Foluso Ogunwale navigated through initial market scepticism and financing challenges to establish iFitness, a gym chain with 20 branches across Nigeria, addressing a gap in the market for affordable and conveniently located fitness centres.
In 2015, when Foluso Ogunwale first launched iFitness, a chain of gyms in Nigeria, banks and other potential financiers remained sceptical, doubting whether the market was substantial enough to support such a venture.
Speaking recently at a conference of the African Private Capital Association in Cairo, Ogunwale explained that at the time, fitness clubs were often seen as a luxury product rather than preventative health facilities. He noted that the only existing fitness centre in Lagos demanded an upfront payment of around US$900 per year.
Owing to a lack of funding, Ogunwale was compelled to bootstrap the business for the initial two years. The first external funding arrived in February of 2017, in the form of an expensive micro-finance loan. This much-needed capital injection came at a critical time as iFitness was planning to add three new branches to its network. “The interest rate was ridiculous; around 3.8% per month. Can you imagine taking money at that interest rate?” Ogunwale said in an earlier interview with How we made it in Africa. “But we knew the microfinance loan was only short term, so we jumped in, did it for a few months and then got better funding by the end of the year.”
The company prioritised maintaining high service levels and standards to ensure customer retention, aiming to demonstrate to potential future financiers that the business was sustainable. “When we had four branches by the end of 2017, the banks were taking us a bit more seriously,” he said.
The influx of debt capital enabled the company to double its number of branches to eight. Subsequently, in 2019, the first private equity funding was secured through CardinalStone Capital Advisers, a Lagos-based fund manager.
Currently, iFitness lists 20 branches on its website, with 18 located in Lagos and one each in Abuja and Ibadan. Ogunwale mentioned that the typical membership fee is around $25 per month.
The CEO shed light on some of the unique financing challenges faced by gym chains in Nigeria, which are typically absent in other parts of the world. One of these includes the need to pay upfront for imported equipment and other supplies used in the gym, while most gyms in developed countries tend to rent their equipment and pay on a monthly basis. The prevailing realities of the property industry in Nigeria also necessitate that iFitness make lease payments for its gyms upfront for five years.
Identifying a gap in the market
The idea to start a gym chain first struck Ogunwale in 2007 when one of his close friends lost a brother to diabetes and heart disease. This event underscored for Ogunwale the importance of prioritising health. Despite his desire to join a gym, he found it challenging to locate a decent, convenient, and affordable fitness centre. To him, the gap in the market was glaringly obvious.
However, he stayed with his job at Skye Bank and later ventured into selling mobile phones, laptops, and accessories. It wasn’t until 2015 that he revisited his gym chain business idea and launched iFitness. The company’s first gym was modest in size, encompassing just 150m2.
In its first year, iFitness found it challenging to meet the demand. Ogunwale noted that this was more a reflection of the limited size of the initial gym rather than a swift market acceptance of their offering. Nonetheless, the market signals were promising enough to justify expansion.
Convenience is key
Ogunwale emphasised that the proximity of the gyms is crucial, especially in a densely congested city like Lagos. The company capitalises on this element of convenience to attract and retain customers. “When you are in a busy city like Lagos, the last thing you want to do when you get home after spending two hours in traffic is get changed and have to travel far to get to a gym. Convenience brings people back. We open branches close to where people live or work.”
iFitness employs a checklist when scouting for the next location. It evaluates the area’s traffic, population density, and the adequacy of access routes. “Wherever there are 25,000 people in a 5km radius is where we want to have at least one iFitness,” he said.
Preventative health a growing trend
In a prior interview with How we made it in Africa, Femi Ogunjimi, a partner at private equity firm CardinalStone Capital Advisers and an investor in iFitness, noted a rising awareness of preventative health in the West Africa region. “From a big-picture perspective, there’s a heightened state of health consciousness. A lot of people are thinking more about leading healthy lives, preventing rather than treating illness, and being more aware of the excesses they expose their bodies to and the impact on their health.
“When we made [the iFitness] investment about three years ago, it had about five locations with 3,000 members, whereas today it has over 20,000 members and 18 locations. These are people who spend a lot of time paying attention to their health, working out, and trying to be healthy,” Ogunjimi said last year.