The fitness industry has been facing significant turmoil this year, with a notable increase in negative news. Major fitness chains like Zhenwei and Weiershi have abruptly closed their doors, disappearing with clients' funds. Meanwhile, the high-end fitness chain Space announced at the end of April the closure of its nationwide locations, only to reveal in July that some of these sites may cautiously resume operations. The yoga brand Kamo Yoga, which had previously attracted attention for securing venture capital funding, has also collapsed, and Keep has quietly downsized its physical gym operations.The industry's downturn has not been a sudden event. According to the "2023 China Fitness Industry Data Report" released by SanTiYunDong in March 2024, there are about 78,000 fitness establishments across the country, including gyms and studios. The closure rate for these facilities exceeded 13% over the past year, indicating a significant contraction in the market.Amidst this bleak market atmosphere, Leke Sports stands out remarkably. With over 1,500 gyms already opened in 27 cities, Leke has also announced an ambitious plan to reach 10,000 stores in five years.According to Xia Dong, co-founder and co-CEO of Leke Sports, setting a goal of opening 10,000 stores has become a prevalent strategy among businesses today. Over the years, many similar brands have successfully breached the 10,000-store threshold. The primary factors enabling this expansion include the high maturity of digitalization and payment systems within the fitness industry, which is fundamentally a service sector. Xia asserted that only with a high density of locations can brands tailor their services to match users' needs regarding time, classes, and locations.Founded in 2015, Leke initially focused on creating an innovative product concept that included "24-hour self-service" for users and a "monthly payment model" for memberships. Leke's gyms typically cover about 300 square meters and are often situated in office buildings, communities, or high-rise shopping centers, opting not to include showers, thus representing a more minimalist fitness space. These characteristics drew on the shared economy trend prevalent among entrepreneurs in the investment community around 2015. Although many startups in various traditional industries failed to thrive, Leke appears to be one of the few that has survived and maintained consistency in its operational model from the outset.In seeking to attain economies of scale, Leke positioned itself as a 'central platform' controlling the entire fitness service supply chain. This includes acquiring customers through a client-facing app, developing standardized hardware and classes to lower entry barriers for newcomers, expanding its store footprint through more than 600 franchisees (accounting for nearly 80% of its stores), and gradually gathering over 10,000 active trainers through external recruitment, graduation programs, and partnerships with sports colleges. Leke's revenue mainly comes from initial franchise fees as well as membership fees and private training commissions generated during everyday operations. Xia indicated that Leke's Gross Merchandise Volume (GMV) has consistently grown by 40-50% annually over recent years, providing investors with a sense of security amid rumors about impending IPO conditions.To further convince investors, Leke recounts its narrative of supporting the infrastructure of the industry through its platform. As a central platform, Leke’s value lies in managing its upstream (trainers and franchisees) and downstream (clients) relationships through digitalisation and systematic approaches, coordinating operations between different stores and monitoring operational risks, enabling continual replication of its business model into new cities’ fitness markets.For college student Li Jing, summer workouts alongside her sister led her to sign up for a personal training session at a nearby Leke gym. It was her first experience in a gym, and she chose Leke due to its proximity and the numerous locations in her area. Similarly, Qian Yuhang, a freelancer from Hangzhou, frequents a Leke outlet just a five-minute drive away, not aspiring to become a fitness expert, but rather seeking a disciplined approach to maintaining his health. He appreciates Leke’s monthly payment and multi-site membership options, allowing him to find a convenient location wherever his travel may take him.Such individuals form the core of Leke's membership base. According to official reports, amateur users make up approximately 40% of Leke’s membership. A Leke franchisee, Li Lei, who runs two stores in a northern city, noted that around one-third of his active users each month are new entrants, the majority of whom are visiting a gym for the first time.The monthly fee of around 200 yuan effectively lowers the decision-making cost for first-time users. Upon scanning the code to access the self-service gym, newcomers quickly notice Leke's many user-experience-oriented design details aiming to mitigate the inherently daunting aspects of gym workouts. For instance, one Leke trainer shared that the gym employs lighter dumbbells and kettlebells than found in traditional gyms to ease new users into their routines, coupled with strict regulations discouraging trainers from offering unsolicited advice to self-directed patrons, thereby minimizing potential discomfort.Besides the equipment and overall hygiene, the quality of trainers plays a crucial role in customer satisfaction. A gym studio owner in Guangzhou lamented that the investment in skilled trainers often exceeds rental