Markets: Segmentation, Targeting & Positioning
Fernwood
Summary
Founded by Diana Williams in central Victoria in 1989, Fernwood has segmented the gym market by gender and achieved spectacular growth by franchising this concept. It now has over 80,000 members spread across Clubs throughout Australia, and has international expansion plans.
Transcript
Stephen Letts: A stint of 18 years as a stay-at-home mum of two is hardly the usual apprenticeship to create one of the nation's fastest-growing private businesses, but in the late '80s, Diana Williams decided to convert a hobby into a vocation and the women's-only gym franchise, Fernwood, was born. Profits have risen 500 per cent in just the past four years, fuelling ambitions to take the franchise to the world.
Diana Williams: I don't have an MBA or any tertiary qualifications but I do have an unrelenting passion to make something successful when I start it, so that's what drove me. I was looking to provide them with something that women would appreciate with all the special touches that women enjoy.
I had no idea that I had the ability to build a national company when I started, and that wasn't my intention. But I've been able to do that so I guess I've learnt that I had a lot more ability than I gave myself credit for.
Stephen Letts: If aspiring gymnasium entrepreneur Diana Williams wasn't about to give herself credit, neither were the banks.
Diana Williams: We had just come out of the 1980s when a lot of gyms had gone belly-up, and we had to live through the legacy of what they'd left. Financial institutions were not interested in lending us money. And being a woman from a country town, that didn't help at all either, so, you know, it was tough.
Stephen Letts: So with minimal capital and a partner with a bit of second-hand gym equipment, Diana Williams opened the first rather rudimentary Fernwood centre in her home town of Bendigo 15 years ago.
Diana Williams: We've been very frugal with everything we've done. You know, it was not easy back then. It's very organic the growth. Every dollar that the business has made has been poured back into the business.
Stephen Letts: To reduce the financial stress on a limited capital base, Fernwood soon became a franchise operation. However, Diana Williams and her original backer in Bendigo have maintained their 50:50 ownership of the brand.
Diana Williams: Franchising is a good model, it's like a safety net. They get the brand, they get support, and they get somebody at franchisor level monitoring the business to make sure they are successful. For that they pay us a royalty. It's 7 per cent of their turnover, so that's the cash they receive. 7 per cent of the cash they receive they pay to us in a royalty and that helps us to fund the level of support we give them.
Stephen Letts: The group's turnover is now around $80 million annually. However, the overall fitness of the organisation is measured by the individual gyms' profitability. The big franchises produce annual profits of around $1 million, but for the average gym it's more like a quarter of that.
Diana Williams: Our franchisees are cash positive from day one. We sell our memberships upfront before the club opens. So when a club opens, the memberships are taken from the member's bank account every fortnight, there is no risk to the member and it's a very sound way to run a business.
We found out that the perception out there in the marketplace was that perhaps we were a little bit stodgy, we needed to put more fun into our brand. So that's when we came up with the slogan, "No Toms, no Harrys and definitely no Dicks." For a franchise system I think we should be very proud of ourselves
Stephen Letts: Fernwood's growth has prompted Diana Williams to hire a business coach and move into an Executive Chairman role away from the day-to-day running of the company.
Diana Williams: I've obviously become more confident. My role has changed a lot. I don't do everything now; I have people around me who do it for me. We are setting ourselves up so that we can perhaps float one day, if that's what we decide to do. So even though we look like a family business, we really are establishing ourselves to be a strong corporate entity operating on its own right.
Stephen Letts: A move into property development and marketing the brand overseas are the next challenges Diana Williams has set herself.
Diana Williams: Growth is one of our very strong objectives over the next three years. We expect to open between 25 and 30 clubs a year for the next three years. Our mission is to have 150 profitable clubs opened by December 2008, and we're on target to do that. We are talking with New Zealand and South Africa about expanding into those two countries and they will be our stepping stone to advancing to other countries around the world.
Sometimes you are so caught up in the passion of what you are doing that you don't even realise what you are creating until you have created it and then you have a look back and think, "Wow, that was pretty good."