Optimizing Business Strategy Through Market Research in the Contemporary Fitness Franchise Sector: A Comprehensive Analysis

Martin Munyao Muinde

Email: ephantusmartin@gmail.com

Abstract

This article examines the intersection of strategic business planning and empirical market research methodologies within the rapidly evolving fitness franchise industry. Through systematic analysis of industry trends, consumer behavior patterns, and competitive dynamics, this research identifies critical success factors for fitness franchise development and expansion in the post-pandemic marketplace. The investigation employs both quantitative and qualitative approaches to elucidate optimal positioning strategies, operational frameworks, and growth trajectories for fitness franchise enterprises across various market segments. Findings indicate that successful fitness franchises increasingly leverage data-driven decision making, technological integration, community-building initiatives, and flexible business models to achieve sustainable competitive advantage. This study contributes to the literature by synthesizing strategic management principles with contemporary fitness industry realities, providing a comprehensive framework for franchise development, market penetration, and long-term value creation in this dynamic sector.

Keywords: fitness franchise, business strategy, market research, competitive analysis, strategic management, franchise development, fitness industry trends, consumer behavior, brand positioning, operational excellence

1. Introduction

The fitness industry represents one of the most dynamic and rapidly evolving sectors in the contemporary business landscape, characterized by continuous innovation, shifting consumer preferences, and intensifying competitive pressures. Within this context, the franchise model has emerged as a predominant business framework, offering entrepreneurs access to established brands, proven operational systems, and economies of scale (Alonso-Dos-Santos et al., 2021). The global fitness franchise market was valued at approximately $87.5 billion in 2023, with projections indicating continued growth at a compound annual growth rate (CAGR) of 7.2% through 2028 (International Health, Racquet & Sportsclub Association [IHRSA], 2023).

The COVID-19 pandemic precipitated profound transformations across the fitness industry ecosystem, accelerating digital adoption, reconfiguring consumer expectations, and restructuring competitive dynamics. These developments have necessitated fundamental reassessment of established strategic paradigms and business models within the fitness franchise sector (Andersen et al., 2022). As the industry navigates this period of unprecedented disruption and opportunity, the integration of sophisticated business strategy and comprehensive market research has become increasingly imperative for sustainable franchise success.

This article investigates the symbiotic relationship between strategic business planning and empirical market research within the contemporary fitness franchise context. Through systematic analysis of industry trends, consumer behavior patterns, competitive dynamics, and operational frameworks, this research aims to identify critical success factors and optimal strategic approaches for fitness franchise development and expansion. The investigation addresses several fundamental questions: How can fitness franchises effectively differentiate their value propositions in an increasingly saturated marketplace? What methodological approaches to market research yield the most actionable insights for strategic decision-making? How might franchisors and franchisees collaboratively adapt their business models to align with evolving consumer preferences and technological capabilities?

The remainder of this article is structured as follows: Section 2 presents a comprehensive review of relevant literature, synthesizing theoretical frameworks from strategic management, franchising, and fitness industry studies. Section 3 delineates current market dynamics and evolutionary trajectories within the fitness franchise sector. Section 4 examines methodological approaches to market research and their application to strategic planning within fitness franchises. Section 5 explores the integration of research insights into strategic frameworks and operational models. Section 6 presents case analyses of successful strategic implementations. Finally, Section 7 discusses implications for practitioners, identifies limitations, and suggests directions for future research.

2. Literature Review

2.1 Theoretical Foundations of Franchise Strategy

The theoretical underpinnings of franchise strategy span multiple disciplinary domains, incorporating elements of agency theory, resource scarcity theory, and signaling theory (Combs et al., 2011). Agency theory has particular relevance within the franchise context, addressing the principal-agent relationship between franchisors and franchisees (Eisenhardt, 1989). This theoretical framework elucidates the mechanisms through which franchisors mitigate moral hazard and adverse selection risks while maximizing system-wide performance (Lafontaine & Shaw, 2005).

