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Entries in new facilities (5)

Tuesday
Feb162016

Prime Time Fitness to Open Europe‚Äôs Highest Health Club

Prime Time Fitness will reach new heights this summer with the opening of its fifth Frankfurt, Germany club—at 190 meters above the ground, the new facility will be highest fitness center in Europe. 

Frankfurt’s Main Tower will host the 500-square-meter club, which will offer a 270-degree view over the city’s skyline. 

“The process of finding this exclusive location took over one year. Over 2,000 people work in this office building who are in our main target group,” Prime Time Fitness said in a release. “It is a high security location, where visitors and members will have to pass through security similarly to in an airport. Our members will have access through fingerprint control, which we already use in one of our other PTF locations.” 

The facility is expected to open in late summer 2016, with memberships starting at over 100 Euros per month. The atmosphere will be similar to Prime Time Fitness’ Romeo and Juliet location

“Due to [Managing Director] Henrik Gockel’s teaching position at the German University of Fitness, Health and Prevention, the latest research in health and fitness is used to benefit members and their training programs,” the release said. “We use a strength and endurance circuit and utilize permanent heart rate control throughout the entire facility. We will also offer a comprehensive personal training program using top PTs.”

Monday
Oct222012

Membership for new club can vary on marketing, advertising and more

This week's question for Best Practices doesn't apply to everyone, right now, but that doesn't make it less important. Opening a new facility can happen in the future to individual and multi-club companies.

Read on to see what Paul Bosley says. 

Q: "How many new members can a start-up club expect to join in the first year of business?"

A: The number of memberships sold during the presales and grand opening marketing campaign varys based upon how aggressive the owner advertises and offers discounted "charter memberships." I personally was involved with companies that focused on this campaign to the point that it was an art. Membership pricing was slowly increased throughout the entire campaign and was full price a week after the grand opening. Corporate sales functions were planned at the grand opening by becoming a member of the Chamber of Commerce the day presales began. Guerrilla marketing with fliers to the local community was a daily activity of the membership sales department. Advertising kicked off with aggressive direct mail campaigns to the 1-3 mile radius over the entire presales & grand opening campaign. The grand opening was a month of different events for members, members families, local corporations, local physicians and the general public. This is a function of focus with no simple answer. If no effort is put in, very little will be realized. With good effort and planning, profitability can be achieved soon after the doors are open.

Paul Bosley
Executive Vice President
First Financial
paul@ffcash.net

Monday
Aug082011

Expanding Your Club vs. Building a New Location: Which Has a Higher ROI?

Photo: vividBreezeDag Lee and Bryan O'Rourke discuss the return on investment (ROI) you can expect when expanding your facility and building a new facility in this week's Best Practices.

Q: "How can we compare the return on investment between adding on additional space to our current facility and opening a new facility?"

A: Consider the local market, growth prospects, macroeconomic factors, competition and so on. This can have an impact on your decision, as well as your own financial situation, the borrowing cost and weighted average cost of capital. 

Calculate the returns and payback times on the two options, perhaps using a 10-year horizon for the budgeting, and then compare them.

Adding additional space to your current facility.

Here you should make two scenarios that include all investments, top line development, as well as costs and expenses for both scenarios. Then do a return analysis on the cash flow differential between the two scenarios; 1 and 2.

  1. Running the club as is without the additional space, but with the capital expenditures required to upkeep the club as needed, and with the expected P&L development.
  2. Similar to 1, but with the added costs and investment of the enlargement project (you may need to renovate the old part of the club as well), including additional rent and other variable costs that increase with additional space, but also factoring in how you might be able to grow your membership base with additional space. Will you need more staff? Consider all costs and revenue changes from the project. You also need to factor in any club downtime, or partial closing of the club. Try not to close, as this is like asking members to go elsewhere. You may also be able to charge a higher price after the refit and enlargement, at least from new members, slowly but surely increasing your average dues, PT and miscellaneous revenue. Projects like these, although positive for the members when finished, can create frustration from partial closings or limitations in the service offer while the projects lasts. Noise, dirt and dust may also impact the experience. Therefore good and complete information in good time through all channels is key: in the club, posters, staff, website, social media, email and newsletters.

Building a new club – effectively a club move.

