Multiple Profit Centers: What Every Club Owner Should Know
When it comes to multiple profit centers in fitness clubs, they can either be a club owner’s best friend or worst enemy. Here, we’ve talked to some of the experts on this topic to bring you the information you need to make your club’s profit centers a success!
There’s no doubt that operating multiple profit centers in a health club can be a real money maker. When properly planned, a profit center can be the difference between being average and being exceptional. As the old saying, “don’t put all your eggs in one basket” implies, a well thought out profit center can diversify a club’s business model and protect its bottom line. They can also increase your membership base and the dollar amount each member spends at your club. Here’s what you need to know about profit centers, including a closer look at some of the most popular options available today.
Multiple profit centers can drive the overall offering of your club and help you combat the industry’s tendency to only focus on lower membership costs. Profit centers can also help you stand out from other clubs in the area and the convenience factor is also a huge part of the equation. According to Mike Feinman, Executive Vice President and COO of Gold’s Gym, profit centers help to drive the lifetime habits and membership value of members while often enhancing their results, which keeps them coming back.
Since a new profit center is not part of your core business, you will need an engaged, motivated management and sales team to help drive success. Your entire staff has to understand the importance of what you are offering. According to Feinman, leveraging programs by offering every new member a 10% off coupon to use toward the purchase of additional services can help drive profit center sales. Don’t allow your sales team to focus only on the basic new membership sale – make sure they are selling all aspects of what your club offers. To get staff members motivated to sell, try paying commissions or holding sales contests with cash bonuses.
For a new profit center to sustain itself, members have to see the value in paying for it. Make sure that all of your club’s marketing materials include information about available services not included in regular membership dues. Other effective marketing options for amenities include: in-club marketing via posters, brochures and banners, video marketing on ClubCom, email blasts, direct mail, enabling your website so members can make purchases, free trial coupons, gift certificates, community infiltration and routine follow-ups with all new members. This last idea gives you the opportunity to bring additional attention to services like personal training and group fitness, which can help new members stay on track, achieve their goals and therefore increase retention.
It is essential for a club owner to take the time to determine the goals for any new profit center before spending money, says Joe Cirulli, Founder and CEO of the Gainesville Health and Fitness Centers. Cirulli also says club owners should determine whether a need exists for the service. The best way to do this is to conduct research by asking as many people as possible for their opinion – you’ll find answers you never dreamed of. The greatest (and simplest) definition of marketing is to find out what people want and offer it.
Chuck Runyon, Co-Founder and CEO of Anytime Fitness, says that club owners should always exercise caution when incorporating a new profit center into their business model, and should make sure that any additional services are top-notch. It’s also important to evaluate how much of a drain on your existing resources a profit center could be, and carefully consider how labor-intensive it will be to run. Before making a commitment to add a new profit center to your club’s lineup of offerings, be sure to determine how it will affect time management and the overall culture of the club.
Almost everyone agrees that the most important thing a club owner can do to make a profit center successful is hire a champion to run it. You should have someone in charge of making it work who is also able to recognize what is not working and adapt. Ralph Rajs, Vice President of Operations at Leisure Sports, says a great work ethic, good business acumen and (no surprise here) strong people skills are the qualities to look for in the person you trust to operate a new profit center.
Tanning is one of the most convenient and most affordable profit centers a club can choose to invest in. In fact, choosing not to offer tanning can mean that potential income is simply walking out the door every time a member leaves after a workout. Not only can tanning increase the amount that members spend monthly at your club, but a tanning center can also increase your membership base by bringing new people in the door. Tanning also has high profit margins and won’t increase your club’s overhead because front desk employees can often manage the tanning center. Tanning beds are also economic to operate from an energy usage perspective, with some beds using only .50 cents worth of electricity per session.
Pricing and branding are two important keys to implementing a successful tanning program in your club. Choose colors for the beds that match your club’s decor, and consider having them branded with your logo. Many club owners see a return on investment in only three to four months, while others may have to wait up to 16 months. This time period often depends on the level of staff involvement and the club’s commitment to marketing the tanning services. According to Runyon, 25-35% of Anytime Fitness members choose to add tanning, so it pays for itself very quickly. Bill Chiccarelli, Director of Marketing for Sun Capsule, recommends signing up members using monthly EFT’s (Electronic Funds Transfers) to generate the most from your tanning center. Sun Capsule offers a tanning unit that comes with an attached dressing room, which eliminates the need for building private rooms.
