The Long Financial Tail of the Fitness Industry

(l to r) Carlson, Burkhardt, Nagle, Hemmer, and Hirsch

Four financial experts who specialize in the health and fitness space explain what’s attracting investors to the sector and why they like its long-term prospects.

BY JIM SCHMALTZ

A snapshot of the investment in and valuation of the fitness market tells the story: $5 billion deployed across wellness categories, global wellness projected to grow 7.8% annually through 2027, and two landmark fitness transactions—EōS Fitness and Crunch—each reaching $1.5 billion valuations.

As HFA Board Chair Luke Carlson says of the post-pandemic industry: “That’s not recovery, that’s structural strength.”

Adam Hemmer, managing director of TSG Consumer, agrees. TSG Consumer acquired EōS Fitness, and Hemmer identifies four pillars that set EōS apart:

· A compelling consumer value proposition at a $9.99 price point that includes strength equipment, cardio, personal training, classes, and recovery services;

· A proven and replicable growth pipeline across geographically diverse markets;

· A company-owned model that ensures consistent brand and consumer experiences at scale; and

· An experienced management team, many of whom have worked together for more than 20 years.

“If we’re coming in and we say, ‘We want to invest more capital to accelerate growth,’ a site in California, a site in Florida, a site in Texas—they all deliver great economics,” Hemmer says. “That gives us the confidence to say, ‘Let’s go put more money behind rolling out further locations.’”

He adds that the company-owned model, while difficult to execute, creates a flywheel: operational consistency drives brand consistency, which drives membership growth.

Global Wellness Growth Projection

“Our data around fitness and wellness actually shows growth across all income demos. I think that supports HVLPs in particular, where you have a broadening of that customer base.” • JuliAnn Burkhardt

Crunch, by contrast, is an asset-light franchise model that nonetheless arrived at the same $1.5 billion valuation. Hemmer says that the parallel transactions say more about the durability of the HVLP segment than about any single company.

JuliAnn Burkhardt, managing director of BofA (Bank of America) Securities, agrees, noting that institutional interest in the space has expanded well beyond traditional private equity (PE) to include structured capital groups, sovereign wealth funds, and family offices—all searching for opportunities not vulnerable to AI disruption or tariff risk.

She cites Bank of America’s proprietary consumer spending data—the bank touches two out of every three US households through credit and debit card transactions—to underscore the case: 18 consecutive months of year-over-year spending growth in the fitness category, running at plus 5% to 6%.

More striking is the fact that this growth is broad-based across income demographics, not concentrated at the top of the income ladder as it is in much of the broader economy.

“Our data around fitness and wellness actually shows growth across all income demos,” Burkhardt says. “And so I think that supports HVLP in particular, where you have a broadening of that customer base.”

What Separates the Herd

Earning premium valuations and maintaining market share depend on several factors.

Jack Nagle, principal at Princeton Equity Group, emphasizes the importance of having scalable strategies that are consistent on both the development and operating sides. Investors, he says, are fundamentally underwriting an operation’s ability to grow at scale, and that requires teams and processes, not just results.

Hemmer explains that if you are the one making nearly all the day-to-day decisions and the business depends entirely on you, investors will see that as risky. Building a strong team around you shows that the company can operate and grow beyond just your involvement, which makes it more attractive and "backable."

Jeremy Hirsch, managing director of Houlihan Lokey, says that analytical conversation of data is critical, noting that many operators have enough data to run the business as is but not the depth of insight needed to attract meaningful capital.

“No data, no deal,” he states. “I think the mindset has shifted—on the sell side, at least—to ‘How do I collect as much data as possible before I actually go to market? How do I cut every single trend so that I know what's going on? How do I go on the offensive so I can explain it, versus being on the defensive?’”

All four experts agree that businesses that command premium valuations have four qualities that are lacking in businesses that struggle:

· Consistent unit economics;

· Same-store sales growth that is traffic-driven rather than price-driven;

· A credible growth pipeline backed by data; and

· A management team that reduces rather than concentrates risk.