Here I have assumed that you close your old club and move it to the new site. You’ll need to make budgets for investments and the P&L (and a balance sheet) for the new club project, as well as factoring in the costs of the move, as well as all costs associated with exiting the old site. This may include any rent obligations, repairs to the structure, etc. As you’ll build the new site while still operating the old one, you need to factor in duplicated costs during the project, if any. You also need to have a strong plan for ensuring that as many members as possible make the move with you, as well as a great presale plan to capture many new members to justify the large undertaking building a new club is. Calculate the returns on the 10-year cash flow.

Now you can compare the returns between the two options: adding space or building a new club. Building a brand new club may require significantly more cash, and construction projects have certain risks you need to understand, as well as negotiating favorable contracts with the landlord. In addition to the financial analysis, it is crucial to understand the market, your position, and in the end, have a good gut feeling for the route you choose.

Have you considered enlarging and upgrading your existing club, AND building a new one? Effectively making a little 2-club cluster with the advantages that can bring.

Dag W. Lee, Taipan Invest, chairman
ACTIC Fitness, board member
dag.wh.lee@gmail.com

A: First calculate the cost of each alternate investment. Be as accurate as possible. Don’t leave anything out. Miscalculating costs could result in a poor decision.

Now that you have an idea of what each alternative costs you want to know what they’ll generate in cash flow. Prepare estimated revenues and operating costs for each option and be meticulous. When expanding an existing club, make sure you have a clear understanding of what the additional space will be used for to create a reliable basis for estimating net cash flows. A new club facility will require even more thoughtful analysis. If you have a geographic area identified engage a professional to conduct a market analysis estimating both demand and supply in the trade area. For each alternative, create a best case, worse case and an average cash flow forecast.

The final step is to use a net present value calculation to determine which option is best. You can use an NPV calculator online. When doing so it might be wise to use a higher discount rate for a completely new facility as opposed to adding on space, given the added risks. 

Finally, have you considered what your strategic end game is for your business ? Managing multiple clubs can be far more challenging than a single location. Take time to really consider the options and what you are committing to and good luck.

Bryan O'Rourke, CSO & Principal
Fitmarc
bryan@fitmarc.com 
www.bryankorourke.org

Monday
Apr252011

What to do When a $55 Million Rec Center Moves in Next Door

Steve Krum and Wayne Westwood discuss what to do when a $55 million tax-exempt facility moves into your market.

Q: "I manage a club in Wyoming in a town of about 30,000 people. In April 2010 we had a $55 million Recreation Center open and we have lost approximately 25% of our membership. Even though we have been very proactive up to this point by upgrading our facility and defining our fitness niche in our community, it has just been very difficult to compete with a $55 million facility that charges significantly lower membership dues than we do. We are contemplating lowering our dues by $5.00/month. Our normal single membership is now $42, but over 60% of our memberships are classified as corporate which we charge only $37. We are thinking it may make sense to lower the other 40% of our members down to $37. Even though we would lose a little revenue, our hopes are that we will get more people in our doors. Not only have we lost members but our sales are down significantly because of this new facility."

A: I’m sorry to hear you are dealing with this, I too have experienced this twice over the last 8 years. In one of the cases we did what you are thinking, it was tough to reduce existing dues, but in the long run I believe it made us more competitive in the market.

We were also able to get the facility to reduce some of the services that competed with us and we got them to stop an expansion to their weight room. We did that by meeting with them and stressing the negative impact they were having on us. I believe they wanted to avoid any negative press and or feedback.

Wayne Westwood, CCM President 
Comprehensive Club Management 
wwestwood@comcast.net  

A: Recreation Centers fall into our category of unfair competition for exactly the reasons you mentioned. Not only do they charge significantly lower membership dues, they seem to have unlimited access to capital and they do not pay some of the taxes that we do as private operators.

However, attempting to compete with them on price is a losing proposition and a vicious cycle. You will never win a price war. Your path of differentiation in your community is the right one. Continue to look to service, staff, programming and member experience as the reason to join your club. 

Partner with some other small businesses in your community to provide additional services that help your members with the biggest commodity in today's world: time. For example, maybe a car wash business can set up in your parking lot and wash member's cars while they work out. Or if you have a nearby restaurant that could post a "member's special" menu with a phone number so someone at the noon hour could get their workout in, then call from your club and it would be ready to go when they arrive.