Personal training is a valuable service that gets members more involved with the club and helps them reach their fitness goals, which is proven to boost member satisfaction and retention. In most cases, personal training programs require managers with direct experience in order to be successful. According to John Spence, Owner/Operator of several Anytime Fitness locations in Southeastern Indiana, when it comes to personal training programs, the number one key to success is finding the right staff. Spence says the main problem club owners face is that trainers are often good at either sales or training, but it’s difficult to find someone who is good at both. To combat this, Spence has adopted a strategy that separates the sales process from the personal training area, but allows the sales team to incorporate information about the personal trainers into the sale. It is also really important to have a software management system that makes tracking sessions and following up with members as simple as possible. This will keep you organized and allow you to make sure that these important elements don’t get overlooked and hinder your program’s success.
According to Geoffrey Dyer, Founder of Lifestyle Family Fitness, group personal training is also quickly gaining in popularity as more club owners realize that it is not only more affordable for members, but that it offers an opportunity for greater profit margins for clubs by allowing trainers to work with more than one person at a time and therefore bringing in more money per hour per trainer.
Deciding to go with a specialty personal training program, like the one offered by the VERT Power Center, is another way to provide a unique edge over your competition. VERT incorporates the principles of sports medicine and offers personalized performance training and physical therapy to members. VERT stands for Velocity Enhanced Resistance Training and uses unique computerized equipment, advanced tra ining techniques and proprietary software to treat and train professional athletes and regular individuals who are serious about fitness.
“Group exercise is often overlooked as a profit center. Some clubs see it as a ‘must have’ like treadmills or free weights, but see it mainly as a cost center, not as a way to build community, loyalty, membership and retention. Group exercise is a very cost-effective way of pleasing a large number of members at relatively low cost – and happy members tend to be long-term members,” says Phillip Mills, Founder of Les Mills International. In addition, the regular attendance that is encouraged by the weekly class schedule means high retention rates for a successful group fitness program. In 2006, Les Mills commissioned an independent Nielsen survey of 1,000 participants in their group fitness classes across the U.S., which showed that more than 90% visited their clubs at least twice a week to take part in the classes, and that nearly 40% visited at least four times a week. Les Mills has developed a system for group fitness management that revolves around targeted marketing, staying organized, training amazing instructors and hiring a dynamic management team.
Typical challenges that are faced when developing a group fitness program often revolve around finding ways to measure the success of the programs and the instructors. By partnering with an outside provider, you are taking some of the guesswork out of the equation because you are guaranteed access to support and expertise that is constantly evolving and growing with the times. In addition, clubs shouldn’t be afraid to start small when starting a group fitness program. Even a room that holds only 15-20 people will contribute to the bottom line, and if you suddenly find yourself thinking about whether you should knock down a wall, that’s a good problem to have!
According to Rich Boggs, CEO of Body Training Systems, by servicing more members through group fitness, retention rates can increase, and by marketing branded programs to the general public, membership sales can increase. Body Training Systems offers “branded” group fitness programs that include seven popular areas of exercise, and also comes with a software program that is designed to help clubs identify potential dropouts before they stop coming in. The company also utilizes highly trained coaches who work with each club to improve performance and profitability by making sure they are running the system properly. The combination of group fitness programs and retention software can be a powerful tool to increase sales, retention and profits.
Cirulli recently threw a party for everyone who is involved in the Gainesville Health and Fitness Center’s group fitness program, and it turned out to be a huge success. He did it because he recognizes the importance of encouraging the formation of groups within the larger member group. Throwing a party is also a great way to network and support other local business owners, so put some thought into where you decide to hold special gatherings and try to make it a win-win for both businesses.
By helping members reach their goals through nutrition and exercise, a smoothie bar can help you create loyal members that will tell others about their positive experience at your club. According to Dan Young, President of Performance Food Centers, it is important to make purchasing decisions that are right for your club’s situation, because this will allow you to reach more members, which will positively affect the juice bar’s bottom line. It is also important to keep managers focused and to make sure the juice bar doesn’t suffer from a lack of attention from management. One way PFC does this is by having weekly communication with a designated club staff member to make sure protocol and marketing plans are being followed. It is important to remember that many club members are extremely busy, so the convenience factor can also drive them to purchase items from your club’s juice bar. The key is to choose products that fit your targeted demographics, which can also prove to be the tipping point that causes a potential new member to choose your club over the competition.
When it comes to a juice bar, offering healthy, nutrient-rich food products is key to being successful. Since nutrition is a huge part of the fitness equation, healthy options at the juice bar can support a member’s workout efforts and help them reach their goal. When this happens, people tend to get excited and keep doing what worked for them, and that can include visits to the juice bar. Your marketing message to members should let them know that you are committed to bringing them total fitness through exercise and nutrition.
According to Dyer, club owners should consider hiring someone with experience to operate certain profit centers, especially juice bars and those that serve food. He says that all too often club owners discover that they don’t have the same success with running a new business in the food and beverage industry as they did with operating a health club. One obvious advantage to choosing a turnkey smoothie bar system is that the company has done the research and legwork for you. This takes much of the guesswork out of the operation because it eliminates the often complicated process of trying to come up with things like recipes and product names.
