KX Pilates’ China JV, studio openings and innovation program drive fitness chain forward

By Sarah Stowe | 18 Sep 2020 View comments

KX Pilates founder Aaron Smith has secured a JV into China and is leading the way on R&D to create equipment unique to KX, which will start rolling out in studios from early 2021. 

Aaron Smith spoke to Inside Franchise Business Executive about moving the brand forward.

Growth in China, Indonesia and Australia

International expansion has focusd on China and Indonesia. A training centre opened in Shenzhen and the business is looking to add two studios in Shanghai.

“China got back on track after Covid and it was an opportunity for our business partner to take on growth over there. We’ve had a lot to focus on, so we’ve trusted him. If it is not as perfect as it would be here, if it is 80 per cent as good, then we can polish everything up.”

Smith says the Aussie brand pr was received very well. He’s extremely confident about growth in the region.

“We’ve allowed them to make their own mistakes. We wanted to use the Australian booking system but they’ve tailor-made a system on the back of an existing Chinese gym system,” he explains.

“They had to learn their own way, which is ideal for a joint venture. All our IP is wrapped up really well, and protected.”

There will be two studios in China by the end of 2020, and plans are set for 10 gyms in 2021.

“We’re quite conservative on that front.”

Another two studios will be unveiled within three to six months in Indonesia, adding to the first outlet for the brand in that country. The local operator will start to franchise the concept once the three studios are up and running. 

Next stop could be Singapore, south east Asia, or the US. 

“It’s about meeting the right partner who can map out growth,” says Smith.

Back home, the immediate plan is to open a further seven studios.

“Growth has not stopped.”

New studios are outside the Melbourne heartland in Victoria, Queensland, Sydney, Adelaide and Western Australia.

Another seven outlets doesn’t match the 12 -15 studios opened annually over the last five years but Smith is happy with the growth rate. 

“One thing we’re taking from this – we’re not guessing, we’re going to boom after this, we’ve seen it in other states. In the three weeks we were open [between lockdowns] the studios were so full with a waiting list, the booking system had a meltdown.”

Equipment innovation will provide point of difference

Smith has previously talked of developing branded Pilates machinery and equipment to distribute more widely as a secondary revenue stream.

Now he’s had time to reflect on the decision to become an equipment distributor, and the goal posts have shifted slightly he says.

“We have to focus on what we do well. We’re mindful that shipping is a different business and we reflected on what we’re in business for.”

However the introduction of exclusive equipment is just a step away for KX Pilates franchisees. The business will begin trialling equipment in November, before rolling it out across all studios.

“We had to change manufacturer this year. We had 55 machines in Melbourne from the Chinese manufacturer for testing. There were too many niggling queries. We’ve gone back to the US clients we’ve been with for 10 years; the equipment is more expensive but better quality, patented, and with an exclusive IP.

“We’re high intensity Pilates and we use a generic machine we customise. This has 20 plus more features adapt to our workout. It looks beautiful and no-one else can copy us. 

“If someone doesn’t want a franchise they can be a KX copycat but no-one can do this machine.”

KX Pilates will be holding the IP so machines can’t be sold into the open market. Franchisees will be required to sell them back to the franchisor.

Surviving Covid-19

Covid-19 has been tough on this Melbourne-based franchise chain.

Smith reports 50 per cent of the network is open and smashing last year’s budgets. The rest in Victoria will be closed until late November. 

A combination of online classes, JobKeeper, revised rental legislation and co-operative landlords have helped franchisees in Melbourne survive.

“I think also what would have helped is that Melbourne is our most established area, owners have been up and running for more than five years, they are more financially stable, a bit more resilient than start-ups. 

“Now we have some money coming in to fund the salaries of marketing, systems, accounting, so we can support the network.

“You could sit back and say I’ll go with the flow – or call all your clients to upsell.

We’re doing everything we possibly can, it’s a testament to how strong the franchise network is. We’re proud of our owners, working to get through it, looking at how we can improve our systems, communication and culture.”