Sweat Equity

Sweat Equity cover story on Tom Hatten of Mountainside Fitness

In 1991, Mountainside Fitness founder Tom Hatten had just $2,000 to his name. Discover his journey from one location to 14 in Arizona.

Some people luck into wealth, by either winning the lottery or making a good bet. But those people are few and far between. For the majority of successful people, wealth is accumulated through good, old-fashioned hard work.

12Tom Hatten falls into that majority. His success story did not begin with a Powerball win or inheritance. His story began with $2,000, a dream and a bit of sweat equity.

“In 1991, I had this crazy idea as a junior in college to open my own health club, [called Mountainside Fitness],” recalled Hatten. “I was 22 years old at the time with really no money to speak of, and even worse, no real business or health club experience.”

What Hatten did have was drive, and a passion for helping people be healthy. With these qualities in his back pocket, he felt like no obstacle was too large to overcome.

But there were obstacles, the first of which was having enough funding to get the gym off the ground. Hatten had saved $2,000, but even in 1991, that wasn’t enough to open a health club, especially when you took into consideration not just purchasing the building, but also furnishing it with equipment and other necessities.

To supplement his savings, Hatten borrowed from friends and family, in addition to landing a $15,000 loan from a local credit union. When all was said and done, he had acquired $32,000 to open up the first Mountainside Fitness.

“What I couldn’t purchase, my roommate and I built, welding and powder coating equipment ourselves,” said Hatten. “We built the front desk — we did everything we could to save money.”

And so the first Mountainside Fitness opened in Phoenix, Arizona, boasting 4,800 square feet of real estate. In that first location, Hatten poured every bit of sweat equity he could muster, opening the gym at 8:00 a.m., closing it at 11:00 p.m., and then cleaning the facility till 2:00 a.m. in the morning the next day. In between, he’d get a few hours of shut-eye, until the process started all over again.

During those early years, what kept Hatten up at night was defining Mountainside Fitness’ brand story. What was their mission? What were their core values? What message did they wish to convey to customers?

“I think in the beginning it was really understanding how business works,” recalled Hatten. “You always want to own your own business — that’s the American dream. That’s true, but you realize there’s so many different aspects to it that you’re just not prepared for, whether it’s getting the money to open, to what it feels like to be a boss, to what’s the culture … Back then, I was spending so much energy trying to figure it all out, that it was tough.”10

Ultimately, Hatten did define Mountainside Fitness’ brand story, and it was one that emphasized value and quality for an affordable price. It didn’t matter if members were paying a mid-priced membership at $43 a month — Hatten wanted them to have a high-end experience.

This meant offering things like towel service, pristine locker rooms and a lounge area, amenities that at the time were more common in country clubs, versus fitness facilities. In addition, it boasted high-quality personal training and group exercise, further boosting the value of a membership.

“Internally we play at the ‘top of the middle’ in the fitness industry,” said Hatten. “We accomplish this by offering the design and services of a larger more ‘exclusive’ facility, but at about half of that price point.”

Of course, every business would like to offer a high-end product at an affordable price. So, how did Hatten actually achieve this? To start, he got creative in terms of how to grow.

For example, when Hatten was 27 years old, he was ready to open a third location, but wanted to make it bigger than 12,000 square feet. However, at that time, not many investors were willing to risk beyond that square footage for a fitness facility.

So, he decided to buy some land — two acres — and turned to the U.S. Small Business Administration (SBA). He was granted $1 million to purchase the property, on which he built an 18,000-square-foot facility.

“That really was my entry point into real estate, and for the next 15 years, to really grow the company,” explained Hatten. “I would use this formula where I would buy the ground to build the building, I would do a market rent and then I would do a sale-leaseback, and that would work because I could get the equity out of the building, and grow and buy another piece of dirt and build another building. And the club just got a little bit bigger, and the dirt got a little bit bigger, the clubs got a little bit nicer, until I worked up to a 40,000-square-foot product.”

3Hatten continued to dabble in real estate until 2009, when the signs of the recession reared its head in Arizona. He explained this was the first time he’d ever felt real fear as a business owner. “That was scary because there were so many things that were out of our control, that I didn’t know if we’d be able to manage through. I had about a thousand employees, and that’s when you start to really worry, because you’re a pretty big employer at that point, you want to make sure everybody keeps their jobs and you don’t mess it up.”

To safeguard Mountainside Fitness, Hatten sold much of his real estate, and did whatever he could to ensure his employees and members never felt that devastation.

“Because the members never felt [that loss], we actually experienced good member growth during that time and we were able to build our way through it,” said Hatten. “The nice thing was we just didn’t have a lot of debt. I didn’t have partners — we could take the money and make it go a long way. Everybody just kind of hunkered down and everyone banded together, and in 2012 we were growing agai
n and away we went.”

Today, Mountainside Fitness is the largest locally-owned fitness chain in Arizona with 14 locations, more than 60,000 active members and 1,300 employees. The gym is still known for its towel service, in addition to amenities like basketball courts, robust functional training areas and sauna and steam rooms.

Although Mountainside Fitness is much larger in scope, Hatten’s first location, and the amount of sweat equity he put into it, is still at the forefront when making decisions.

“I was always lucky, because I didn’t really have a lot to lose,” said Hatten. “I was so young and I didn’t start with a lot of money, that to this day I’m still playing with $2,000 in my mind.”

Now that, is the American dream.

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