Gold's Gym International, Irving, TX, has acquired 17 of the 18 clubs in the Maryland, Virginia and Washington, DC, areas operated by Fitness First, Frederick, MD, the company announced today. The deal, which was signed Wednesday night, is set to officially close sometime next week.
Terms of the deal were not disclosed, but Club Industry has learned that the acquisition price is in the $30 million to $40 million range.
This is the second big acquisition by Gold's Gym in the past two years. The company acquired 11 San Antonio-area Spectrum Athletic Clubs in February 2012.
With the acquisition, Gold's now has nearly 50 gyms in the Washington, DC, area, making it the leading operator in one of the most densely populated areas in the country.
"We love the clubs because of the distribution in the DC area in relation to our current clubs," Gold's Gym CEO and President Jim Snow told Club Industry today. "There's just very little overlap, and they fill in the market nicely. It takes us to 50 clubs, both corporate and franchise, in that DC market, giving us a strong, clear competitive advantage, so this is a really nice acquisition from that perspective."
Fitness First will continue to own and operate one club in Bethesda, MD. That decision was based on how the lease was structured with that club's landlord.
Peter Harvey has operated PH Fitness Inc., which does business as Fitness First, since 1991.
"It's been a great 20-year ride," Harvey told Club Industry today. "I think it was a great opportunity for all sides. It was great for me, personally, and I think it's a great move for Gold's. I think the members are not going to see too much change and will have a lot more clubs to use."
The 17 Fitness First clubs will be rebranded under the Gold's Gym name over the next six months. All current Fitness First memberships will be honored, and Gold's Gym plans to introduce options that will allow former Fitness First members access to additional Gold's Gyms. For current Gold's Gym members, options also are in development that would grant access to former Fitness First clubs, which range from 16,000 to 23,000 square feet and had a price point of $29 per month.
More Competition in Marketplace
Fitness First has seen its revenue dip over the past few years. The company reported $36.8 million in 2010 revenue and $34 million in 2011 revenue, which put it at No. 35 on the 2012 Club Industry Top 100 Clubs list. Recently, Fitness First reported $32 million in 2012 revenue for this year's Top 100 list, which will be out next month.
Harvey said that Fitness First was facing growing competition from surrounding clubs, including CrossFit studios and Planet Fitness.
"We held our ground very well and probably still could have," Harvey says. "But I had an opportunity, and I couldn't afford not to take it."
Negotiations between Gold's and Fitness First began about six months ago, Harvey added. Rumors of a deal have been increasing for the past several weeks. He credits Fitness First COO Amy DiPasquale, who has been with the company for 21 of the 22 years, for her work in the negotiations.
"When Peter and I started to entertain the idea of selling, we had a lot in mind, most importantly our members and our staff and how any kind of change would affect them," says DiPasquale, whose husband, Andrew, served as the company's attorney. "I think it was important for us that we felt very comfortable with whomever came in to acquire us. When Gold's Gym came to us, I thought that it really worked with our members and our staff, so we were pleased to go down this road with them."
Integrity Square LLC, a New York-based boutique advisory firm focused on the active lifestyle, health and wellness sectors, brokered the deal.
"Integrity Square was pleased to have the opportunity to advise Fitness First in this transaction, and we believe the combination of Gold's and Fitness First is a win-win for members and employees in the greater DC market," Pete Moore, managing partner of Integrity Square, said in a statement. "This transaction also represents yet another key strategic M&A move in the rapidly changing, U.S. health club industry."
More Growth for Gold's
Gold's Gym now has about 100 corporate-owned clubs and 675 clubs overall, says Snow, who adds that 17 more clubs are in development. Of those 17 clubs, 11 will be Gold's Gym Express clubs, the company's low-price model. There are currently 10 Gold's Gym Express clubs open.
Gold's Gym could make moreacquisitions in the future, says Snow, who adds that the company is still focused on franchising.
"We're trying to grow our footprint," Snow says. "We're certainly growing our corporate footprint. We'd like to continue to acquire small and mid-size club chains, and we're continuing to pursue that in the marketplace, as long as the clubs make sense from a geographic standpoint with our current operations. We're aggressively growing the company."
"Franchising continues to be a major focus of our growth strategy, and we believe that strong corporate club ownership enhances the opportunities we can bring to franchisees," Snow adds. "International growth is strong, and we will continue to see growth there as well as some exciting new international market developments we should be able to share in the next few months. Needless to say, our commitment to the franchise system is stronger than ever, and we are seeing robust activity and interest in franchising as the economy improves."
This marks an eventful time for Gold's, which is hosting its annual convention July 15-17 in Las Vegas. At the end of July, Gold's Gym will be moving its corporate office from Irving to Dallas, where it will be housed with parent company TRT Holdings.
Also, TRT Holdings CFO Brandon Bean has taken over as chairman of the board of Gold's Gym International, Snow says. Former chairman Jim Caldwell has shifted his focus to another TRT company, Omni Hotels, which recently acquired five resort properties from KSL Capital Partners.
"Brandon's just a great guy to have in tune with Gold's," Snow says. "He's a sharp guy who has a lot of goals for Gold's and supports the directions that we're taking. I'm super excited to be working with Brandon."
As for Harvey, although he will still have the one Fitness First club in operation, his immediate plans include spending more time at the beach.
"All these years, I worked hard for my money," Harvey says. "Now my money is going to have to work hard for me."