Despite some health clubs closing during the recession, most clubs survived and some even grew, emerging with plans to expand even further. Reasons for success despite adversity varies, but for Fitness Formula Clubs, which owns nine high-end clubs and manages three office building fitness centers in downtown Chicago, knowledge of its community was one key to its success.
The recession had a pruning effect on clubs in the Chicago market, but that effect created opportunities, says Gale Landers, co-founder and owner of Fitness Formula Clubs, and his company was positioned to take advantage of that by making three acquisitions, accounting for some of the revenue growth from $30 million in 2007 to $36.4 million in 2011. Landers is projecting more than $40 million in revenue for 2012.
“Every seven, eight, 10 years, there’s a recession,” Landers says. “You can count on it. So, the way I look at it is that you should be planning during the good times to be able to get through the tough sledding or the bad times. That means making sure you are handling the river of cash properly and setting up your balance sheet so that your percentage of overall assets gives you the opportunity to take advantage of opportunities when they come up. And they always do during a recession.”
An economy like the last few years usually separates clubs that put their customers first from those that sacrifice loyalty for short term gain, he adds.
Landers and his team put their customers first by learning about their customer base and tailoring their facilities to the needs of each neighborhood, he says. Knowing the market is easier for Landers and his team than for some companies because their roots are firmly planted in Chicago.
“One of the great advantages that we have is that because we are in Chicago, we live Chicago, we breathe Chicago, we understand these neighborhoods,” Landers says. “So it has been very helpful to us in terms of how we plan and how we select the next location that we want to go to.”
A High-Quality Experience
Landers knows his members and prospective members well enough to have noticed a shift during the past 10 years. Many members have moved from self-materialism—the purchase of things and the latest gadgets—to greater self-actualization, where they are interested in experiences and the experience of wellness, he says. In particular, how that creates quality and longevity in their lives and how it helps them in their careers.
This shift means club operators must ensure they offer an experience where the value exceeds the price, Landers says.
“If the [value of] the experience does not exceed the price, it’s hard to sell it, and it is really hard for people to latch onto it and to create consistency and longevity,” Landers says.
Landers’ clubs provide a high-quality experience by creating an overwhelming value proposition and focusing on service, he says. The company has undertaken an internal “good to great initiative,” taking cues from author and researcher Jim Collins’ book “Good to Great” about owners of Fortune 500 companies who have moved their companies from good to great, both economically and in their offerings to customers. Landers and his team looked at how to apply the methodologies of these companies to their business.
The company established simple top priorities and top non-negotiable behaviors to solidify the Fitness Formula brand and enhance the overall experience across all locations.
Landers also focused on leadership training and developing his management team as well as how to be more consistent in product offerings. Part of that process involved looking at discipline.
“When you can drive discipline throughout the company, you get that consistency factor,” Landers says. “For us, that consistency part is important because we get so much cross-use among our clubs because most of them are right there in the city.”