Q: Tell me a little bit about your experience in the industry and how you came to Club One.
A: Very good. Well, I think what’s important is that I’m not from the industry. I have over 20-plus years in retail, primarily in the world of food service. [I have] many years at Taco Bell, and then I built a company called Noah’s Bagels that was sold in the mid-1990s and spent five years at Jamba Juice building those organizations, each of those growing 50 to 100 sites plus a year. I moved over to Club One in 2002 because I saw a couple things. No. 1, I’ve always been an exerciser and loved it, and I thought if this is an area in which I like to play, maybe it would be fun to work in it as well. Secondarily, I think this business is much like the retail business I’ve come from. It’s about people and programs and service. And what I learned primarily from Noah’s and Jamba, which both have higher purposes, is that when you can rally people around a higher purpose, the results and the productivity and the alignment are so much greater. I vowed back in the early 1990s after understanding how when people have a higher purpose how much harder they work—sometimes in a volunteer organization for nothing, but they work harder than in their paying job—that I would only work going forward in an organization that had that. I think Club One brings that to the Bay Area and to our management accounts that we serve and our community centers.
Q: You’ve been with Club One for six years. What have you brought to the company, which was founded by Jill and John Kinney?
A: Jill and John Kinney did start Club One in 1991, and as the entrepreneurial owners, they set the foundation for what I’ve been able to accomplish over the past five years. From 1991 through the early 2000s, they were acquiring clubs and trying to build the Club One and the Frog’s brand. When I came on board, we began to separate the two brands and strengthen our vision and purpose, bring the right players on the bus, so to speak, in terms of leadership at the club level. Bill McBride, who is an industry veteran, [offers] financial leadership [as] our CFO and then in each of our department heads strengthening the team that way.
We also concluded that the Frog’s brand and the Club One brand were not the same. Thus, rather than trying to align them, we separated them. Frog’s was a little more hip and edgier than Club One, which has much more of a sophisticated approach. We’ve taken them in their own directions. We’ve stabilized and brought consistency of all the back office systems throughout all the clubs. We’ve put a greater emphasis going forward on our management contracts. And we chose that we could bring strength from being in the middle. We’ll do that by differentiating ourselves through people, programs and results for members as the beginning of our points of differentiation.
Q: Most of your Club One clubs are in Northern California and the Frog’s clubs are in Southern California. Do you plan to keep the clubs separated geographically or will there be an overlap since they are different brands?
A: You are correct in that our Frog’s brand is in San Diego, and we have one Frog’s in Long Beach (CA), and all of our Club Ones are in Northern California. They are separate brands, and all the behind-the-scenes systems are the same. Part of our philosophy is each individual unit should reflect the community it serves. Even within Frog’s, what happens at Solana Beach (CA), which is obviously along the beach, is very different than our inland club in San Diego, and clearly Club One in downtown San Francisco is very different than a club in the suburbs of San Jose (CA). While all the behind-the-scenes systems are the same, everything that is reflected to the consumer is very different because of the communities we serve.
Q: Sounds like you really know the market you are serving, and your clubs are reflecting that. Do you find that enough clubs are doing that? That they are aware enough of their demographics and have tailored their clubs to those demographics, particularly now with greater competition?
A: Well, I think that’s going to be the key for a club company our size or even an entrepreneur within a community is to leverage and understand what’s going on in their community and that a big box—and some of the other boxes that are out there—can certainly find the real estate and build the building, but the ability to connect to the community and help the members achieve the results they are looking for, I think sometimes falls short in some of the larger boxes. We are a mid-sized company, I would say. We are certainly not as big as some of the large ones, and we are certainly not a one- or two-club company, but I think the strength lies in being able to position yourself to serve that community. Some of the very best and most successful clubs—if you look across the country—are entrepreneurs who are really engrained and connected to the community they serve.
Q: What sort of new programming do you have planned or have implemented already this year at Club One and Frog’s?
A: The first piece that I’d like everyone to understand is that our goal is to separate from the industry much like Hawaii is separate from the mainland. It’s all part of the United States, and so we want to be part of the industry, but we want to create this blue ocean of separation in the book, and that’s where we are going. And we are going to do that through innovation and integrity—integrity meaning results for our members and innovation [meaning] programs that add value. So let me go through a whole litany of programs that we have started to bring to our members. Some of them will take time to develop and change lives, but we are convinced they will do so.