Resource scarcity theory provides complementary explanatory power, conceptualizing franchising as a strategy for overcoming capital, managerial, and informational constraints during organizational growth phases (Oxenfeldt & Kelly, 1969). This perspective illuminates franchisors’ strategic decisions regarding system expansion, territory development, and resource allocation (Hussain et al., 2017).

Signaling theory offers additional insights into franchise brand development and market positioning, examining how quality signals influence stakeholder perceptions and decision-making processes (Connelly et al., 2011). Within the fitness franchise context, signaling mechanisms assume heightened importance due to the experiential nature of fitness services and the substantial information asymmetries between providers and consumers (Williams & Dyer, 2017).

Recent theoretical developments have extended these foundational frameworks to incorporate dynamic capabilities perspectives (Teece, 2018), institutional theory applications (Grewal & Dharwadkar, 2002), and knowledge-based views of franchise organizations (Paswan & Wittmann, 2009). These theoretical advancements provide more nuanced understanding of how fitness franchises develop competitive advantages through organizational learning, institutional legitimacy, and knowledge transfer mechanisms.

2.2 Market Research Methodologies in Franchising

The literature reveals diverse methodological approaches to market research within franchise systems, encompassing both quantitative and qualitative paradigms. Quantitative approaches typically employ survey instruments, econometric modeling, and statistical analysis of operational data to identify performance drivers and optimize strategic decision-making (Barthélemy, 2008). These methodologies facilitate systematic comparison across franchise units and enable identification of statistically significant relationships between strategic variables and performance outcomes.

Qualitative methodologies offer complementary insights through case studies, in-depth interviews, and ethnographic observations (Watson et al., 2005). These approaches provide rich contextual understanding of franchise dynamics, capturing nuanced aspects of organizational culture, knowledge transfer processes, and stakeholder relationships that may elude quantitative measurement (Dant, 2008).

Mixed-methods research designs have gained prominence within franchise studies, combining quantitative and qualitative approaches to develop more comprehensive understanding of complex franchise phenomena (Nijmeijer et al., 2014). These integrative methodologies have particular value in the fitness franchise context, where success depends on both quantifiable operational metrics and intangible experiential elements.

Recent methodological innovations include application of big data analytics (Bradlow et al., 2017), social network analysis (Greve & Song, 2017), and experimental designs (Croonen et al., 2016) to franchise research questions. These advanced methodologies enable more sophisticated modeling of franchise system dynamics and provide novel insights into strategic decision-making processes.

2.3 Fitness Industry Evolution and Strategic Implications

The fitness industry has undergone substantial transformation over recent decades, evolving from a fragmented landscape dominated by independent operators to an increasingly consolidated sector characterized by branded franchise systems and corporate chains (IHRSA, 2023). This evolutionary trajectory has been shaped by changing consumer preferences, technological innovations, and shifting competitive dynamics.

Research indicates several significant trends with strategic implications for fitness franchises. First, market segmentation has intensified, with specialized concepts targeting specific demographic segments, exercise modalities, and price points (ClubIntel, 2023). This specialization contrasts with earlier generic fitness facility models and necessitates more sophisticated market positioning strategies.

Second, technological integration has become increasingly central to fitness business models, encompassing digital engagement platforms, wearable technology integration, and virtual/hybrid service delivery models (Thompson, 2022). These technological capabilities create both opportunities and challenges for franchise systems, requiring substantial investment while enabling enhanced member experiences and operational efficiencies.

Third, consumer expectations have evolved toward more holistic wellness orientations, transcending traditional fitness definitions to encompass mental wellbeing, recovery modalities, and lifestyle integration (Andersen et al., 2022). This expanded conceptualization of fitness services necessitates corresponding expansion of franchise value propositions and service offerings.

Fourth, the COVID-19 pandemic accelerated industry transformation, catalyzing rapid adoption of digital fitness solutions, heightened emphasis on health and immunity, and reconfigured facility designs emphasizing hygiene and spatial considerations (Dyer et al., 2023). These pandemic-induced changes have enduring strategic implications for fitness franchise development and operations.

