With a customer first approach to management, Bahram Akradi, Life Time Fitness founder, president and chief executive officer, has helped the 11-year-old chain achieve revenues topping $200 million through a number of innovative profit centers and community outreach initiatives. With additional growth expected, Akradi believes the chain is well-positioned to achieve its lofty goals.
Ci: Give us a bit of your background and starting Lifetime and how that all came about in 1992.
I was involved in a chain of health clubs after college for about eight or nine years. We built a chain of clubs and sold it to Bally's. I worked at Bally's for about 2 Ω years and then I left to start Life Time Fitness. I spent several years trying to get that off the ground and finally we opened the first club in July of 1992.
Ci: Your clubs have had rapid growth since that time. What do you attribute that to?
We are entirely focused on our customer. Everything we do is from the member's point of view. I think our growth is related to member satisfaction and our focus on the customer.
Ci: I noticed your growth, which is 35 percent across the board. Can you continue this growth and expansion as a privately held company? Is there talk out there at some point where you may look at the public venue?
We certainly can. Our company is primed for the future. We can maintain that growth without raising additional equity and in the event that we do raise additional equity we certainly would speed up that development. At this point, we are able to continue to grow at our current pace without having to raise additional dollars or go public.
Ci: In looking at your growth plans for 2002 and 2003 you are looking at opening 10 clubs overall. How many of those have you opened and do you have plans to continue opening clubs for the next year or so?
We will continue to open five, six, seven clubs a year at this time. In the future, as we grow larger, we probably will intensify that and even build more clubs per year. In the event that we decide to go public and bring in some additional equity to the company then we would grow faster.
Ci: In looking at your health clubs, you seem to go outside the box. Was that intentional to be more than just a fitness facility?
We really aren't into thinking that we are a fitness facility. We don't see ourselves as that. Our goal is to create a combination life center, exercise facility, country club combination — a high-end, plush, beautiful, customer-service-oriented facility and a complete experience for the family. And it doesn't matter what kind of family unit, whether it is just one or five. Our clubs are a place where they come to enjoy themselves. It's more than where they can pump iron or use cardio machines.
Ci: You are one of the few chains that concentrates on taking your name and your brand outside of clubs with your sporting activities, triathlons, etc. Where did that philosophy come from and how has that benefited you?
We aren't worried about how it benefited us. Our focus again is the customer. The idea is to provide a complete experience to them where they can have a place where they get the right education or information in terms of their body's health and fitness and a healthy way of life — a more balanced approach to life. We do this through educational efforts like seminars and our magazine, Experience Life. We provide activities in terms of a full range of amenities. Our members can have a better opportunity to come in and enjoy a fuller experience. And we also offer nutritional products, which are designed to give our members the highest possible quality at a great value with the education for those things. So it is a well-rounded approach to work with the customer and what is the best thing for the customer, and all of that results in what you see.
Our triathlon, which happens to be the biggest in the world, with the biggest purse, as well as being televised on NBC for the first time, is designed to create an avenue that we think is healthy for endurance athletes to do an Olympic-length or international-length triathalon. We think that is the right vehicle for these types of people and we like to promote it and provide the training in our facilities so people can go learn how to swim, bike and run and do their triathlon training. We also provide the most incredible experience as far as the race goes for them. All of that amounts to building a comprehensive brand that is consistent everyday about the highest possible quality at a sensational value.
Ci: Are these programs additional to the membership fee or are most of these programs included within the membership fee?
It depends on what you are asking. If you are taking tennis lessons, it is an extra cost as it would be anywhere else. And personal training would also be an extra cost. But then there is no extra charge for things like Yoga or towels or locker rooms or childcare, which are provided for free.
Ci: I noticed your Life Spa concept. How big of an incorporation is that and how does that help to expand your services to members beyond traditional fitness clubs?
Again, you have a full-service health and fitness facility or you don't. Either you have a gym with workout equipment, aerobics and maybe a lap pool or you have a full-service athletic facility with recreational components and spas and cafes — which is whole different animal. We are not building the gyms; we are not building the 40,000-square foot facilities. That doesn't mean that is the wrong approach. It doesn't mean that those people who are doing that are doing the wrong thing, nor are we suggesting that we are better than they are. Really, all we are doing is building a different product.