When competing with low-end clubs, YMCA's, or rec centers, adding value to what you provide is the answer.

Steve Krum, VP of Facilities & GM
Spectrum Clubs 
skrum@spectrumclubs.com
spectrumclubs.com

###

This post is a part of our weekly Best Practices series. We post a new question and answer every Monday morning. If you have a question you'd like our Industry Leaders to answer, submit your question today.

Monday
Nov292010

Tax-Exempt Competition: What to do when a YMCA moves in next door

IHRSA's public policy team discusses what to do when a YMCA moves into the neighborhood:

"A local YMCA is going to open next to my club. They are going to offer a weight room to compete with my successful club. Can I sue to stop the development?"

A: A legal challenge to the development of a new YMCA based on unfair competition can be a costly battle without any guarantee for success. The legal principles underpinning such a lawsuit would be based on state law and would therefore vary from state-to-state. A victory at this level would, at best, mean that the Y would be subject to state and local taxes. Oregon and Pennsylvania are the two states in which Ys were required to pay a form of local taxes. Those cases date from the 80s and 90s.

Alternative legal challenges employed more recently involve legal actions aimed at slowing down or halting development of a YMCA by raising procedural issues, such as potential violations of zoning and other local land development ordinances.

Meanwhile, there are at least two strategies that may be more cost-effective than litigation:  

  1. Creating a dialogue within the community to discuss whether the YMCA is right for the community and to demand that any new facility be held accountable for its charitable responsibilities as a tax-exempt fitness center; and 
  2. Focusing the full force of the club’s resources on outperforming the new tax-exempt facility. 

 A brief discussion of each strategy follows. 

Creating a dialogue 

The following is excerpted from IHRSA’s white paper, “Stop Tax Inequity”. For more information, please contact gr@ihrsa.org.

Ordinary citizens, small business owners, and public officials all have a stake in making sure that tax laws are applied correctly and that organizations in equal circumstances get equal treatment. Otherwise, the country will see more situations like what was proposed a few years ago in the North End of Boston. The YMCA was granted access to public land to build a $40 million tax-exempt facility in an area the Boston Globe noted was already served by 47 taxpaying health clubs. Tax exemption is a powerful tool that tax-exempts use to compete directly with taxpaying businesses for identical customers.  

So what can any of us do to ensure a proper distinction between charity and business? 

  • Support state and federal officials when they ask for better reporting and disclosure on what tax-exempt organizations are actually doing and collecting. 
  • Insist that “community accessibility” standards be observed.
  • Demand that tax-exempts’ services that are priced at commercial levels be treated as business revenues subject to tax.
  • Report apparent violations to state attorneys general and the IRS for review. 

When local officials are considering a construction project for a tax-exempt fitness center, citizens and small business owners should urge officials to examine the operating plan closely. If not, their community will face increased tax pressure.  Land and buildings will go off the tax rolls. New taxpaying fitness clubs will be dissuaded from entering the market, and those already operating can be put out of business. 

Outperforming the new tax-exempt facility

This information was excerpted from “How to Prevail in Competitive Markets: An IHRSA Guide for Health Club Operators,” written by John McCarthy and sponsored by CheckFree. To purchase this publication (in English), visit www.ihrsastore.com

Today, in most major metropolitan markets, every commercial fitness facility has 10 to 25 competitive fitness operations within its trading area. This one fact - the intensification of competition - implies that the entire fitness industry has entered a new and more demanding era.  

How can you set your club apart from the competition? Consider the following suggestions. 

  1. Get Fresh. 'Store Blindness' is an affliction that besets everyone who lives or works in the same space, day after day, month after month, year after year. After awhile, we don't notice the worn carpets, the tired colors, the musty smells, the stale coffee, the dirt, the grime, the messy staff rooms, the clutter behind the front desk, etc. But anyone who walks into a club for the first time and sees it with fresh eyes, ears and nostrils will notice these things. Whenever a strong competitor enters the market, it is imperative that clubs undergo a 360-degree examination from the perspective of the first-time visitor. It is imperative to 'get fresh,' i.e., update one's image, so that the experience of being in the club is not an experience that is locked into the 1970's, 80's or 90's. 
     