We are, as I think everyone will learn more about at IHRSA [the International Health, Racquet and Sportsclub Association conference], the very first and only club in the world right now to bring Kranking, which is upper-body cycling, into our clubs both on the strength floor and on the cardio floor and in our group fitness classes. We have partnered with Johnny G, who created Spinning, as everyone knows, to be his test. He will be bringing this to IHRSA later this year. Johnny chose to work with us because he believes we are an innovation leader.
We have brought MYE downloads into the clubs, in a half dozen or so of those clubs. [We are] testing the ability for members to purchase the MP3 and then download for a very small charge unlimited exercise programs that they can use when they are on any piece of cardio equipment at home, in the club or when they travel. And it’s an alternative to “I want to be distracted with TV or music and actually have a coach in my head, and basically I have a group exercise class going whenever I’d like it.” And that’s off to a good start. A challenge that’s always there is trial for our members.
As part of our trying to create blue oceans of separation for our members and provide value for our members, we have launched a series of programs that we are calling Well Power, and we will continue to build on those. The vision behind that is we will add value to our members while they are at the club, and just as importantly, try and influence their lives outside the club through programs that can make a difference. We have three right now and more are in development. The first one is our Activity Tracker, which merely allows our members to go into a portal after they sign up—and it’s only for members—to see their usage of the club and compare their usage to other members across the Club One and Frog’s Fitness family. So they can see that, they can see their usage, they can see their momentum for the month, etc., and we are building more and more stats on that.
Q: Is that available to any member or just personal training clients?
A: No. All 50,000-plus members have access to the system. As long as they provide us the e-mail address—which is a our way to validate that they are a member of Club One—then they have access to all these programs and more that are coming. So the first one is a very basic tracker that gives them information about their usage and how they compare to others who are members of Club One or Frog’s.
The second [program] is called Couplers. This one is magical. This one has already changed the lives of our employees—by the way, we rolled these programs to our employees as well as our members. Couplers marries an individual and their family background (because all that impacts their health and wellness) to any kind of condition they have. There are management couplers, and there are diagnostic couplers that basically can help our employees and help our members improve their health and improve their ability when they interact with their physicians, since you generally have seven to 10 minutes with your doctor. For instance, what are the questions parents should be asking their physician when they take their child in for their well-child visits from the age of six weeks to 18 years? I know I have grown kids, and I don’t think we did as good a job as we could do now with this tool. I now have elderly parents, and my father is struggling with movement. There are things you can do to the house to make it safer for him. How do you learn about that? We had a member who was fighting anemia, and she couldn’t figure out why. She took our Coupler on anemia and solved her problem and saved thousands of dollars going forward because she’s already spent thousands of dollars trying to resolve that.
So, we are bringing that free to our members. There are over 120 couplers that again marry a condition that they or any member of their family may be facing—because everyone in their family can use this program. And so this will be a huge value addition for our members and for our employees, helping them to live healthier lives, helping them to make better health care decisions. In the haze of health care or the muck of medical care, it’s really going to be a huge improvement for them.
Q: Do you partner with doctors on that or coordinate with them on this once they find out what their condition is?
A: Here’s the beautiful piece about this tool: Doctors love it once they understand what it is because obviously the questions are tailored to how you answered the previous question. Basically, doctors are human, and computers and medical decision-making is part logic and a little bit of art, correct? And so what happens is this program is tied into all the medical journals and guides that doctors use to study to pass their exam, and it quotes it. So if I’m looking at, I have pain in my knee and I’m doing the knee pain Coupler, it will highlight the page and the paragraph and the reference book that doctors use that narrows down to what likely could be the cause of my concern. And then, of course, that leaves the doctor to making choices about whether or not further X-rays need to be taken, etc. It’s HIPAA compliant. The organization—meaning we also sell it to corporations—never sees it. In the case of members, it resides on their desktop, on their computer at home. They can print it out and bring it to their office visit or show the doctor where the logic flowed to “this is the most likely outcome.” And it provides risk factors. So it’ll say something like, “Given the questions you’ve answered, you have three out of nine indications that it’s a meniscus tear, in the case of a knee,” or “You have zero out of 11” or “You have seven out of nine,” which begins to then narrow the focus for the doctor, which you can imagine then begins to reduce your health care costs in some of the tests that have to take place.
