Gyms are closing because of financial difficulties, rising competition, high operating expenses, and changes in consumer behavior, such as a growing preference for home workouts.
See how this has affected several brands in the fitness industry. Be prepared for each of these situations.
Stay with us in this article and learn how to fight to stay on the fitness market.
Key Takeaways
- IHRSA reports that 81% of gyms in the United States fail or close within their first year. While owning a gym can seem exciting, it’s still a business, and many new gyms falter due to a lack of sufficient capital, expertise, effective branding and gym marketing.
- Gyms are closing due to financial struggles, increased competition, high operational costs, and shifts in consumer behavior (e.g., preference for home workouts).
- With an established target audience and a solid business plan, you can successfully stay on the market, both as a personal trainer or a bigger gym owner.
Why are gyms going out of business?
- Post-Pandemic Struggles: COVID-19 led to reduced memberships and financial strain.
- Home Fitness Boom: More people are opting for home workouts and virtual classes.
- High Operating Costs: Rent, equipment, and staff expenses are hard to sustain for smaller gyms.
- Competition: Budget gyms and boutique studios have increased market pressure.
- Changing Consumer Preferences: Many prefer flexible, on-demand fitness options over traditional gym memberships.
- Poor Gym Marketing: Ineffective gym marketing strategies, such as a poor online presence and the lack of gym software, make it difficult for gyms to attract and retain members in a competitive fitness landscape.
7 Fitness Businesses That Failed
Here are a few real-world examples of gym failures in 2023-2024, along with their key challenges, the causes behind the issues, and lessons gym owners can learn from them.
These examples highlight common challenges faced by gyms, including financial mismanagement, failure to adapt to market trends, and poor gym member retention.
Key takeaways for gym owners include the importance of diversification, offering flexible pricing and memberships, staying agile with digital tools, and keeping a strong focus on both financial health and member experience. That’s what the best gyms across the country do
1. Gold’s Gym (Chapter 11 Bankruptcy - 2023)
Gold’s Gym is an iconic fitness brand founded in 1965, known for its bodybuilder culture and legacy in the fitness industry. The brand, which once had hundreds of locations across the U.S. and globally, faced financial struggles in recent years.
Failure Case:
In 2023, Gold’s Gym filed for Chapter 11 bankruptcy and closed multiple locations. The gym chain struggled with maintaining profitability during and after the pandemic. The rise of boutique fitness studios, digital fitness offerings, and increasing competition from lower-cost gym models like Planet Fitness hurt Gold’s Gym’s market share. Despite efforts to pivot with new memberships and digital services, the company faced mounting debt and was unable to recover.
Lessons for Gym Owners:
- Adapt to Market Trends: Ensure your gym keeps up with consumer preferences. With the rise of digital fitness platforms, a shift towards boutique gyms, and a desire for more flexible membership options, gyms must diversify their offerings.
- Financial Management: A solid financial strategy is crucial, especially when dealing with debts. Keeping overhead costs in check, while adapting to industry changes, is key.
- Embrace Innovation: Incorporating tech into the fitness experience, such as apps, virtual training, or hybrid membership models, can help future-proof your business.
2. 24-Hour Fitness (Closed Locations and Declining Membership - 2023)
24-Hour Fitness was once one of the largest fitness chains in the U.S., offering members flexible, round-the-clock access to gym facilities. However, in recent years, it struggled to retain its competitive edge.
Read more:
Downtown San Francisco 24 Hour fitness closing after 29 years
Lessons for Gym Owners:
- Offer Unique Experiences: Relying solely on 24/7 access and basic gym equipment isn’t enough. Members are looking for specialized classes, personalized training, and community-focused experiences.
- Member Retention Focus: Investing in retention programs, loyalty rewards, or member engagement can help prevent high turnover.
- Evaluate Location Viability: Regularly assess whether a location is performing well enough to justify its overhead. Closing unprofitable locations early can save resources and help refocus efforts on more successful sites.
3. The Athletic Club (Closed due to High Operational Costs - 2023)
The Athletic Club, located in San Francisco, was a luxury fitness club catering to high-income professionals. It offered premium services such as high-end spa treatments, personal training, and a comprehensive wellness approach.
Failure Case:
Despite its upscale offerings, the club shut down in 2023 due to high operational costs. The club’s pricing model and target demographic limited its potential for scalability, and rising competition from boutique gyms with more flexible pricing and membership structures led to a loss of members. The club’s reliance on a niche market (high-income individuals) proved to be too narrow in a post-pandemic world where consumers increasingly seek value over luxury.
Lessons for Gym Owners:
- Diversify Membership Options: Relying on a niche market can be risky. Offering tiered membership levels, flexible pricing, or packages that cater to a broader audience may help increase market reach.