costs, as professional and high-quality instructors nurture a more stable client base.Given the high density of locations and broad coverage, Leke’s business strategy requires large-scale training for trainers. In February 2021, Leke launched a training program aimed at standardizing fitness coach education.In March this year, Zhang Quan left a finance job and contemplated starting as a part-time trainer at Leke while looking for a career transition. Having previously worked out with classmates, Zhang earned his fitness experience, by spending over 7,000 yuan to enroll in Leke's trainer certification course. He underwent training at Leke's Beijing training center twice a week for six weeks before passing examinations and receiving both the Leke “Personal Trainer” certificate and the professional coach qualification from the China Bodybuilding Association. The former serves as a prerequisite for Leke's coach system, while the latter allows him to apply to work at other gyms.During the six-week training program, Zhang learned about various topics, including muscle anatomy, training methods for different body parts, user training plan creation, and CPR. He noted that of the 40-plus students who enrolled alongside him, only five completed the course and passed the initial assessment. He reasoned that the evaluation requirements, particularly concerning trainers' foundational fitness levels and the precision of their movements, posed a challenging threshold.Zhang shared his training success on social media but faced critiques asserting that Leke's coach certification was inadequate and resembled a "junior high graduate teaching first graders" scenario. Zhang defended the program, explaining, "A junior high graduate can teach first grade. Most students are novices, aiming not to become bodybuilders but to learn the basics and prevent injuries."Currently, all coaches at Leke's FEELINGME personal training centers are full-time employees, while some trainers under the main Leke brand work part-time. The ratio of part-time trainers for group classes is higher. With many traditional gyms shuttering recently, a surplus of trainers is expected in the job market, hence Leke is gradually shifting from part-time to full-time requirements for new trainers. Zhang ultimately decided against pursuing a role at Leke due to his schedule.Standard gym trainers often bear sales responsibilities, with commissions accounting for nearly two-thirds of their income. However, "selling" is expressly forbidden in Leke’s trainer manual, and the income for part-time trainers revolves solely around teaching fees. Leke maintains a higher commission rate for trainers than industry averages, which typically range from 20% to 40%—Leke trainers take a minimum of 50%, which can increase with upgraded star ratings, with top-rated trainers potentially earning up to 68%.Private training sessions at Leke range from 220 to 300 yuan, while traditional gyms often charge between 300 and 500 yuan. Ultimately, a trainer's income heavily depends on the frequency of their sessions. Leke needs a steady stream of private clients to retain its trainers.Creating engaging group classes is essential for attracting novice gym-goers. Group workouts generally feature lower difficulty levels, making 45-minute sessions less daunting for participants. These classes can effectively bridge a novice user into a deeper commitment to fitness, as establishing a habit and enjoying results often lead to increased demand for specialized training.Admittance criteria for group class instructors are less stringent than for personal trainers. Zhang Qiao, who works in real estate, began part-time group class training this year at Leke. Having attended many dance classes and group workouts previously, she completed a two-day training course in Leke's self-developed group program "Double Dance Trendy Dance" and successfully passed the interview to start teaching as a one-star instructor, earning 100 yuan per class.Every Friday, Leke releases a week-ahead group class schedule and pays all instructors their fees by the 10th of each month. In a city like Shanghai, each district has a designated operational staff member responsible for coordinating class offerings across stores. In smaller cities, a single city might form a complete "city platform".As a new group instructor, Zhang monitors local store openings to apply for class opportunities weekly through the instructor app. The platform and store managers negotiate placements to finalize schedules. Zhang appreciates how the platform protects instructors from partial favoritism, assuring no preferential treatment given to trainers whom store managers favor. By effectively utilizing her free time after work, Zhang currently can teach up to 7 to 8 classes weekly, while full-time instructors occasionally manage up to 6 or 7 classes per day.In just the past year, Beijing alone saw the addition of over 50 Leke-branded stores, putting the city at over 200 gyms, a first in the nation. Including the FEELINGME personal training facilities, the overall count reached 264 stores. A potential franchisee in Beijing lamented that while they apply for a store, they couldn't choose the specific location and must wait for notifications.Franchise applicants receive detailed cost estimations for a new store, with initial investments estimated at around 1.2 million to 1.5 million yuan. This estimate includes a franchise fee, security deposit, equipment costs, renovation expense, and the first month's rent typically ranging from 12,000 to 24,000 yuan. Leke confidently assures potential franchisees that