It’s a brilliant, beautiful program, and we’re so thrilled to offer it to our members—free. It’s a part of their membership and another advantage to being a part of Club One.
Q: Is it free for both corporate and club members?
A: No, our corporate members have to purchase this if they are interested in it. For our 50,000-plus club members, it’s part of the membership.
Our third program is called Be Well. And that’s also complimentary to our members. That program is a behavior-based change program. First off, it allows them to take a mini health-risk profile, so they can see where they are in bounds and out of bounds on all aspects of their health. It then provides the tools, primarily focused against exercise and nutrition, including having a complete calorie counter so that you can punch in how many calories are in a Starbucks latte, or if I have a salad, here is my portion size. It gives them all that information. It has exercise profiles. It has a meal planner that if you choose to do so, you can then print off into a shopping list that actually tells you based upon what you’ve chosen to eat, here’s what you need to purchase at the grocery store. Then it has all sorts of guides and tips and tools for our members. That was also launched in the November/December time frame.
And then we have many more programs coming down the road. Our philosophy is that essentially one a quarter or so. We will continue to build and add value for our members with these programs that can impact them when they are outside the clubs, as well as great programs inside the club.
Q: Sounds like you’ve really looked at problem areas people are having. A lot of clubs don’t do a lot with weight-loss programs. These programs seem to make it simple for members.
A: I think that’s the advantage we have of having multiple points of access for people to live healthier lives—and I’m speaking about our corporate, what we call our work-site health and fitness locations. In those environments, that is the No. 1 issue that organizations are facing: how do we help our people live healthier lives so they are more productive, and [how do we] reduce the health care costs that organizations are facing? And when you boil it all down, there have been so many wellness programs in organizations today, and yet we all know that obesity continues to increase health care costs and outpace inflation. If you will allow me to be a skeptic for a second, everything we’ve done is not working well at all because at the core of any of those programs has to be getting people to move more and eat better. So we’ve been on the hunt in our work-site health and fitness to find those kinds of programs to help our partners reduce their health care costs and improve the productivity of their employees. Thus, these programs have great relevance for our corporate partners. As we looked at them, we said, “Wow. They have just as much relevance for our members.” This is a way, again back to our vision to create blue oceans of separation from others in the industry, part of that process. So it’s a very well thought out strategy and then implementation plan to deliver it.
Q: So you originally rolled these out to corporate clients, and then you decided to roll out to all members?
A: That is correct, and then there’s one other piece that I’ll be a little opaque on, but we are really excited about this because we are about two or three months away. But we’ve been working with a psychologist who loves exercise and understands the human mind. This person has been able to take some standardized tests that we are all familiar with and take out the psychological jargon and create words that have no label to them. Again, I’m being opaque for a reason. But just imagine that a new member can come in, and we begin to understand who they are, their likes and their dislikes totally as it relates to exercise by asking some psychologically based questions. That has proven research behind it, so it’s research that has been going on for hundreds of years. She has been able to apply it to the world of exercise. So our membership reps—and, more importantly, our trainers and everyone in the club—begin to understand in a language that has no label to it that has any relevance, that an individual is this label or this other label—again, I’m being opaque for a reason—and now I can begin to understand how to communicate with this person in the words and language that is meaningful to them.
Q: So it’s a matter of the words they use and your representatives understanding what that language means to them, but also a matter of the language that your trainers use with the client?
A: Yes. For instance, I am this certain person, and if a trainer used language with me that was very structured and critical in terms of how I did an exercise, it would drive me nuts. We have trainers in this industry that are like that, that are very focused on the perfect movement. There are people who love that, and there are people who reject that. So, sure, they can find that out over time, but in the case of people who aren’t inclined to exercise regularly, all it takes is one of those experiences, and they are out of the club so fast it’s not funny. We’ve been able to marry the psychological profile then with a tool that enables the member to review what is played back to them and agree or disagree, and along with our welcome tracks, [we can] begin to move them on to a profile and a path that has a higher likelihood of success than if we leave it up to the human mind and dimension by itself.
Q: Would that help you to assign the right trainer to that person based on that trainer’s style and that person’s style, or are you not taking it to that level?