- Be Cautious with Luxury Offerings: While luxury services can drive higher revenues, they come with higher operational costs and the risk of alienating broader customer segments.
- Monitor Market Changes: Consumer preferences change rapidly. Regularly evaluating the market and adapting offerings to meet evolving trends (e.g., virtual training, hybrid models) is essential.
4. YogaWorks (Declining Revenue & Closure of Studios - 2023)
YogaWorks, a well-established yoga and wellness brand, has been a leader in the yoga industry in the U.S. The company had a long history of offering studio-based yoga classes as well as online options, but its reliance on traditional studio memberships led to issues as market dynamics shifted.
Failure Case:
YogaWorks filed for bankruptcy and closed several of its locations in 2023. The decline in revenue was attributed to the growing popularity of online and hybrid fitness options, as well as increased competition from other yoga and fitness brands offering more affordable or flexible plans. Despite having an online platform, the company failed to pivot quickly enough to match the changing demands of consumers who were seeking more versatile workout options.
Lessons for Gym Owners:
- Adapt to Digital Trends: As more consumers opt for online or hybrid fitness models, having a strong digital presence or offering virtual classes is no longer optional—it’s a necessity.
- Diversify Offerings: Offering a variety of fitness experiences, from in-person to virtual, can help future-proof your business and ensure you’re catering to the needs of a broader demographic.
- Be Ready to Pivot: The pandemic and the rise of at-home fitness have changed the landscape of the fitness industry. Flexibility and adaptability in business models are key.
5. Fitness Connection (Closed Locations & Bankruptcy Filing - 2023)
Fitness Connection was a low-cost gym chain that expanded rapidly across the U.S., offering affordable memberships and a range of fitness services, including group classes and personal training.
Failure Case:
Fitness Connection faced severe financial struggles in 2023, ultimately filing for bankruptcy and closing several underperforming locations. Their business model, which depended heavily on low-cost memberships, was unsustainable due to rising operational costs and stiff competition from budget gyms like Planet Fitness. The chain also struggled with retention, and many members complained about overcrowded gyms and long wait times for equipment.
Lessons for Gym Owners:
- Balance Cost and Service: Offering low-cost memberships can attract large numbers of people, but if your gym becomes overcrowded or fails to provide an enjoyable experience, retention will suffer.
- Focus on Member Experience: Even with low-cost memberships, the quality of the gym experience (e.g., clean facilities, sufficient equipment, good class offerings) is crucial to keeping members happy.
- Plan for Growth: Rapid expansion can lead to overextension. Ensure that your growth is sustainable, with enough resources to maintain quality and member satisfaction.
6. LA Fitness (Declining Membership & Lawsuit - 2023)
LA Fitness is one of the largest fitness chains in the U.S., offering a wide variety of fitness options, including cardio machines, weights, group classes, personal training, and swimming pools. With hundreds of locations across the country, it has been a long-time player in the fitness industry.
Failure Case:
In 2023, LA Fitness faced several challenges that contributed to its struggles, including a decline in membership post-pandemic, rising operational costs, and a class action lawsuit. The lawsuit, filed by former members, accused the gym of deceptive billing practices related to membership fees, automatic renewals, and cancelation policies, further tarnishing its reputation.
While LA Fitness is still operational, the company has seen a decline in memberships, with many former members opting for lower-cost gyms, boutique fitness studios, or online fitness alternatives. The pandemic accelerated these shifts, and despite offering various services and amenities, LA Fitness struggled to differentiate itself in a highly competitive market. The lawsuit also undermined consumer trust, contributing to a drop in new sign-ups.
Lessons for Gym Owners:
- Transparency and Customer Trust: It’s essential to maintain transparency with your billing practices, cancellation policies, and membership terms. Negative publicity or lawsuits over these issues can severely damage your reputation and drive members away.
- Embrace Innovation & Flexibility: While LA Fitness offers a wide array of services, it has been slow to adapt to the rising popularity of boutique fitness studios, specialized classes, and online fitness memberships. Diversifying your offerings, whether through virtual classes, flexible memberships, or hybrid fitness models, can help attract a broader audience.
- Member Retention Is Key: It’s not just about attracting new members—keeping them is crucial. Focusing on high-quality customer service, consistent engagement, and building a community can help boost long-term retention.
- Adapt to Post-Pandemic Trends: Many consumers have shifted to more flexible fitness options, such as virtual or on-demand services, that fit their busy lifestyles. Gyms that continue to rely solely on in-person memberships may find themselves struggling to keep up.
7. Lifestyle Fitness (Financial Problems & Locations Closure - 2024)
Lifestyle Fitness was a popular gym chain in the U.K. and U.S., offering low-cost memberships, 24/7 gym access, and group fitness classes. The gym was part of the larger fitness sector’s push for affordable, accessible fitness services.