they can recoup their investment within two years, stating that 400 or more members usually ensures profitability.Li Lei invested 2.8 million yuan to open two Leke franchise locations in 2022 and is nearing break-even—an outcome consistent with Leke's official forecasts. Both of his facilities boast an average of 500 to 600 members, and with membership fees at approximately 199 yuan per month, each site generates about 100,000 yuan monthly in member revenue. Additionally, private sessions add another 120,000 yuan with 500 to 600 sessions booked monthly. After accounting for platform commissions, trainer fees, manager salaries, and rent, his gyms net around 50,000 yuan monthly. Li Lei hopes to open a FEELINGME personal training center soon, having found success with his initial locations due to their prime positioning in densely populated areas.Under Leke’s early model, Li is categorized as a "career partner," fully responsible for managing daily operations, including hiring staff and strategizing marketing campaigns. Leke also offered a "financial partner" concept, where operational responsibilities could be handled by the headquarters. However, in practice, career partners usually attain more significant revenue through deeper personal investment in operations, leading Leke to de-emphasize the financial partner model.As the number of stores increases, franchisees worry about competition between locations siphoning off potential clients. Leke's dual-centered platform strategy allows for controlled management over store placement and member-trainer coordination. National average membership per store hovers around 600, reflecting the company’s effective handling of its operational data. In June, membership visits recorded a year-on-year increase of 27%.An insider noted that Leke's initial strategy encompassed a 3-kilometer scope for acquiring customers per store, but now this range has tightened to 500 to 800 meters, as the penetration of fitness culture grows among consumers. As the market expands, more individuals engage in fitness, subsequently increasing the number of potential members within existing neighborhoods.Leke recently announced improvements to class scheduling due to peak periods where wait times reached as high as 45%. Many committed users now routinely set reminders to check the Leke app to secure spots in highly anticipated new classes.In early 2023, Leke modified group classes, eliminating the "9.9 yuan premium courses" in certain cities and shortening class durations from one hour to 45 minutes to increase availability based on demand. However, seasoned gym users have expressed that 45 minutes is insufficient.Some locations have begun to offer an extra group class at 8:30 a.m. once weekly, but determining the optimal number of classes each gym should hold involves balancing customer flow and operational costs.With the growth of private memberships, Leke faces the pressing challenge of enhancing overall trainer professionalism. A fitness enthusiast from Shanghai remarked that while Leke’s private coaching sessions are more comprehensive and systematic, the training intensity offered did not meet their advanced expectations. Furthermore, they cited crowding within the gym space and ambiguous delineation of equipment zones made their experience less favorable, leading them to forgo purchasing personal training sessions.Last year, following the announcement of their "100 Cities, 10,000 Stores" expansion plan, Leke unveiled two new sub-brands: the yoga studio YOGAPOD and the fitness brand Lightning Panda, targeted at emerging markets. The YOGAPOD initiative is currently operating in test mode in Hangzhou and Shenzhen with monthly memberships priced at 399 yuan, and private training sessions costing 450 yuan each, aligning with market standards for similar yoga studios. Each YOGAPOD location schedules over ten group classes a day with limited capacity, seeing minimal wait times, suggesting a slower expansion phase for this segment.Lightning Panda, which opened its first store in Shaoxing in 2022, aims to replicate the Leke model in smaller formats. Summer emphasized that Lightning Panda will utilize a "city partner" recruitment approach, adjusting flexibly according to local market needs and pricing strategies.An investor familiar with Leke's journey indicated that variations in user demographics across different regions need careful consideration. For instance, in second-tier cities, a considerable older demographic comes into play during weekdays, as they often prefer a more spacious environment with shower amenities. Accordingly, Leke has integrated showers into its Lightning Panda facilities.According to Xia, fitness as a lifestyle has no geographical limitations, but he recognizes that the assimilation of this lifestyle requires time, with market capacity varying across cities. He indicated that penetration rates remain low in certain markets and that training quality requires time to develop, with a stable cash flow needed to facilitate expansion.“Our growth rate needs to keep pace with the industry's development. Otherwise, we risk losing momentum,” Xia stated. In April this year, Leke announced the integration of franchise opportunities for personal training facilities. After attempting significant transformations in large gyms in 2019, which faced considerable hurdles due to the pandemic, Leke is now focusing on resizing existing smaller studios and renewing their operational frameworks. Having honed its platform support for nearly a decade, Leke believes that it now has the expertise to undertake such transformations effectively.