The literature reveals significant research gaps regarding the specific strategic challenges and opportunities confronting fitness franchises within this evolving industry landscape. While substantial research examines franchise systems generally, comparatively limited scholarship addresses the particular dynamics of fitness franchising. This article addresses this gap by integrating strategic management principles with fitness industry realities to develop a comprehensive framework for fitness franchise strategy development.

3. Contemporary Fitness Franchise Market Dynamics

3.1 Market Structure and Competitive Landscape

The contemporary fitness franchise sector exhibits complex structural characteristics, with differentiated market segments defined by price point, service model, and target demographic. Premium segment franchises (e.g., Orangetheory Fitness, F45 Training) emphasize experiential elements, specialized programming, and community engagement, typically commanding monthly membership fees of $150-250 (Fitness Business Association, 2023). Mid-market franchises (e.g., Anytime Fitness, Snap Fitness) offer comprehensive facilities with moderate service levels at price points ranging from $40-80 monthly. Value-oriented concepts (e.g., Planet Fitness, Crunch Fitness) provide basic facilities with limited services at monthly rates of $10-30.

Competitive intensity varies across these segments, with the mid-market experiencing particularly acute competitive pressures due to positioning challenges from both premium and value competitors (ClubIntel, 2023). The premium segment maintains higher barriers to entry through specialized training methodologies, proprietary technology platforms, and brand equity. The value segment leverages scale economies and operational efficiency to maintain price leadership positions.

Market concentration has increased significantly, with the ten largest fitness franchisors now controlling approximately 35% of total market share, compared to 22% a decade ago (IHRSA, 2023). This consolidation trend reflects advantages of scale in technology investment, brand development, and location acquisition. However, the market remains sufficiently fragmented to permit entry of innovative concepts with differentiated value propositions.

3.2 Growth Trajectories and Expansion Patterns

Fitness franchise systems exhibit diverse growth trajectories, influenced by strategic orientation, capital structure, and market positioning. High-growth systems typically employ aggressive expansion strategies, prioritizing rapid territory development and market penetration (Fitness Business Association, 2023). These systems often utilize area development agreements and master franchise structures to accelerate unit growth while addressing resource constraints.

Alternative growth models emphasize system profitability and unit economics over expansion velocity, focusing on franchisee selection quality, operational excellence, and sustainable same-store revenue growth (ClubIntel, 2023). These systems typically maintain more selective development criteria and provide enhanced support infrastructure for existing franchisees.

Geographic expansion patterns reveal strategic prioritization of metropolitan markets with favorable demographic characteristics, including household income levels, educational attainment, and health consciousness indicators (IHRSA, 2023). Secondary market development presents both opportunities and challenges, often requiring adaptation of standard operating models to address different competitive dynamics and consumer preferences.

International expansion represents an increasingly significant growth vector for established fitness franchise systems, with particular focus on markets exhibiting rising disposable income, increasing health awareness, and underdeveloped fitness infrastructure (Fitness Business Association, 2023). Successful international development requires careful adaptation of operating models to accommodate cultural differences, regulatory requirements, and local market conditions.

3.3 Technological Integration and Digital Transformation

Technological capabilities have become critical differentiators within the fitness franchise sector, with leading systems investing substantially in digital transformation initiatives. These investments encompass multiple domains, including member engagement platforms, performance tracking systems, operational management tools, and content delivery mechanisms (Thompson, 2022).

Mobile applications represent the central component of most fitness franchises’ digital ecosystems, providing functionalities including class scheduling, performance tracking, community engagement, and content access. Advanced systems integrate wearable technology to enhance workout experiences through performance metrics, gamification elements, and personalized coaching (ClubIntel, 2023).

Virtual content delivery capabilities gained particular prominence during pandemic-related facility closures, with many franchise systems developing hybrid service models combining physical facilities with digital offerings (Dyer et al., 2023). These hybrid models expand addressable markets beyond geographic constraints while enhancing member value propositions through increased convenience and service optionality.