  2. Get Connected. 'Connectivity' may be the number one advantage that existing clubs enjoy over powerful, new entrants into the market, so it needs to be leveraged to the hilt. 'Connectivity' refers not only to the relationships between members and staff, but just as importantly, to the relationships among members. 'Connectivity' is the basic reason why some neighborhood restaurants and coffee shops that may have flawed operations succeed year after year. Like those, this business is all about connectivity. 
     
  3. Get United. Many club owners and managers say they never knew how well they could perform until they were faced with an imminent threat from a new club. Whenever a new competitor announces its entry into your market, you have an opportunity to unite your staff in the pursuit of a higher level of performance and excellence across the board. Smart club managers do this. Not only do they unite their team leaders, but they also unite their smaller teams - front desk, sales, group exercise, and personal training teams - asking all of them to raise their performance to higher levels than ever before. The advantage of such external threats is that they can unite your staff in the pursuit of better performance. In such circumstances, your team - motivated and mobilized - becomes the ultimate asset, the ultimate weapon with which you can win the war. 
     
  4. Get Serious. This term has two implications. First, whenever a powerful new competitor enters the market, it is no longer 'business as usual.' Both the staff and the members expect to see signs that the ownership and management of the company will step up to the plate and make whatever replacements and/or improvements are necessary to present the strongest possible defense/offense against the new competitor. These replacements/improvements are often items that might otherwise have been delayed for years. Second, 'get serious' implies that this is the time to expunge from the staff any personnel who are not totally on board with a united effort to raise the level of performance to heights never before achieved. 
     
  5. Get Receptive. Now is the time to ask your staff and your members for their input as to how you can improve the club and better serve your customers. As you do this, leverage your staff members' creativity and passion for the business to the hilt. Invariably, they will think of ways to improve your operation that you might not otherwise conceive of. Some of these items may not cost a dime, but may be worth their weight in gold. Make your staff members feel that their opinions count. Their loyalty and commitment to your business will help it rise to the roof. 
     
  6. Get Positive. While this is easier said than done, staying loose, positive, confident and bullish on your future is never more important than when your ship is being buffeted by the storms of competition. Your staff needs to feel your drive, your confidence, your commitment and your plan to win. Never grouse, blame, or go negative -either toward your own team or toward your competitors. The moment you complain about a competitor is the moment that bespeaks fear, defensiveness and a lack of confidence. None of these emotions build confidence in those with whom you work. It is in situations such as this that true leadership rises to the top. 
     
  7. Get Clear. This is the perennial issue of company identity. This is - for almost all club operators - not the time to abandon this identity, whether it be as a family club, an adult fitness center, a low-cost provider or an upscale facility. Rather, this is the time to STRENGTHEN AND CLARIFY that identity. Yes, this is a time for innovation, but optimally, it should be innovation that strengthens your identity rather than betrays, abandons or compromises it. The goal is to add value rather than to retreat - and to play offense, rather than hunker down in a defensive position. 
     
  8. Get Sharp. In the words of Stephen Covey, 'sharpen the saw.' Invest in sales, service and hospitality training. Help your people 'be all that they can be.' Because of the new market entry, it is likely that at least for awhile, your club's fresh 'leads' will diminish, which means you will need to score a higher 'closing percentage' on those that you do get. Keeping every member also becomes exponentially more important, so it is crucial that your staff's hospitality and service skills be honed to a higher pitch. 
     
  9. Get Real. Never put your head in the sand and say to anyone that the new competition will not affect you. Every competitor takes a slice of the market. It may be a small, marginal, or temporary slice - but it's still a slice. Maybe it's only 50, 150 or 250 members. But at most clubs, it's that final 10%, 15% or 20% of the members that constitute 100% of a club's profitability. Losing just 10% of the membership can mean losing 100% of your profitability. The stakes are high, and any one competitor can spell the difference between life and death. Take every competitor seriously. 
     
  10. Get Partnered. Clay Hammer, one of the great consultants to this industry in the 1970's and 1980's, never tired of repeating the phrase 'same bed, same dream.' This was his way of saying that one of the best ways to energize your team to mount an all-out counter-offensive is to create incentives and reward each team member for 'partnering' with you in achieving desired results. As a leader in your company, you don't want to go into battle alone. You want your entire team to be as committed as you are. To achieve this, put some financial incentives on the line, so that when you win, they win, too.