When the Olympic Games open in Greece this summer, 24 Hour Fitness Worldwide will play a behind-the-scenes role.
The California-based company and U.S. Olympic Team sponsor not only revamped the workout facility at the U.S. Olympic Training Center in Colorado Springs, CO, but it is also designing, outfitting and staffing High Performance Centers in Athens where U.S. team members can prepare for competition using cutting-edge athletic training equipment.
“The USOC is all about winning medals, and we're all about helping them do that,” says Mark S. Mastrov, chairman and CEO of 24 Hour Fitness Worldwide.
Mastrov knows something about putting together a winning team. His 24 Hour Fitness team has parlayed a $15,000 loan from his grandmother into the nation's largest, privately owned and operated fitness center chain. In 21 years, Mastrov has gone from one gym in San Ramon, CA, to more than 300 clubs in 16 states and seven countries, serving more than three million members. 24 Hour Fitness employs 24,000 full and part-time people with worldwide sales in excess of $1 billion in 2002.
“We focus on winning, having fun and making a difference in the communities we serve,” Mastrov says.
BUILDING FROM THE GROUND UP
Mastrov didn't have a grand plan to build a fitness empire when he started in 1983. The former natural foods salesman almost didn't get into the fitness business. Mastrov visited a small gym in San Ramon that had the same Nautilus machines he used to rehab a college knee injury. The club's owner offered Mastrov a job teaching the staff how to use the machines. Mastrov declined before deciding to trade four hours a week of work for a free membership.
When the club was sold, the owner asked Mastrov if he wanted to buy in. He did and the rest, as they say, is history.
“I fell into the business and became passionate about it. Our approach was, if you wanted to get involved in fitness, we'd be happy to help you.”
Mastrov and his partner had complementary skills. His partner was a software programmer, while Mastrov was into training. The two focused on writing a front-end system for the fitness industry and sold it to neighboring clubs. Mastrov credits his software-writing partner for teaching him the business skills necessary to successfully run a club.
“It taught me how to manage the business and make it more efficient,” he says. “It's a side of the business a lot of people don't think about. One of the big Achilles heels for most club owners is the back office. That side of the house never gets enough credit for making the club run and making the business run.”
A year later, Leonard Schlemm, a Harvard MBA in finance, came on as the third partner, but the trio soon split with Mastrov and Schlemm taking the club business and Mastrov's original partner claiming the software side.
The goal for the fitness guys was local expansion. “Our goal was to have 10 clubs in Northern California,” Mastrov says. Their dreams weren't big, in part, because neither Mastrov nor Schlemm had any background in the industry. It wasn't until Mastrov attended a Club Industry convention in the mid-1980s that ideas began taking shape. For the first time, Mastrov was meeting peers, making connections,learning about the industry and thinking outside the box.
While his club was financially healthy, Mastrov's expansion dreams stalled because banks saw health clubs as a risky loan. To build capital, Mastrov had to be innovative. In 1983, he was one of the first club owners to use electronic fund transfers. He also honed the company's business model, keeping it debt free.
The company expanded through the 1980s, and by 1994 had 32 fitness centers in Northern California. With expansion came new employees, each bringing varied experiences to the company. Mastrov credits those people, including David Atencio (regional vice president, Central Midwest division) and Brian Bouma (president) with helping to create a company culture.
“A big part of the culture was born from our people,” he says. “When you look at the folks and the value they brought, the passion they brought, we had a good, eclectic group.”
That same year, Mastrov went to McCown DeLeeuw & Co., a private equity investment company, to raise $30 million. That led to 24 Hour Fitness' 1995 acquisition of 68 Ray Wilson Family Fitness Center clubs in Southern California. The purchase brought with it a savvy management team, including Wilson.
The infusion of money and talent led to the purchase of several smaller chains in the Southwest and Pacific Northwest and allowed Mastrov to execute his plan — since he had one now. In the early 1990s, he recognized that consumers wanted fitness to be convenient. His idea was to build a hub-and-spoke network of clubs clustered in markets. Each center would focus on a different price point, making sure there was something for everyone. The swanky, higher-end clubs would have swimming pools and basketball courts while the basic model would be grunt and sweat gyms loaded with weights and machines.
“We tiered it in different levels,” Mastrov says. We found that we don't have to put a pool in (every club) to be successful.”
Mastrov's management team began exploring opportunities in Europe and Asia. By the late 1990s, the company was acquiring and building clubs in Sweden, Germany, Spain, Denmark and Norway. Meanwhile, Wilson, who left the company, was establishing a chain of fitness centers in Asia. In 2000, he sold the chain to 24 Hour Fitness. The company continues to operate clubs in five Asian countries.
By late 2000 the money markets were slowing down, and the company's board decided to pull out of Europe.
“In light of the changes in the world, it turned out to be a brilliant decision by the board of directors,” Mastrov says.
But Mastrov was still developing and executing ideas. An avid traveler, he thought about putting fitness centers inside airports. In 2000, 24 Hour Fitness opened a 14,000-square-foot Fitness on the Fly center at McCarran Intnl. Airport in Las Vegas.
About the same time, Mastrov entered talks with Magic Johnson about opening inner city sports clubs. In 2001, the first of six Magic Johnson Sport Clubs opened in Richmond, CA. Then, tennis great and Olympic gold medal winner Andre Agassi contacted Mastrov about opening a fitness club in Las Vegas. In February 2004, the company opened the 65,000-square-foot 24 Hour Fitness Agassi Super Sport Club, the first of four such clubs.
While Mastrov wasn't seeking celebrity partners, he is happy with the arrangement. In July, the company announced another celebrity partnership — this time for a club in Miami with basketball star Shaquille O'Neal.
JOINING THE OLYMPIC TEAM
24 Hour Fitness' participation with the U.S. Olympic team came only after Mastrov's hesitation about the feasibility of being a sponsor. However, after working out an agreeable deal, Mastrov has committed to be a sponsor for the next three Olympics.
As part of its sponsorship, 24 Hour Fitness launched its Commitment to Athletes Support Program for U.S. Olympic hopefuls. The program includes job opportunities with flexible hours and employee benefits, free and discounted memberships, and an opportunity to become a fully certified personal trainer.
The Olympics hasn't distracted Mastrov or 24 Hour Fitness from its goal of expanding the company at 10 percent unit growth per year. But Mastrov is going to do it his way.
“The philosophy has been that in the markets we enter, we want to be the number one or number two player,” he says. “We don't have to be in any particular market. We have a nice, steady business plan.”
Nor will he compromise the company's adherence to its “customer-first” mantra. 24 Hour Fitness has no contract option. Every member is on a month-to-month program. Mastrov likes it that way because it makes the company stay service-oriented.
“It boils down to the performance within the facility,” he says. “Five years from today we will continue to chug along at 10 percent unit growth per year and getting better at what we do. We are focusing on creating a healthy way of life in our communities.”