Back-end technology systems enable operational optimization through automated processes, data analytics capabilities, and enhanced communication mechanisms. These systems facilitate performance monitoring at individual unit and system-wide levels, supporting data-driven decision making and continuous improvement initiatives (Fitness Business Association, 2023).

4. Strategic Market Research Methodologies for Fitness Franchises

4.1 Comprehensive Market Assessment Frameworks

Effective fitness franchise strategy development begins with systematic market assessment employing multiple analytical lenses. Demographic analysis represents the foundation of this assessment, examining population characteristics, income distribution, educational attainment, and lifestyle factors within target markets (Watson et al., 2020). Advanced demographic analysis incorporates psychographic profiling to identify population segments with high propensity for fitness service utilization.

Competitive analysis provides crucial contextual understanding, mapping existing fitness service providers across multiple dimensions including price positioning, service offerings, facility characteristics, and brand perception (Barthélemy, 2018). This analysis should encompass both direct competitors (other fitness facilities) and indirect competitors (alternative fitness modalities, home fitness options, recreational activities) to provide comprehensive competitive landscape understanding.

Site selection methodologies have particular importance for fitness franchises, given the significance of location accessibility in consumer decision-making processes. Advanced site selection incorporates traffic pattern analysis, visibility factors, co-tenancy synergies, and catchment area characteristics (Nijmeijer et al., 2014). Geographic information systems (GIS) enable sophisticated modeling of these variables to optimize location decisions.

Comprehensive market assessment should additionally evaluate regulatory environments, labor market conditions, real estate dynamics, and economic indicators within target markets. These contextual factors significantly influence operational feasibility and financial performance for fitness franchise units (Dant, 2018).

4.2 Consumer Research Applications

Consumer research provides essential insights for fitness franchise strategy development, illuminating preference structures, decision-making processes, and satisfaction drivers. Quantitative survey methodologies enable systematic measurement of consumer preferences across multiple service attributes, facilitating identification of optimal service configurations and pricing strategies (Bradlow et al., 2017).

Qualitative research approaches, including focus groups, in-depth interviews, and observational studies, provide complementary understanding of consumer motivations, barriers, and experiential factors influencing fitness facility selection and utilization (Watson et al., 2005). These methodologies reveal nuanced insights that may not emerge through structured survey instruments.

Segmentation analysis represents a particularly valuable consumer research application, identifying distinct consumer groups with similar preference structures and behavioral patterns. Effective segmentation enables tailored positioning strategies and service offerings aligned with specific target segment characteristics (Croonen et al., 2016).

Experience mapping methodologies examine the consumer journey across multiple touchpoints, identifying opportunities for experience enhancement and friction reduction. These methodologies are especially relevant for fitness franchises, where consumer experience significantly influences satisfaction, retention, and referral behavior (Greve & Song, 2017).

4.3 Franchisee Performance Analytics

Strategic research within franchise systems extends beyond consumer and market analysis to examine franchisee performance patterns and success determinants. Unit economics analysis provides fundamental understanding of revenue drivers, cost structures, and profitability factors at the individual franchise level (Hussain et al., 2017). This analysis enables identification of optimization opportunities and best practice dissemination across the franchise system.

Comparative performance analysis examines variation across franchise units, identifying factors associated with superior or inferior outcomes. This analysis typically employs statistical methodologies to isolate the effects of specific variables including location characteristics, operator capabilities, local market conditions, and implementation fidelity (Lafontaine & Shaw, 2005).

Franchisee satisfaction research provides important insights regarding system-level strengths and improvement opportunities from the operator perspective. This research typically examines multiple dimensions including training effectiveness, operational support quality, marketing program impact, and franchisor communication (Combs et al., 2011).

Advanced franchisee analytics incorporate predictive modeling techniques to identify early indicators of performance challenges or opportunities. These methodologies enable proactive intervention to address emerging issues before they manifest as significant performance deficiencies (Teece, 2018).