“There are plenty of single-modality, market-by-market concepts that have been around, and they really stand the test of time. But if you're doing what you've been doing the entire time, you're probably not going to be around much longer.” • Jeremy Hirsch

Adam Hemmer

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Full Stack vs. Boutique: The Structural Debate

As HVLP 3.0 gains traction, investors may be signaling that the stronger long-term model is full-stack services, where consumers have a menu of options at a reasonable price rather than single-modality models, a signature of the boutique category.

Hirsch argued that full-stack platforms carry structural advantages. Single-modality concepts face a ceiling on scale, he says, because consumers naturally experience fatigue with repetitive formats.

“There are plenty of single-modality, market-by-market concepts that have been around, and they really stand the test of time,” notes Hirsch. “But if you're doing what you've been doing the entire time, you're probably not going to be around much longer.”

He adds that offering multiple modalities within one brand increases lifetime value and creates upsell opportunities within tiered pricing structures.

“If you’re a gym, there’s an opportunity to embed some of these offerings within specific pricing tiers," he says. "That allows you to basically upsell people to higher levels.”

Burkhardt adds a nuance: Single-modality concepts that evolve within their discipline— integrating strength training into yoga, for example, in response to GLP-1 drug-related muscle loss—can remain competitive.

But Nagle cautions against adding modalities purely to expand offerings. Excellence in a core modality, he argues, must not be diluted. He points to Princeton Equity’s investment in Barry’s Boot Camp as an example of disciplined brand protection—every M&A decision is weighed against whether it maintains the premium experience that keeps members returning.

“Doing what you do in a bank of excellence is the priority,” Nagle says.

“If you are driving almost all of the day-to-day decisions in your business and it all relies on you, figuring out how to invest in a team around you is going to make your business that much more backable. If you are the business, that just increases risk.” • Adam Hemmer

When to Raise Capital

On the question of when to raise capital, Hirsch is blunt: not during a plateau. He cites Planet Fitness as a cautionary example of a great brand that has nevertheless seen multiples compress as investors question remaining runway. Momentum and proof points, he says, are the right conditions—not the promise of growth but demonstrated, replicable growth.

Hemmer adds that founders who are tempted to wait for their EBITDA to grow—knowing the valuation math that follows—should recognize that macro events are unpredictable. If everything is clicking and a near-term exit is on the table, it may be better to act than to wait for circumstances that cannot be controlled.

For founders considering a sale, the decision is as personal as it is financial. Nagle raises the question of equity rollover: A meaningful reinvestment alongside a PE sponsor aligns incentives and preserves upside while allowing founders to diversify personal net worth.

Hemmer confirms that investors generally prefer rollover arrangements, precisely because aligned incentives strengthen confidence on both sides of the deal.

Sometimes, the transition from founder-operator to CEO of a PE-backed business invites scrutiny that forces a difficult adjustment in leadership. Hirsch stresses that leaders need to be open to doing things differently—recognizing that the team and infrastructure appropriate for a business at its current size may not be appropriate for the next stage.

Nagle encourages founders to research their potential PE partner the same way they would any important relationship, talking to other company operators about board dynamics and working style.

“You’re getting into a marriage with somebody for the next five-plus years,” Nagle says.

Burkhardt reminds operators that the right partner depends on the founder’s own goals: highest valuation, value-added operational expertise, passive capital with minimal governance intrusion, or some combination. Each has a different cost of capital and a different set of expectations.

“Cost of customer acquisition can be a really good indicator of effective value—and I would also look at actual attendance, or door swings, from members. In this business, visitation is usually equal to retention.” • Jack Nagle

The Lightning Round

Here’s what the financial experts had to say on specific topics.

Metrics that make a fitness company worth investing in?

Same-store sales growth is the consensus here.

On what KPIs are important?

Nagle: “Cost of customer acquisition can be a really good indicator of effective value—and I would also look at actual attendance, or door swings, from members. In this business, visitation is usually equal to retention.”

The biggest mistake founders make preparing for a capital raise?

