LOS ANGELES - The health club consolidation group formed by Brentwood Associates continues to grow. Not only has the group added two new officers, it has added another cluster of clubs.
The new officers are CEO Bob Steele, who worked in the retail service industry, and CIO Dan Tilley, formerly with the country club/gulf industry. The 10 clubs are the Spectrum Clubs, located in Southern California. Brentwood purchased the Spectrum Clubs from The Sports Club Co. for $49 million.
This acquisition came a month after Brentwood launched the club consolidation group with the purchase of the Racquetball and Fitness Clubs of San Antonio. With the addition of the Spectrum Clubs, the group - now operating as Spectrum Clubs International - boasts $60 million in revenue.
According to Rick Caro, the group's chairman, the Spectrum Clubs have a solid history as an upper/mid-price brand in the Los Angeles area. He added that the clubs have not reached their limits in terms of capacity and opportunity, so there is great potential for future growth.
The new owners have asked Spectrum's management to remain on board, including executive Nick Taylor, who will continue to head up the Spectrum Club region. This is consistent with the group's business model. As Caro explained it, the group's corporate team does not plan to take complete control of acquired clubs. Instead, the corporate team plans to serve as a support mechanism. The top executives may create plans for a region, but it's up to the chains to implement them. "To some extent, this is a little different formula from what we've seen in some of the other acquisitions of other companies in our industry," Caro said.
It isn't different from acquisitions in other industries where consolidation has occurred, however. In fact, as Spectrum Clubs International expands, it will look for the best practices outside of the industry and inside its own clusters of clubs. As Caro pointed out, you must understand the strengths and weaknesses of all of the available elements in order to build consistency. So if one club cluster has a great sales management program and another club has an adequate program, you share the superior one. And if you find an even better program outside of the industry, you incorporate it into your own business.
When seeking new club clusters, Spectrum Clubs International looks for financially successful organizations that know how to take care of their members and employees. The group is also interested in clubs from the upper/mid-priced tier of the market, as the acquisition of the Spectrum Clubs indicates. The group's goal is to develop a brand for this high-end market. "It's our belief as people continue to grow more health-conscious, and with the increasing wealth of the baby boomers, they are willing to pay more," explained David Wong, a managing partner with Brentwood.
Brentwood's consolidation strategy is based on the highly fragmented nature of the club market. Wong explained that there is an opportunity to acquire the scattered players and put them together into a single, quality company. He also said that there is an opportunity to grow through the construction of new facilities, adding that the health and fitness industry is healthier than some Wall Street analysts realize.
"The club industry continues to grow nicely," Wong said, "and I don't think that has been fully appreciated by the financial markets."