David Schnabel does not look like the kind of guy you’d expect to run into at the gym, much less the kind of guy you’d expect to see running one-and that’s a good thing. Schnabel, who assumed one of the health and fitness industry’s starring roles in 2006 when he was named CEO of Gold’s Gym International, represents a significant evolution in an industry that’s poised for big changes: Not only does Schnabel’s business school and financial world background make him the first leader of his kind for Gold’s, his successes at the fitness industry giant signal that Schnabel is a man in the right place at the right time. Coming off a record-breaking year of club openings, Gold’s Gym is poised to reinvent itself as the health club of the future, maintaining its 40-plus year tradition of excellence in brave new ways. Which begs the question: What does David Schnabel know that the rest of us don’t?
When David Schnabel took the helm at Gold’s Gym International, he seemed something of an anomaly-a business man in a bodybuilder’s world. But Schnabel has succeeded in keeping Gold’s strong in a changing industry because he’s not your typical fitness industry guy. As the man behind the brand, Schnabel is steering Gold’s into the future-and it’s a future where the landscape is significantly different from the world the fitness industry has gotten used to. Schnabel’s leadership at Gold’s is definitely a sign of things to come-and during this period of massive transition, he’s definitely the man to watch. And every single club owner can benefit from the lessons he’s learned as Gold’s Gym International’s CEO.
Lesson One: It’s all about the people.
“Our success is really a testament to our employees and our franchisees,” says Schnabel. “Frankly, the passion these people have for the business just bowls me over. I think you expect to see that kind of passion in high-level of executives, but it’s been both surprising and inspiring to see this kind of deep-seated passion in every single employee.”
Schnabel knows he’s fortunate to head a company whose reputation in the industry makes it a magnet for great talent. (The most recent example: new Gold’s Gym chief operating officer-and 24 Hour Fitness’ former vice president-Mike Feinman admits that the opportunity to work with Gold’s was just too good to pass up.) In recent years, Gold’s has grown its workforce in new ways, with employees and franchisees coming from all walks of life. A Gold’s owner-operator today might be a former physical trainer or a recent business school grad.
“It’s a cliche but I am always looking to hire people who are smarter and more talented than I am,” says Schnabel. “That’s the key to creating a good team. We interview candidates for senior positions very carefully to make sure they have the character, commitment and capability to make Gold’s the leader in the industry. We take our hiring very seriously and expect to continue to raise our standards.”
Lesson Two: Passion and success go hand in hand.
“It takes a lot of energy and passion to run a successful club. Our most successful employees and franchisees all share this trait,” says Schnabel.
The highlight of Schnabel’s year is Gold’s annual franchise convention, where Gold’s Gym franchisees gather to share their success and grow their skill sets. It’s a fitness industry red carpet event, so it’s no wonder Schnabel looks forward to it-and Gold’s franchisees travel from as far away as Japan, India and Brazil to be present.
Schnabel credits Gold’s long-running success to these passionate people. Gold’s added a record-breaking 60 clubs to its fitness empire in 2007, including 75 franchise agreements.
Lesson Three: Never underestimate the value of making things personal.
“This industry is fantastic because our product helps people and our employees are passionate about what they do. That’s a pretty rare combination and it makes it exciting to go to work every day,” says Schnabel.
Schnabel says the bright light of his day-to-day duties for Gold’s comes in the moments when he’s able to walk out onto the gym floor and soak in the power of his surroundings. And the most successful Gold’s employees and owner-operators are the ones who still get that same kick.
“When someone walks through the front door of a gym, they are hopeful that they’ll find a place where they can improve their life. The services, exercise programs and equipment a club offers are keys to helping these people improve their lives, but the personal attention is what makes the experience enjoyable-and ultimately sustainable,” says Schnabel. “The hundreds of franchise owners we have in our family provide the personal experience every day, and that’s a key to their success.”
Lesson Four: Remember that the health club business is still a business.
Schnabel believes his atypical background for fitness industry leadership is one of the keys to his success at Gold’s-and a sign of things to come.
“I’m a huge advocate of advanced education because it really helps develop strategic thinking,” says Schnabel, who attended Stanford University and the Harvard Business School before joining TRT Holdings. “MBA programs offer the opportunity to learn about key facets of a wide range of industries. and you start to see parallels among those industries. It also helps to learn about all of the disciplines in running a business, from operations to marketing.”
As fitness clubs expand their scope to reach more members and a tightening economy makes it more important for clubs to maximize their profits, the kind of business skills Schnabel lauds will become increasingly important for club owners.