5. Integrating Research Insights into Strategic Frameworks

5.1 Value Proposition Development and Positioning Strategy

Research insights inform development of compelling value propositions that address unmet market needs and differentiate the franchise concept from competitive alternatives. Effective value propositions in the fitness franchise sector increasingly transcend traditional facility-centric definitions to encompass experience elements, community dimensions, and results orientation (Andersen et al., 2022).

Positioning strategy establishes the franchise concept’s location within the competitive landscape across multiple dimensions including price point, service level, specialization degree, and target demographic. Research insights enable identification of positioning opportunities with favorable competitive dynamics and strong alignment with target consumer preferences (Williams & Dyer, 2017).

Conceptual differentiation represents a critical strategic challenge within the increasingly crowded fitness franchise marketplace. Research-based differentiation strategies might emphasize proprietary training methodologies, technological capabilities, community-building approaches, or specialized programming targeting specific fitness objectives or demographic segments (Thompson, 2022).

Brand identity development translates positioning strategy into cohesive visual, verbal, and experiential elements that communicate the concept’s distinctive characteristics and value proposition. Research insights inform development of brand identities with strong resonance among target consumers and clear differentiation from competitive offerings (Connelly et al., 2011).

5.2 Operating Model Design and Optimization

Operating model design establishes the fundamental structure of the fitness franchise concept, encompassing membership structures, pricing strategies, service delivery systems, staffing models, and facility requirements. Research insights enable development of operating models optimized for both consumer satisfaction and unit economics (Paswan & Wittmann, 2009).

Membership architecture represents a critical operating model component, encompassing tiered options, term structures, enrollment processes, and billing systems. Research-based membership architectures balance revenue optimization with market penetration objectives and competitive positioning requirements (Dyer et al., 2023).

Service delivery systems define how the franchise concept’s core fitness experience is created and maintained, including programming structures, instructor requirements, equipment configurations, and quality control mechanisms. Research insights inform development of service systems that deliver consistent experiences while accommodating operational realities and franchisee capabilities (Grewal & Dharwadkar, 2002).

Facility design translates the franchise concept into physical environments that support the intended member experience while optimizing construction and operational costs. Research-based facility designs incorporate member preferences regarding layout, equipment selection, amenities, and atmospheric elements while maintaining feasible development economics (ClubIntel, 2023).

5.3 Growth Strategy and System Development

Growth strategy establishes the franchise system’s expansion approach, including development velocity, geographic prioritization, franchisee selection criteria, and support infrastructure. Research insights enable development of growth strategies aligned with market opportunities, organizational capabilities, and capital resources (Oxenfeldt & Kelly, 1969).

Territory development strategies define the system’s approach to geographic expansion, including market prioritization, cannibalization management, and development scheduling. Research-based territory strategies optimize system penetration while protecting individual unit economics and maintaining sustainable development pipelines (Eisenhardt, 1989).

Franchisee selection frameworks establish criteria and processes for evaluating potential system operators, balancing growth objectives with quality control considerations. Research insights inform development of selection criteria predictive of franchisee success, potentially including financial qualifications, operational experience, cultural alignment, and personal characteristics (Alonso-Dos-Santos et al., 2021).

Support infrastructure development ensures the franchise organization maintains capabilities commensurate with system requirements as expansion proceeds. Research-based infrastructure planning addresses training capabilities, operational support resources, marketing systems, and technology platforms required to maintain consistent implementation across an expanding franchise network (Fitness Business Association, 2023).

6. Case Analyses: Successful Strategic Implementations

6.1 Premium Segment Case Study: Orangetheory Fitness

Orangetheory Fitness exemplifies successful integration of market research and strategic planning within the premium fitness franchise segment. The concept’s development process began with extensive research identifying consumer demand for science-based, results-oriented fitness experiences combining personalization with group dynamics (IHRSA, 2023). This research informed development of a distinctive value proposition centered on heart rate-based interval training with performance tracking technology.