A: We absolutely are. But instead of it being subjective and it usually at the insight and intuition of either your fitness manager or a membership rep, we have a lot more fact-based information to make improved decisions. All of this, to go back to result for the member’s journey to those results that is more fun and meaningful than [if] left to a random walk.
Q: When will you begin implementing that program?
A: I would say in the next 90 days. We are finalizing all the forms and questions in the process, and then we are going to test it in a couple of sites to figure out the best way to roll it on its way to all the members.
Q: As far as these programs you’ve already implemented, what are your goals?
A: In the case of our wellness programs, when you study the market with respect to Internet programs and how many people we’ll put through and enroll, we’ve already exceeded the norm. Over 10 percent of the members have enrolled in our first month. That may seem low, but historically, if you send information out to someone and ask them to enroll, you get somewhere between 3 and 8 percent. So we are on our way, and we have a marketing plan that begins to prompt people with Couplers that may be relevant to them or messages and e-mail campaigns that help them to go back to Be Well and check this out. We believe this is a yearlong process to get more and more members on board. We hope that over time, we’ll get over half of our members who we have their e-mail addresses—and we have the large majority of those—to consider these programs when they are relevant to them in their lives. And as we roll out more and more, obviously every new member once we get to this profiling piece will have access to it. Again, our goal is to move to where we can help people who have failed when they have enrolled at other clubs for whatever reason perhaps be more successful with Club One because of our ability to connect with them and help them find their joy. So all of this is really against driving retention, which we’ve had great success with, and then we will use our Kranking and other programs to drive revenue inside the club.
Q: So far, you’ve been pleased with how the programs are being received by members?
A: Absolutely. The stories right now are exactly that, stories and testimonials, especially for Couplers. You have to have something that’s bothering you to want to go to this site. If you are perfectly healthy and all is well, thank goodness, there’s no reason to go. But the beautiful piece is that it’s not just about you; it’s about everyone in your family that can have access to this, even though only one is a member. And somewhere in everyone’s family, someone is facing some medical issue. And this is just a great resource and very different from WebMD or any of the other programs that are available on the Web today. And the difference is, it’s about you instead of generic information.
Q: Are all of these programs specific to your club company or are other club companies using these?
A: I think we are the only ones in the industry today.
Q: [What is your] retention rate right now? Goals with it in the future?
A: Mid-60s and obviously lower in some clubs and higher in others, but we have 19 clubs, and across the board, we have some small fitness-only clubs and some multi-sport clubs. Obviously, we believe that over time, there is a third or so of our attrition that [come from] things we can’t control. We just believe we can continue to knock a point or two or three off with value-added programs that make a difference for the members. We’ve continued to improve our retention and reduce our attrition over the past couple of years.
Q: Tell me a little bit more about Kranking and what that’s all about.
A: We’ve had an association with Johnny G for years. Our chief fitness officer, Jim Karanas, is coached actually by Johnny. Jim is an ultra cyclist, and Johnny was a competitor in Race Across America and is the creator of Spinning. We are a contributor and sponsor of Challenged Athletes Foundation, which are folks who have missing arms and legs and have prosthetics. We think they are the epitome of why people should exercise. It’s not to look good; it’s to feel good about who you are and to lead a healthy life. These are folks who have to put on arms and legs before they go and exercise. We sponsor a five-hour spinning event every year on the bluffs of La Jolla (CA) while the Challenged Athletes Foundation has a half Ironman. We have over 100 bikes on the bluff, and we raise well over $100,000 every year for this group.
Johnny has always been a part of this, and he marveled at these challenged athletes who were getting on an upper-body ergometer and cracking away for hours. And Johnny, who’s a world-class cyclist, got on an upper-body ergometer, and after about 10 minutes his arms were ready to fall off. He said, “There must be something here, but these are the ugliest pieces of equipment I’ve ever seen.” And so over the past four years, he has been working on this new Krankcycle, as he calls it. And Jim Karanas has spent months doing all the research on the upper-body exercise. What we saw was this has such relevance to all types of people.