Ci: In building that different product, how do you see yourselves going into the future in offering other services? Do you see yourselves continuing to grow into a destination club?
Yes.
Ci: What benefit does that give to you and your members?
Because we are a full-service, full-amenity club, we give them more than one reason to come to our place. It is a place where they get more than just exercise. It's a social element. It is a spiritual element in that they can feel good…they can have mental health where they come and get relaxed and get a massage or get their nails done, whatever. It's a different experience than the pure fitness element. I think both products have their place. I'm not suggesting that building the club that focuses on just fitness is the wrong approach or the old approach. It's just a different approach. Plenty of convenience stores are being developed and built and there is nothing wrong with them. Then there are grocery stores where they sell everything from cosmetics to pots and pans to all the groceries you need. It's just a different approach.
Ci: With the spa services, do you have a wellness component, like chiropractic or physical therapy for your members?
We have not put in physical therapy or chiropractic facilities. It does not suggest that we would never do it. But so far we have decided not to pursue that avenue.
Ci: You mentioned customer service and really concentrating on your members. How big of a role does your staff play in that and what kind of training, education, retention do you offer to really develop a good staff?
Life Time Fitness has been committed to educating the staff with vigorous intense training. It is because of that we developed Life Time University about five or six years ago. And in that period of time what we've done is bring in a fine-tuned curriculum for each of the positions within our facilities. For every position from a supervisor to the front desk or any specific position that you can think of in our facilities there is a specific guideline and training program and testing that takes place to make sure that consistent service is delivered to our customers.
Ci: Is it a problem finding qualified people and keeping them on staff considering you span from Minnesota all the way out to Texas?
No. We actually have a fairly easy time finding the people and once we take them through the training program we have very little attrition and dropouts at our clubs.
Ci: That's one thing that clubs are worried about is doing that much education and then losing their staff to the competition.
That's right.
Ci: How important is your web site to the success of the chain going forward as far as providing education, information, training to members that can't make it to the club on certain days?
I think the web site is more and more important every day that goes by. We are pleased with where our web site is today, but we are also intensely trying to improve on that and try to provide more quality and more services as much as we can as time goes on. It's the way that people are getting information and using the computers for communication. So it's where you have to go. It's not a choice, whether you want to do it or not want to do it. You have to do it.
Ci: Life Time Fitness doesn't work off a contract for monthly membership. What is the reasoning behind that? Some companies look at that like it's hard to show receivables if you don't have somebody contracted for a year with a monthly EFT payment.
We are a fortunate company that doesn't need to bill receivables or need to sell receivables to make ends meet. We have established our business so that we would not have to be dependent on the receivables and we wanted to provide the customer with the most convenient way of being a member. So they have a choice. They can be a member today and if they don't want to be a member next month they could do that. That is the customer perspective and the member point of view. Everything is designed from the member point of view.
Ci: In providing educational seminars to your members, do you also open them to outside your membership to bring others into your club?
Our seminars are open to the people in the community. As long as they know about it and they want to go to it, they can. The goal is to provide the consumer or the potential consumer with the right information so they can make wiser decisions about their health and fitness. How it would help us and what is does for our reputation is secondary, but I'm sure that it is a good one.
Ci: Your supplement line and the weight management have extended your clubs into a different realm than a typical health club. Is this a trend that you see as being important?
The reason we are focusing on nutrition is because as we saw years ago with health clubs, there hadn't been a brand that truly focused on the customer benefit first. So we felt there needed to be a better product developed and distributed. We are doing exactly that. We are providing the best possible product that could be developed without compromising it because of cost cutting. As a result of that our customers who are trying our products are happy with them and they come back. We never thought of Life Time Fitness as purely a health club company. We've always wanted to be a health and fitness company that provides fitness, exercise, education and nutrition for the consumer. And every which way we can accommodate the consumer or any part of that that we see is a void in a quality product, we will get involved in.