Companies like City Blends can add additional revenue via a smoothie bar without much of an increase in labor costs because the company offers a turnkey system that is designed to make the smoothie bar simple to operate in a fitness facility, says Stephanie Suddarth, President of City Blends. In some cases it can even be combined with the front desk area, or staffed with only one employee.
To run a successful smoothie bar, it should be placed in a high traffic area, such as near the front desk or next to another retail space in the club. It is also essential to utilize external marketing materials and strategies, and to give away samples of the products while promoting the smoothie bar within the club. It is also necessary to have knowledgeable staff members, so City Blends offers free phone conference refresher courses for all clubs so staff members can stay up to date on important information.
Bill Haugh, CEO of Dr. Smoothie Brands, also stresses the importance of keeping staff members up to speed on the products, especially the nutritional value. It is very important to fully understand what it will take to open and successfully operate a smoothie bar before getting involved. The company you choose to partner with should provide very detailed descriptions of the products, including features and benefits as well as an explanation of the science behind them. Dr. Smoothie provides video training via their website so new employees can be easily brought up to speed. Under-trained employees are one of the biggest detriments to the successful operation of a smoothie bar. There is nothing worse for your club’s reputation than a member’s question being answered with “I don’t know.”
The popularity of massage has caused more and more fitness centers to consider adding this amenity, but traditional massage services can be messy and require additional personnel and significant space. On the other hand, dry water massage systems allow health club owners to bring the benefits of massage to their members without the mess and personnel requirements that come with traditional massage. In addition, the user does not get wet and can remain clothed because they are protected from the water jets that deliver the massage by a supple membrane. According to Dow Cote, Sales Manager for Aqua Massage, dry water massage systems can deliver professional massage results, rejuvenating the body at a fraction of the time and cost of a manual massage.
When you first introduce a dry water massage system in your club, offer all members a free five minute session so they can experience how wonderful it feels. You can also offer a special for any member who signs up before the massage system is installed. It is also worthwhile to let the general public know, via print and radio ads, that your club offers the dry water massage system. This can be a great way to drive new clients through the door, and gift certificates or pay-per-use sessions can be sold at higher rates for non-members or at special rates for senior citizens to boost your club’s revenue. Aqua Massage units are self-contained, require no plumbing and each unit is covered by a canopy that gives privacy to the user and allows them to be operated in the open. In addition, members can operate the massage system without the help of club employees.
According to Kevin Conaway, Marketing Director for HydroMassage, proper staff training and awareness is one of the biggest hurdles club owners face. Basic operational and sales training that shows staff how to use the massage bed and how to sell it is essential. When you walk into a club and the staff is excited about a new service, you can almost feel the buzz – an energized staff is a great way to get members talking about a new service. According to Conaway, the nice thing about dry water massage systems is that between 20-50% of members buy packages on the spot after a quick trial run, so the more members you can get to try the bed, the more packages you will sell.
Pro shops provide one more piece of glue that connects members to the club. Club merchandise can help increase the lifetime value of members by creating emotional ties to your club. With all club merchandise it is important to have a clear system for inventory control, since unfortunately the majority of theft in a club is committed by staff members, so lock up your merchandise and establish a strict counting system for all items.
According to Feinman, members are more likely to buy retail items after they work out, so observe them to see where their eyes naturally go when they are leaving the club and put merchandise in those areas. Also, avoid placing large items in front of smaller items, and don’t block lighter colored items by placing them behind darker colored items. It is important that all retail areas remain clutter-free and have clear messaging to avoid confusion. Feinman suggests offering what members need; Shirts, shorts, sweatpants, jackets, workout bags, vitamins, and diet-related items are typically the most popular, in addition to drink coolers with protein and hydrating drink options. Other items like batteries and ear phones are always reliable staples.
When it comes to multiple profit centers, the options are practically endless. Some clubs are looking at offering weight management programs, since 25% of all members join hoping to lose weight, while others are ramping up kids programming and charging parents for the service and still others are renting space within their clubs to outside businesses that provide services members want. According to Dyer, this is a worthwhile possibility to consider, since it prevents club owners from having to wear too many hats. But it’s also important to remember that any service offered in your club will be viewed by members as being a part of your brand. If a rented space in your club is poorly managed, it will reflect poorly on you, so be very careful before entering into any such agreements. Some club owners are even branding areas of their club, like the swimming pool or the basketball court, with the marketing messages and images of large corporations to generate easy additional income. According to Rajs, certain profit centers – like sports leagues – are really not meant for profit at all, but instead aim to break even. They exist to provide another strong connection point to the club, so the key is member participation, not profitability.
Whether you revel in the idea of running multiple profit centers, or prefer to remain focused on your first love – running a fitness club – there’s no doubt that properly managed profit centers can dramatically improve a club’s bottom line and provide an edge against the competition.