I’ll give you an example. We’ve had it now in the clubs for a couple of months. Just think about how many people injure their lower extremities and put their memberships on hold and are very frustrated. Well, now they can get on the Krank cycle either on the fitness floor, in the cardio area, in the strength area or take a Spinning class. We’ve now integrated Kranking into the Spinning classes where the spin instructor will cue what you are doing with your legs and cue what you are doing with your arms, and you are in the room side-by-side. So there’s no reason if you have a lower extremity injury that you can’t continue to train and exercise and keep your cardio fitness up, whereas in the old days you were out. You were not doing anything in terms of your cardio, so [that’s] No. 1. No. 2, it’s a wonderful exercise for seniors, for pregnant women, and if you’re a serious athlete and you exercise for multiple days in a row, your legs get tired. So guess what? Now, I can still exercise my upper body and still have a cardio workout to improve my fitness while I give my legs a rest. Then, we had the light bulb go on that says we can do fusion classes that combine, in a very short burst of time, upper-body and lower-body training. So, literally, in a 30-minute workout you can take your arms and legs to exhaustion multiple times while your heart stays up near its threshold. Of course, your heart doesn’t get tired; it’s your muscles that get tired, and you can go back and forth. So we’ve created these fusion classes that people truly enjoy, and we are in the process of rolling those out to the other clubs.
Q: How many of your clubs have Kranking?
A: We are in 12 of the clubs, but not all of them in the group fitness programs while we were testing it. By end of March, all of the clubs will have Krank cycles on the floor and in the group fitness room so that we can combine Spinning and Kranking in the room together. We will be the only club [to offer Kranking] until Johnny brings this to IHRSA in March. Then Johnny has to create a manufacturing agreement to move it forward.
If you think about the upper-body ergometer today, it’s something you see for physical therapy and older adults. I will tell you in our classes today that we have about four Krank cycles in a room with 30 bikes, so it’s a 1-to-5 ratio. People get on the Krank cycle for 10 to 15 minutes, then get back on the bike, and we will have literally 20 to 30 people with only four or five bikes get on a Krank cycle in a 45-minute class. We are very excited to be the first to bring Kranking to the industry.
Q: Well, let’s move onto your wellness programming. How are you developing the wellness programming at Club One, and why do you place such an importance on it?
A: It stems from our work-site health and fitness channel of access, as we call it. Our corporate partners are asking us to provide programs to help their employees lead healthier lives. It’s not just about managing the fitness center for them; it’s how we connect with and impact the lives of their employees and complement the programs that their health care provider offers or some of the other programs that they have going on in their organization. The light bulb just went on with all of us, that all of these employees—some of them are members of our commercial clubs, so there’s great overlap—we felt we could take some of those programs and bring them to our members, which we are doing, and add value for our corporate partners by selling them to them at a very reasonable rate because we can leverage the 50,000 plus people we’re buying it for for our employees. So, again, trying to take our positioning and our core strength and leverage those to add value for the different channels of access that we serve.
Q: Are you seeing more corporations being willing to be open to the whole idea of fitness for their employees, and is that part of your business growing even more than other parts of your business?
A: I’m going to get on a pedestal for a minute and say this: When an organization’s leaders at the C level get behind a wellness program, it’s amazing how fast it goes in that organization. When an organization channels its fitness center into the world of procurement or facilities, then it’s strictly an employee amenity, and the ability to implement wellness programs has slowed down. The challenge we face and everyone faces is finding the right audience and demonstrating…the facts are there with respect to return on investment from an exercise program and a wellness program, getting people to move and make better health choices. No doubt. The challenge is getting to the top and connecting with CEOs and C-level folks and having them lead the charge. I can tell you that from our own organization. We are a bunch of health nuts in this company, but I certainly lead the charge in that, in terms of our own health care costs and programs and rewards for folks to lead healthier lives because I think it’s so important. But that isn’t necessarily the case across corporate America.
Q: But you feel corporate wellness is becoming more important to business leaders as they realize it’s helping to reduce their health care costs?
A: We are getting to the tipping point. I don’t think we are there yet. A key piece of this will be some of the new medical insurance programs offered by insurers that will reward healthier behavior. The more of that that we see, I think the closer we will get to the tipping point and see a great landslide of successes as we get to that point, but we are not there yet. There are a few states that have flipped the switch in the sense of raising the deductible for all employees, and then you can buy down, so to speak, or be rewarded for that deductible all the way down to zero for indicators that show you are leading a healthy life, meaning your weight is in line, your blood pressure is in line, your cholesterol is in line, you’re not a smoker, etc. When insurance providers offer it and organizations have the backbone to step up to it, I think we’ll see a significant change, but only when that’s the norm instead of the exception. Now, the companies that are doing that are written up all the time because it’s so out there, and that’s going to change.
