Fitness Connection, Houston, may be the latest acquisition by Titan Fitness, McLean, VA, but it is not the only change the company made recently and it will not be the last, promises Jeff Skeen, president and CEO of Titan Fitness.
In July, Titan Fitness purchased seven Fitness Connection clubs for an undisclosed sum, and shortly thereafter, ended its Gold’s Gym International franchisee status, under which it had 10 clubs.
Titan’s 17 clubs are now branded as Fitness Connection, and the company has budgeted $1 million to rebrand as such.
At about the same time, Titan completed a $4.6 million equity offering with its two private equity fund backers, WestView Capital Partners, Boston, and National City Equity Partners, Cleveland.
“Leaving the brand was definitely a difficult decision,” Skeen says. “However, by not being a franchisee, we now have the ability to view our growth with a much broader lens, including developing new markets that were not available to us before and a wider spectrum of acquisition/merger opportunities.”
The move also allows Titan Fitness to develop a localized brand into a national one. And it will allow the company to expand more into wellness.
“When we started looking at the Fitness Connection acquisition, we realized that the company had a name which reflects our desire as a company to reach a part of the American population that isn’t coming into health clubs,” Skeen says. “A big part of our messaging is about connecting people to health and fitness and being a solution to the health care crisis.”
Skeen’s clubs offer programs, such as boot camps and corporate wellness programs, that can be offered outside the walls of the clubs. More of these types of offerings are planned.
“We are in the process of speaking to a number of companies that we plan to either acquire or strategically partner with to expand into areas such as corporate wellness, nutrition and wellness coaching, and medical services,” Skeen says.
Prior to the Fitness Connection purchase, Skeen’s team had considered other acquisitions, but the economy made it difficult to find financially attractive possibilities. Skeen’s criteria for acquisitions is that the chain has at least $1.5 million in regional EBITDA, is in a market that has the potential for growth and is one of the top three operators in that market.
“The Fitness Connection management team is very talented and has done a great job of navigating through the recession as well as providing a business that met all of our acquisition criteria,” Skeen says. “We have worked with this team in the past through other acquisitions, so we felt very comfortable with the way they run the health club chains they own.”
As is typical in acquisitions by Titan Fitness, the management team at Fitness Connection is staying on board. This practice allows Titan Fitness to be opportunistic in its purchases rather than geographic, which accounts for why Titan’s clubs are located in different parts of the country: North Carolina, Nevada and Texas.
Skeen’s team is considering a number of potential acquisitions, but he would not elaborate. If all of them come to fruition, the company could have more than 60 locations in five years, and that does not count the possible purchase of synergistic companies that focus on health and wellness.
“As a company, we are much more interested in optimizing our investors’ returns than the number of locations we acquire,” Skeen says.
Skeen had a long history with Gold’s Gym that goes back to 1992 when he was partner and CFO for the G Group, which was owned by brothers Kirk and John Galiani. The G Group owned and operated a Gold’s Gym club and grew that to 11 locations. After becoming one of the most profitable Gold’s franchisees, the G Group bought Gold’s Gym International in 1999 with Brockway Moran & Partners, a private equity firm, sponsoring the transaction. Kirk and John Galiani, who then served as CEO and COO of Gold’s Gym, respectively, stepped down in 2001, but Skeen remained a principal and CIO for Gold’s Gym, designing an information system that united the chain’s corporate and franchised locations. In 2004, he created Titan Management Solutions as a consulting company for Gold’s Gym franchisees. In July 2007, he became a Gold’s Gym franchisee as head of Titan Fitness LLC.