It's after 1 a.m. local time, yet Michael Sanciprian cannot contain his excitement over the phone as he discusses his World Gym Taiwan clubs. Sanciprian has traveled many miles and sacrificed countless weeks and months away from his wife back in California to focus on the growth of his clubs in Taiwan.

When Sanciprian first arrived in Taiwan in 2007, the country had three World Gym Taiwan clubs. World Gym Taiwan was created by John Caraccio in 2004. Today, Caraccio and Sanciprian are partners and operate 15 World Gym Taiwan clubs. The latest club, which was scheduled to open late last month, is on the sixth floor of Taipei 101, one of the world's tallest buildings.

The two have succeeded, in part, with roll-up-the-sleeves guerilla marketing as well as “gorilla” marketing, relying on the famous World Gym gorilla to attract the Taiwanese to a U.S. brand. Sanciprian says his clubs generated $49 million in 2009. By the end of 2011, he expects revenues to hit $100 million, with an additional 20 locations.

“I do it the old-fashioned way,” Sanciprian says. “I still do marketing stuff that we did in the late 1980s because it's still so new [in Taiwan].”

As the U.S. economy continues to lag, resulting in banks restricting lending to potential operators, and as some big-box club operators continue to struggle to pay the rent on their high-priced leases, international possibilities may be an attractive option for U.S. operators. However, creating successful club operations around the globe is not as simple as creating a club in a veritable fitness oasis. U.S. operators must wade through some difficult terrain before achieving success overseas. Besides economic hurdles, there are language and cultural barriers as well. For example, the 125,000-square-foot Gold's Gym in Jeddah, Saudi Arabia, is built so that men and women exercise separately.

“International business is a code word for paperwork,” says Helen Rockey, chief operating officer for World Gym International, Los Angeles.

The Taiwan clubs represent one example of American operators looking outside U.S. borders for growth and prosperity. Recently, Gold's Gym International, Irving, TX, landed what potentially could be the largest franchise agreement in the company's history. A group based in the United Arab Emirates, Al Ahli Holding Group, agreed to operate 26 new Gold's Gyms in four Arab Gulf countries and has the option to operate an additional 66 clubs in 13 countries.

Last month, Anytime Fitness, Hastings, MN, announced a master franchise agreement for the United Kingdom and Ireland. Anytime Fitness, which has 1,250 clubs open in the United States and about 100 clubs open in Canada, Australia, New Zealand, Mexico and India, could boost its total club count to 2,000 by the end of the year with the recent franchise agreement.

Clubs in countries outside of North America generated revenue three times greater than North American clubs, according to the 2009 International Health, Racquet and Sportsclub Association (IHRSA) Global Report. North American clubs generated $22.7 billion of the$68.1 billion in revenue worldwide. European clubs produced $33.3 billion in revenue, a 16 percent increase from the previous year. (The 2010 IHRSA Global Report is scheduled for release this month.) And there is room for growth. The 2009 IHRSA report says that European club units rose by 8.6 percent, and membership grew by 4.6 percent from the previous year.

“It's not the kind of barren wilderness that a lot of people suspect it is internationally,” says Jim Teatum, president of Global Business Systems, San Diego, which handles international franchising for World Gym.

China remains one of the most attractive opportunities for the club industry. Only 4.5 percent of the 1.3 billion people in mainland China belong to a health club, according to the 2009 IHRSA Global Report. Despite that low penetration rate, mainland China's impact in the industry is beginning to grow, says Mark Mastrov, founder of 24 Hour Fitness and now the co-owner of New Evolution Fitness Co. (NEFC), Lafayette, CA. China's restrictions, however, can make life difficult for club operators, he adds.

“Investing money and bringing money into countries and then pulling money out is probably one of the harder challenges,” Mastrov says. “If you're bringing funds from abroad — no matter what country you're in — into China, there are regulations on how you bring the money in and how you bring the money out. There's a lot of tax work.”

MONEY MATTERS

Few club operators know the potential growth opportunities and the frustrations in the international market quite like Mastrov, who has opened clubs in more than 25 countries. He made California Fitness, a wholly owned subsidiary of 24 Hour Fitness, successful in the Asian markets. California Fitness opened in seven Asian countries, targeting the novice fitness club members, and included the backing of some big-name celebrities, such as movie star Jackie Chan and basketball star Yao Ming.

Mastrov says international markets are interesting but difficult.

“I've seen a lot of people lose their shirts internationally investing,” Mastrov says. “There's thousands of sad stories versus lots of winners. How many Americans have gone abroad and performed well and made money? Not too many in the 30- to 40-year history of our industry.”

Mastrov says the downturn in the economy around the world means that banks overseas are just as cautious as banks in the United States about lending money to potential club operators.

“As the U.S. goes, so does the rest of the world,” Mastrov says. “If it's difficult to borrow money in the U.S., it's not going to be easier to borrow in Australia or Beijing or Hong Kong. It's going to be more difficult.”

Karen Woodard-Chavez, president of consulting company Premium Performance Training in Boulder, CO, and Ixtapa, Mexico, says that credit is typically not as available overseas as it is in the United States.

“When credit is more difficult to acquire and the standards are more stringent, you see a very different type of person starting their own business,” Woodard-Chavez says. “Very often, businesses are not started with any credit at all but instead the individuals own capital, and then credit may be used to grow the business.”

Real-estate costs also vary from country to country. In Asian countries, real-estate values are sky high, especially in Hong Kong, where a lease could cost $300,000 to $400,000 per month, Mastrov says.

Real estate isn't the only area of caution. Some business aspects of the club industry do not translate overseas, says Joel Tallman, senior vice president of franchising and global operations for Gold's Gym International. For example, some countries' banking systems do not support an electronic funds transfer (EFT) method of payment for members, instead operating in a cash environment with paid-in-full memberships.

However, Sanciprian overcame the reliance on the cash model, and now about 95 percent of the World Gym Taiwan clubs' billing is EFT (all through checking accounts — no automated clearing house drafting), with 5 percent pre-pay for those who do not have a credit card.

Once the World Gym Taiwan clubs went to an EFT model, personal trainer revenue increased 600 percent, from $15,000 a month to $90,000 a month, Sanciprian says. He also negotiated a rate for the clubs' rent at about 80 percent less than his competitors and convinced the buildings' landlords to help with the build-out of the clubs.

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