Q: Is this a part of your business you plan to grow in the future?
A: Absolutely. As I said, the wave is coming. It’s just a matter of time. To give you a classic example, I’ve gone out and spoken at a number of human resource conventions as well as wellness conventions and showed people that at Club One…our health care costs relative to the other companies that our medical provider insures—we are the exact same age, so it’s not age based—we run one-third to one-tenth the norm on every single metric that they track. One-third to one-tenth, and it depends on the metric. That’s what a healthy lifestyle does.
I can show that to other HR leaders and facilities and procurement people. And we’re not effective enough. I wish I was more effective. And when I show it to senior executives, they’re amazed, and then they say, “But you’re a bunch of health nuts.” I say, “That’s exactly the point. Yes, we may be at the far end of the spectrum and you are somewhere at the different end, but you have to take steps to reward and look at your benefits programs because if you look at benefits that are offered in corporate America today...” This is the question I asked them: So let’s talk about the benefits you offer that reward healthy behavior with respect to movement and nutrition. And the answer is none in most cases. Yet we offer employee assistance programs, and we offer all these other benefits programs that don’t have as much value as one-third to one-tenth the norm because we’re a bunch of health nuts. So that message is beginning to resonate, but we’ve got a long way to go.
Q: The economy is in an uncertain state. Club One is positioned as a middle-priced club company. A lot of people have said that to survive, you will have to be low priced or high end. How do you plan to stay in the business and be profitable as a mid-priced club?
A: I must be a contrarian. The middle is where the meat is. So I would say we can compete very effectively in the middle by playing our strengths, continuing to add value to the programs we offer inside the club and outside the club, and, most importantly, continue to understand what our members want, which are results— however, they define them, not how we define them—and deliver against that. Because when you do that, the price in the middle is certainly less relevant because I’m achieving something that I’m looking for. There are very few people who can determine a program for themselves, find their joy in exercise, and I think that’s the challenge with the low-price leaders. There is always a place for the high-end, and there’s always a place for the low and the middle. I think the key is to understand who you are and play your strengths.
I think you can clearly see from the phone call, we have a plan and are adding programs and services that can add value for our members. We’re just not sitting still at all. That’s for sure.
Q: You have really gotten into managing other clubs, particularly JCCs. What are your goals for Club One’s management company?
A: We continue to leverage our strengths. Our strengths are obviously in running mid- to high-level clubs, our people and our back-office processes. So our nonprofit groups have begun to see that the JCCs—and we manage an India community center here in the Bay Area as well—that club management is an area that is important to their other mission-based services, and they know it’s not anything they do well. So they’ve contracted with us to manage that piece and to improve the profitability and drive the revenue of those programs so that they can spend it all back on other mission-based services in the community.
We have three JCC contracts today that we manage, and we have numerous consulting arrangements with them. We’ve even developed programs, taking our service training module and branded it for the JCCs so that it’s a little bit “hamisha,” which is a Yiddish term and reflects the culture of the JCCs that we can then turn around and leverage and provide to the JCCs across the country to elevate their service game. So again, we are just going to play our strengths, which are service to others, all the back-office systems, great people and programs. Where we can find partners who see that that strategy benefits them as well as benefits Club One, we’re interested in pursuing it with them.
Q: How has the mix of a for-profit and nonprofit working together been, especially when so many are at odds?
A:No, actually here in the Bay Area, the San Francisco JCC, six years ago—so it started before I came on board—approached us as they were building a new building because they loved what we did in our clubs and thought that we had the systems and people to help them as they were opening up a brand new facility. And we successfully did that. That, of course, led to other JCCs here in the Bay Area and throughout the country to inquire more about what we do and how we do it and how it is favorably impacting the Js. And, of course, we like it for what it does for our business. Here in the Bay Area it’s an incredible complementary business. And what I mean by that is the JCCs close on certain holidays, and all those people have access to our Club One clubs during those holidays. Of course, when we’re closed on Christmas, and all of our members have access to the JCC on that day.
So we’ve actually created here in the Bay area complementary memberships and discounts on guest fees. If a member of the J wants to visit any Club One club, they have a discount and then this open access on days in which either site is closed for either renovation reasons or religious reasons. So we’ve leveraged that again, turned what is historically an issue into a strength.
