How to Make Your Business Recession-Resistant

Editor’s Note: This story was in progress when Rick Caro, co-founder of HFA and an inductee into the HFA Hall of Fame, passed away unexpectedly on August 31 at the age of 79. (Read more on Caro’s life and his enormous influence on the industry.)

Caro was a frequent contributor to HFB, and his more than 50 years of experience and knowledge of financial matters made him a go-to source for features such as this one.

He will be greatly missed.

As this issue of Health & Fitness Business is published, the US economic picture looks relatively good, but some analysts see mixed signals.

On September 9, the US Labor Department released a report revising its March 2025 estimate of nonfarm payrolls downward by 911,000 jobs. The unemployment rate ticked up one point to 4.3%.

"I think the economy is weakening," Jamie Dimon, CEO of JPMorgan Chase, told CNBC. "Whether it’s on the way to recession or just weakening, I don’t know."

Conditions can change quickly, but that’s nothing new. Periodic recessions are part of the business cycle, unpleasant as they are.

"No one ever looks forward to dealing with recessions," says Rick Caro, president of Management Vision, a New York-based industry consultancy. "Given the unpredictability of the economy, international politics, tariffs, etc., a recession could be in the headlights downstream."

While recessions are often described as “two consecutive quarters of significant negative GDP growth,” the National Bureau of Economic Research (NBER) also examines other indicators, including real income, employment, industrial production, and wholesale-retail sales. Downturns can be marked by job losses, declining income, and decreased consumer and business spending.

Every recession has its own distinct quality, but common triggers include stock market or banking crises, a sharp increase in the price of oil and other market disruptions, and contradictory government actions that slow economic growth. Downturns can be local or national.

Whatever the root causes, a recession can have a significant impact on a business’s primary or ancillary revenue streams. To avoid the worst outcomes, preparation is the key. Undergo a financial health check-up on your business and make any needed changes right now. Studios and smaller individual clubs and chains could be especially vulnerable should things go south.

Lessons From the Great Recession

Since World War II, US recessions have lasted an average of 10 to 11 months. The Great Recession officially lasted from December 2007 to 2009, according to the NBER. Its primary cause was the collapse of the housing market, which led to a financial crisis marked by widespread mortgage defaults and foreclosures. GDP declined, jobs were lost, and median family income dropped significantly.

During the Great Recession, the US unemployment rate peaked at 10%, returning to pre-recession levels several years later. Median household income finally recovered in 2016. After setbacks, the S&P 500 took six years to rebound. Although the effects were felt worldwide, conditions differed from country to country.

How did club operators—and the US industry—fare? Better than some expected, according to Caro.

“The industry did not decrease in size,” he points out. “Rather, its growth curve flattened.” The total number of clubs in the US remained the same in 2008 and 2009. Membership growth also flattened. However, it came back a year later.

“Tough times are when good companies thrive,” states Steven Schwartz, CEO of Midtown Athletic Clubs, a Chicago-based company that has experienced multiple shifts in the economy since its founding in 1970. “They have these basic features in place right before a recession hits—a sound concept, good people, a strong culture, and a strong balance sheet, meaning low leverage and cash in the bank.”

Lise Kuecker, founder and CEO of Studio Grow, remembers signing her first lease in 2007 and then realizing the economy was in a spiraling downturn. “Interest rates fluctuated to a degree that no one could have imagined, and financial institutions collapsed.”

Kuecker says that weathering a deep downturn, especially as a startup, makes you stronger and more likely to survive challenges in the future.

“When you open and build through a recession, you have a different type of grit and drive to succeed,” she says. “It forces you to be excellent in all things.”

Today, Kuecker’s consulting firm has clients in 48 countries, and she has seen economic difficulties in a number of those markets.

“If I start seeing major layoffs, a change in consumer spending or confidence figures, I make sure I’m running the tightest ship possible,” she says.

Recession Resistance

Schwartz remembers worrying about how his business would fare during the 2008 financial crisis, but his members stayed, and sales continued.

“We raised prices and did not have a problem,” he says. In fact, same-store revenues increased 4.5%, and EBITA increased 6.2% with similar results in 2009, he adds.

“It was a really dark season, and yet many of us who opened at the same time did so profitably,” Kuecker recalls.

All of this begs the question: Is the industry recession-proof?

“I would never say that,” Schwartz insists, noting that Caro often called the industry “recession-resistant.”

Schwartz adds: “A club that provides physical, emotional, and social benefits may become even more important to its members in tough economic times.”

The real effect depends on a club or studio’s price point and the type of customer, Caro says. “If a customer loses his job or is furloughed for a time, their club membership may be the last thing they cancel.

But it could be a consideration,” Caro says.

Midtown serves the luxury market, which tends to suffer less during tough times, Schwartz says.

Still, he doesn’t take that for granted, noting, “The market for clubs is different this time around, as there are many more good low-price options.”

An Opportunity to Optimize

Economic downturns have been happening for millennia. Being ready to face tough times is a best practice.

“We can become complacent,” Kuecker says. “This is your chance to play at a higher level and develop something that’s even better than it was before.”