“Many people fail to take into account the fact that successfully running a health club requires a practical business mindset because each gym is a big business with marketing, HR, customer service, operations, and legal issues.” says Schnabel.
Lesson Five: Get ready for this industry to change-a lot.
“I think that the fact that I’m not typical of the kind of person you’d expect to see in a gym is representative of where the industry has gone,” Schnabel says. “I think health and fitness clubs today appeal to a broader spectrum of people, and more of them are ‘regular’ people like me who care about being fit and healthy but who don’t fall into old stereotypes of what a fit person should be.”
And Schnabel is quick to point out that while his background may not mirror that of a traditional fitness professional’s, he’s logged plenty of time as a fitness club member.
“I’ve been going to gyms since I was in college,” says Schnabel, who says that for him part of the pleasure of working out has always been setting goals to challenge himself. “It’s also a great stress reliever for me,” he says.
As Gold’s enters 2008, one of its primary goals is to be a steady beacon in a fluctuating landscape. “We have so much to offer people, such a broad range of services and amenities, that we’re the right club for a broad range of consumers, from first-time exercisers to long-time fitness enthusiasts,” says Schnabel. “Our message is simple: If you’re serious about getting results, then Gold’s Gym is the place for you-whether that means losing 5 pounds, toning up after a pregnancy, managing your diabetes or preparing for a professional football game.”
Lesson Six: Spend your money on the things that really matter.
“It’s important to reinvest in your club because it shows members you care,” says Schnabel. There’s no one-size-fits-all approach to spending money-instead, it’s about analyzing what spending will have the most positive impact on your members, and that’s a set of considerations that will vary from club to club.
Schnabel applies the same financial philosophy to planning for Gold’s corporate growth. “Gold’s is the biggest chain in the industry, but we want to become the incontrovertible leader in the industry,” he says. “That means we want to be known as the best franchisor, the best employer and the best service provider on the business. It’s easy to say, but getting there will take a lot of hard work and investment on our part. We are making the required investments in people, systems and programs, as we speak.”
Lesson Seven: Grow smarter.
As the health and fitness industry becomes more and more crowded, it’s the clubs who grow wisely that will prosper.
“The health club industry has seen some interesting growth over the past few years, but I think that in the future it’s going to consolidate a bit,” says Schnabel. “The business has traditionally been filled with individual entrepreneurs who own somewhere between one and five clubs. In the last few years, we’ve started to see the biggest brands in the business expand incredibly quickly, making it harder for smaller chains or individual clubs to compete. Over time, I think you’ll see the biggest players, including us, own a much larger share of the fitness market than you do today.”
Gold’s has benefited from a lot of franchisee growth, as its franchisees branch out to open more clubs with the support of Gold’s. Schnabel believes Gold’s strong business model and corporate support have been major factors in sustaining that kind of growth.
“Our brand can give smaller operators the power and the tools to compete in an increasingly competitive environment. They can continue their individual ownership and pursue their individual dreams, but do so with the power of the best know name in the business and the help of our experienced staff,” says Schnabel.
Still, Gold’s encourages a plan of smart growth over rapid growth. Schnabel and his team work closely with franchisees to help them to determine when and how much they are really ready to grow. “We spend a lot of time advising franchisees on exactly this issue. It’s important to realize that there are major differences between running one club, two clubs, five clubs and 10-plus clubs. When you expand you have to make sure you have the bench strength, the systems-IT, cash controls, business processes, etc.)-and the financial wherewithal to do it.”
This smart approach to growth along with Schnabel’s commitment to encouraging excellence in Gold’s owner-operators is part of the reason the Gold’s franchise model continues to be so successful. (This year, Gold’s ranked number 183 on Entrepreneur magazine’s 2008 Top 500 franchise list.)
“A franchise system like ours is very powerful,” Schnabel says. ” It offers the opportunity to leverage the individual energy and talents of the entrepreneurs who become franchisees, and it helps create a closer connection to the consumer. It is also a terrific structure for sharing and testing ideas and developing best practices. Franchises remain an important focus for us.”
Lesson Eight: Don’t just make it about money.
In a crowded marketplace, pricing can be an important tool for differentiating one club from another, but Schnabel thinks many clubs are putting too much emphasis on price-and that they’re overbuilding in order to compete for the same member pool.
Schnabel thinks clubs who use price as their major means to compete are missing the big picture-and setting themselves up for problems down the road.
“One of the mistakes I see happening today is a lot of players are chasing the exact same communities and building on top of each other,” Schnabel says. “The logic everyone has is that they’ll beat the other guy. Obviously, competing like that comes at a cost. The problem is exacerbated when price is the tool used to compete. That’s probably the biggest mistake I see.”