Failure Case:
In 2024, Lifestyle Fitness faced significant financial struggles, with multiple locations closing across both the U.S. and U.K. The chain struggled with increasing debt, low member retention, and competition from bigger brands like Planet Fitness and PureGym. Despite low membership prices, Lifestyle Fitness was unable to generate enough revenue to cover its costs, leading to closures and a bankruptcy filing.
Lessons for Gym Owners:
- Monitor Cash Flow Carefully: Even low-cost gyms can fall into financial trouble if cash flow is not carefully managed. Monitor memberships, expenses, and debt levels to stay afloat.
- Build Strong Member Loyalty: Retaining members is often more profitable than constantly attracting new ones. Build a strong community, offer personalized services, and reward loyalty.
- Competition Awareness: Understand what your competitors are offering and find ways to differentiate your business. Don’t rely on price alone—add value in other ways.
Why Gyms Fail - 3 Mistakes to Avoid
Mistake 1. Lack of Business Adaptation: Pandemic Case
How Many Gyms Closed Due to the Pandemic? Comparing data from March 2020, when COVID-19 first struck, to December 31, 2021, we now know that as of January 1, 2022:
- 25% of all health and fitness facilities closed
- 30% of studios shut down, an 11% increase since January 2021
- Over 1.5 million jobs were lost in the industry
This data, provided by third-party payment processors servicing 95% of U.S. gyms, health clubs, and studios, highlights the severe impact the pandemic had. It underscores the urgent need for economic relief during this period, as emphasized by IHRSA President & CEO Liz Clark.
To survive the pandemic, fitness businesses needed to adapt quickly by offering virtual classes, on-demand content, and outdoor or socially-distanced workouts. Clear communication, flexible memberships, and diversifying revenue (like selling fitness equipment) were crucial for staying afloat.
Flexibility and innovation were key to maintaining client engagement during uncertain times.
Mistake 2. Lack of Modern Technology as a Help in Staying on Top
The wave of gym bankruptcies during the pandemic offers key lessons in the importance of efficient management and customer satisfaction. One of the critical factors for success in today’s competitive fitness industry is leveraging modern technology. A gym management software plays a pivotal role in this.
With the best gym management software, a gym owner can:
- streamline operations,
- track memberships,
- manage payments,
- monitor employee schedules thanks to gym staff management software module,
→ all from one centralized platform.
This not only reduces administrative overhead of a gym business, but also enhances the customer experience, offering:
- personalized communication via gym CRM,
- seamless online booking,
- automated billing,
- a custom-branded fitness app on iOS and Android to provide a premium experience for the customers of your fitness business.
How a Gym Management Software Helps
By improving both internal processes and customer engagement, gym management software helps gyms stay organized, agile, and responsive to changing market conditions, making it an invaluable tool for long-term sustainability and growth.
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Mistake 3. Inability to Combine Business Aspects
- Financial Management: A gym business must carefully manage debt, operating costs, and cash flow. Don’t overextend or expand too quickly without a solid financial plan.
- Adaptability: As a gym owner you should keep up with industry trends (digital fitness, hybrid models, member experience) and be ready to pivot as market conditions change.
- Customer Service & Retention: Focus on delivering exceptional service, clear communication, and high-quality experiences that encourage long-term membership.
- Diversification: Offer a mix of in-person, online, and on-demand services to appeal to a wider audience and increase member retention.
- Legal Compliance & Transparency: Fitness businesses fail also because of legal trouble. Ensure you have all gym licenses and permits, and the membership terms, fees, and cancellation policies are clearly communicated.
- Successful gyms are built on more than just great facilities – they require a solid business plan. Without a clear strategy for business growth, including effective marketing, customer retention, and financial management, even the best gyms can struggle to thrive.
- Importance of continuous learning and adaptation. Taking business classes can equip you with the skills needed for strategic decision-making and long-term success. Additionally, joining a fitness association provides valuable resources, networking opportunities, and industry insights. To ensure business growth and avoid stagnation, it’s crucial to stay up to date with the latest trends, technologies, and best practices in the fitness industry.
FAQ
The failure rate of health and fitness businesses is notably high, with reports indicating that about 80% to 90% of new gyms and fitness-related businesses fail within their first few years. Key factors contributing to this high failure rate include poor financial management, lack of proper marketing, inadequate customer retention strategies, and failure to adapt to market trends.
Gyms are closing due to financial struggles, increased competition, high operational costs, and shifts in consumer behavior (e.g., preference for home workouts).
People quit the gym due to lack of motivation, unmet fitness goals, poor customer experience, and inconvenient schedules or location.
The fitness industry is struggling with over-saturation, inconsistent quality, ineffective business models, and failure to adapt to changing consumer needs and preferences.