Hirsch: Not hiring enough people—and then being surprised when buyers deflate the EBITDA figure to account for the roles that need to be filled.

Nagle: Making drastic changes to the business in anticipation of a sale.

Hemmer: Cutting marketing spend to boost short-term EBITDA.

Burkhardt: Not understanding the structural dimensions of the deal before receiving term sheets.

Real estate lease structure

Hirsch cited three lease-related factors that investors scrutinize:

· Consent provisions (landlord approvals that can complicate transactions);

· Exclusivity clauses (or the lack thereof, which can allow a competing brand next door); and

· Tenant improvement allowances—where, as with most things, balance tends to be the right answer.

On handling debt

Hemmer: “The good news is the debt markets are open for fitness in a more favorable way even than 12 or even 24 months ago. … There is a lot of fear around big loans that have been made to software players, but if you are a four-wall-based business with great membership metrics, you are suddenly looking very, very attractive in terms of where you may want to put your money.”

Burkhardt: “Direct lenders have been competing with the more traditional banks and institutional lenders. A lot of them have raised a significant amount of capital that they want to put to work in as many de-risked opportunities as they can. So this space continues to represent an attractive option for them.”

Nagle: “It's not necessarily a binary open or closed market. There are nuances to the amount of credit, pricing, structure, and terms that you'll get.” He adds that if you're going to raise capital, think very long and hard about bringing in somebody who can advise you, and make sure that you don't step in any potholes along the way.

If you had $100 million to invest in fitness?

Hirsch would put it into smaller regional fortress brands with loyal, long-standing followings.

Nagle would target high-growth concepts with significant market potential.

Burkhardt would back category-leading and category-defining brands.

THE 29TH FINANCIAL PANEL: A CHERISHED TRADITION CONTINUES

Renamed the Rick Caro Financial Panel in memory of its founder, the discussion once again proved to be one of the highlights of The HFA Show.

It didn’t take long for the 29th annual Financial Panel at The HFA Show 2026 to prove that the much anticipated event was going to be as lively and informative as the first 28 renditions.

Some had doubts. After Rick Caro, HFA co-founder and HFA Hall of Fame inductee, passed away on August 31, 2025, many worried that the panel wouldn’t continue. It was Caro who had built bridges to Wall Street banks and institutional investors decades ago, elevating the fitness industry’s standing in the eyes of traditional financial centers. To solidify this growing relationship between the finance and fitness industries, Caro had launched the Financial Panel at The HFA Show, assembling a group of financial experts and moderating the discussion.

Caro would have been deeply disappointed if the Financial Panel had been discontinued. The HFA Show organizers, under the direction of outgoing HFA President and CEO Liz Clark, made sure that didn’t happen. On March 17 in San Diego, the event took place with a new moderator, HFA Board Chair Luke Carlson, founder and CEO of Discover Strength.

Before the panel began, Clark took the stage and announced that the event would be renamed the Rick Caro Financial Panel.

Caro

Carlson

Noshirvani

The 29th panel was sponsored by AltaDX, and Al Noshirvani, the company’s co-founder and executive chairman—and a close personal friend of Caro—offered remarks before the panel got underway.

“Rick wasn’t just the founder of the Health & Fitness Association ... he was a mentor,” Noshirvani said. “He was a connector for many of us and a compass for most.”

The experts appearing at the Rick Caro Financial Panel were:

· Adam Hemmer, managing director, TSG Consumer

· Jeremy Hirsch, managing director, Houlihan Lokey

· JuliAnn Burkhardt, managing director, BofA Securities

· Jack Nagle, principal, Princeton Equity Group

The Rick Caro Financial Panel will occur for the 30th time at The HFA Show 2027 in Las Vegas on March 10-12. To sign up for alerts on registration dates, keynotes, and other information, visit here.

Health & Fitness Business is a publication of

Health & Fitness Business (HFB) is the leading health and fitness industry publication. Published monthly by the Health & Fitness Association (HFA) and distributed free to the industry, HFB offers analysis of the opportunities, challenges, issues, and news that impact the industry.

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