In each of the community centers we serve, in most cases our name is not out there. We’re perfectly fine that the members love that the J is run well, and we can silently pat ourselves on the back and provide all the credit to our partners, which is where it belongs. It’s a great model of servant leadership.
Q: Where do you plan to take this part of the company? Do you plan to grow it by 50 percent in the next five years or at what level?
A: I’d love to be able to grow at that level. The management-contract business on this size of a program is really about our partner organization coming to the realization that perhaps there is someone else who can do it differently and better and enable us to focus on the things we do better—meaning the partner organization. And that’s a process that we can influence, but part of it takes place with our partners or prospective partners. So we continue to use the crawl, walk, run program, meaning that’s why we develop these consulting programs that we can demonstrate value to prospective partners. That’s our crawl phase. And then perhaps [we can] take a larger role on the way to a management business where we free them up to focus on their programs and we deliver greater returns for them to spend back to the community. It’s a slower process. We are not in total control as you are when you build a club and away you go.
Q: Your company is dividing into three pieces: has its own facility, does corporate wellness programming and manages other facilities. Which brings in the most revenue?
A: Clearly today our clubs, owned and managed—by the way, some of our clubs that are branded our club name, we manage [but] we don’t own them—but our clubs are our first [in revenue generation], our work-site health and fitness locations are our second, and our community centers are growing rapidly, and they are third today.
I know where we are headed is to increase the profitability and revenue from our managed sites. And whether those are community centers, that’s great. Whether they are work-site health and fitness, that’s also wonderful, and if they’re branded clubs that we manage, that’s wonderful as well.
Q: Any club purchase plans in the works for this year or next?
A: Last year, we opened a half-dozen work-site health and fitness locations, one community center and one 60,000-square-foot club. This year we have a number of work-site health and fitness locations that we are in final discussions with. We have expanded our consulting in the community center business to multiple sites right now, and [we are] in discussions with others. And there are numerous club opportunities that we continue to work through. Nothing is penciled in, so until the deal is signed, I don’t think it’s something we should talk about. But I can tell you there are numerous opportunities both ground up and takeovers that we are in discussions with here in the Bay Area and across the country.
Q: Any new partnerships in the works beyond Johnny G and Kranking?
A: We have a couple new wellness programs that we are working on. I’m confident one of them will launch later this year—second or third quarter—and one other one that’s in development. I think it’s a good likelihood that we will have more to come in that area as well.
Q: If I were to talk to you a year from now, where do you see your company being in a year in terms of the number of clubs and your programs?
A: Where we’d like to be a year from now is moving towards that goal of creating blue oceans of separation from the industry, yet remaining part of it, again through innovation and integrity. I hope that we will have a couple of new deals done so that the industry and others outside the industry will see Club One as a management-services company that can deliver on our own brand if that’s the kind of management service we are providing or deliver on the partner’s culture and brand (or the organization in the case of work-site health and fitness) so that we seamlessly integrate into those organizations. And so that’s really it—that we continue to push the needle on our management services, integrity and innovation.
Q: If we were to talk three years from now, do you see any additional things in your longer range plans?
A: I think we are on a journey that’s going to take at least that long to develop all that. We believe there will be a lot more facilities that we serve, but many of them may not have our name on them at all, and you wouldn’t know that we were running them.
Q: Do you have a goal of being as large as 24 Hour Fitness in the next several years?
A: We’re focused on quality partnerships, profitable ventures. Really, the number of units is not so critical as continuing to build the business, and our excellence in operations and in service to the communities and partners we serve. We stayed away from ‘it’s all about growth and size.’ If you consider that I come from a background of adding 50 to 100 units a year, that’s a big switch for me, as well as for all of us here to focus on doing things well and living up to our purpose.
Q: Right now, your clubs are all in California. Do you plan to expand beyond California in the next three to five years?
A: We certainly hope so. Primarily, again, in partnering with developers who see the value of Club One as part of their development, whether that’s multi-unit retail or multi-tenant arrangement. And more and more developers—as we tell our story and highlight how we can make a difference for their development—are beginning to see that that’s a path that has value.
Q: I appreciate your time and your willingness to talk to us.
A: You’re welcome.