Investors
back plan that could see gyms in Tescos

A gym chain hopes to create thousands of jobs after securing a £5m investment.

The Business Growth Fund (BGF) is backing Leeds-based Xercise4Less, which plans to open gyms around Britain.

BGF will also help the company’s founder and managing director Jon Wright, by providing advice in the boardroom.

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Xercise4less, which has 150 staff, was founded as Xercise Health and Fitness Club in 2006.

It rebranded as Xercise4less in January 2009 and now has 11 gyms.

The company’s turnover more than doubled last year to £7.5m, and Xercise4Less plans to open another 100 clubs in the next five years.

Mr Wright believes that around 4,000 jobs could be created as part of the expansion plans.

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Mr Wright said that more “nimble low-cost gyms” were increasingly taking market share from mid-market operators.

He added: “This is an exciting time to be aggressive about our growth. BGF’s funding will give us the financial and operational facilities to continue our expansion at a key time for the market. We look forward to working with the team over the coming years.”

Xercise4Less has agreements signed on a further 14 sites in Yorkshire, the North East and the South West.

The gyms are usually based at large out-of-town sites.

Mr Wright added: “The Xercise4Less concept is growing because we believe that a budget gym shouldn’t offer a budget experience.

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“Cost remains a major issue for many consumers today, but we work hard to ensure our members benefit from many added value services.

“The facilities we offer and the price at which we offer them, continue to attract a large number of new consumers into the market.”

Xercise4Less recently completed a deal that will see the company join forces with retail giant Tesco.

As a result, Xercise4less gym facilities are expected to appear at a number of Tesco stores around the UK.

The first site has already passed the planning stages.

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Xercise4Less has taken on the 31,910 sq ft mezzanine floor of the existing Tesco Durham Road store in Stockton-on-Tees, where residents will soon be able to combine their weekly shop with a workout.

They can fit in a boxercise class after stocking up on baked beans and fresh bread.

Xercise4less at Tesco will offer more than 40 free classes per week for members.

Richard Taylor, a Leeds-based investment director at BGF, said: “We are delighted to be working with Xercise4Less; it is an exciting brand with a very simple but attractive consumer offering.

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“The company has established a unique model in a high growth sector and the management team, under Jon’s guidance, has demonstrated its expertise in rolling out new gyms over the past 18 months and consistently delivering a fantastic customer experience at the same time.”

Earlier this year BGF opened an office in Leeds, to help it find new investment opportunities.

Mr Taylor added: “We are really encouraged by the response that we have had from businesses in Yorkshire and the North West.

“This is our third investment in a local business in two months, making us currently one of the most active investors of long-term growth capital in the region.”

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A team from law firm Squire Sanders, including Richard Hunt and Jitesh Lad, provided legal advice to BGF, while KPMG, provided financial due diligence.

Law firm Walker Morris advised Xercise4less, while financial due diligence was provided by Sentio Corporate Finance.

BGF is an independent company with capital of up to £2.5bn which is backed by five of the UK’s main banking groups – Barclays, HSBC, Lloyds, RBS, and Standard Chartered.

BGF is managed autonomously with an independent management team. BGF will invest between £2m and £10m per business in return for a minority equity stake and a seat on the board for a BGF director.

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Earlier this year, BGF regional director, Andy Gregory said: ““Our own commissioned research indicates that there are in the region of 4,000 British companies with more than 10 employees, and a turnover of between £2.5m and £100m, that are growing at 10 per cent or more year-on-year.

“Around 15 per cent of these businesses are based in the North of England. We need to see these numbers increase.

“We are working hard to inspire more entrepreneurs in this region and look forward to making a real difference to the local community of small and mid-sized companies that need guidance and support, as much as funding, to achieve growth”

In July, BGF invested £10m in printing business The York Mailing Group.

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Last year, the Leeds-based Springfield Healthcare Group secured two investments with a total value of £4.4m from the BGF.

The equity investments were made into two businesses within the Springfield Healthcare Group: Springfield Homecare and Seacroft Care Village.

In 2012, BGF also backed Mexican food chain Barburrito and Northern pub chain Wear Inns.