The concept’s operating model was systematically refined through iterative testing, with comprehensive data collection regarding member experience, exercise efficacy, and operational feasibility. This research-driven optimization resulted in a highly replicable system delivering consistent experiences across diverse markets and operator capabilities (Fitness Business Association, 2023).

Growth strategy development incorporated sophisticated market analysis to identify optimal expansion territories and development sequencing. The franchisor employed a deliberate growth trajectory, prioritizing operational excellence and unit economics over rapid expansion during initial development phases. This approach established strong performance benchmarks and success patterns before accelerating system growth (ClubIntel, 2023).

The system’s continued evolution demonstrates ongoing research integration, with regular assessment of consumer preferences, competitive developments, and technological opportunities informing strategic adjustments. This adaptive approach has enabled maintenance of premium positioning despite intensifying competition within the boutique fitness segment (Thompson, 2022).

6.2 Mid-Market Segment Case Study: Anytime Fitness

Anytime Fitness illustrates effective strategy development within the mid-market fitness franchise segment, employing research-based approaches to address distinct strategic challenges. The concept originated from market research identifying unmet consumer demand for convenient, 24-hour access to quality fitness facilities without unnecessary amenities or complex membership structures (IHRSA, 2023).

The operating model was specifically designed to address franchise viability in secondary markets, with reduced staffing requirements, optimized facility footprints, and streamlined operations enabling sustainable unit economics in lower-density population areas. This model was systematically refined through performance data analysis across diverse market contexts (Fitness Business Association, 2023).

International expansion strategy development incorporated comprehensive research regarding global fitness trends, regulatory environments, and cultural factors affecting fitness consumption patterns. This research informed market prioritization and operating model adaptations required for successful cross-cultural implementation. The resulting expansion framework has supported development across more than 30 countries with consistent implementation quality (ClubIntel, 2023).

Technology integration strategy has evolved through continuous assessment of member utilization patterns and emerging capabilities. The system has strategically prioritized investments in mobile access technologies, security systems, and member engagement platforms aligned with its core convenience value proposition while maintaining moderate price positioning (Thompson, 2022).

7. Conclusion and Future Directions

This analysis demonstrates the critical importance of integrating sophisticated business strategy with comprehensive market research for fitness franchise success in the contemporary competitive landscape. The findings indicate several key principles for effective strategy development within this sector:

First, successful fitness franchises increasingly adopt data-driven decision-making processes, employing systematic research methodologies to inform strategic choices ranging from concept development to international expansion. This empirical orientation enables more precise alignment with market opportunities and reduces implementation risk.

Second, strategic differentiation has become increasingly imperative as market saturation intensifies across multiple fitness segments. Research-based differentiation strategies identifying underserved consumer segments or unmet preference structures provide foundations for sustainable competitive advantage.

Third, technological integration represents both strategic necessity and differentiation opportunity, with research insights guiding investment prioritization across multiple technology domains. Successful implementations align technological capabilities with core value propositions while maintaining feasible unit economics.

Fourth, operational optimization through continuous performance analysis enables sustained profitability despite competitive pressures and evolving consumer expectations. Research-based optimization frameworks identify efficiency opportunities while maintaining service quality and member satisfaction.

This study contributes to both scholarly literature and practitioner understanding by synthesizing strategic management principles with fitness industry realities, providing an integrated framework for fitness franchise development. Future research directions might include longitudinal analysis of fitness franchise performance determinants, cross-cultural comparison of implementation success factors, and examination of emerging business models incorporating hybrid service delivery approaches.

As the fitness industry continues its evolutionary trajectory, successful franchise systems will increasingly differentiate themselves through strategic sophistication and research integration capabilities. Those organizations developing superior capabilities in market assessment, consumer insight generation, performance analytics, and strategic adaptation will be best positioned to create sustainable value for franchisees, members, and shareholders in this dynamic business sector.

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