Hitting the Big Time

For anyone who knows Jeff Skeen, it probably comes as no surprise that he’s the president and CEO of his own company. For as long as he can remember, Skeen says he dreamed of running his own successful business, and Titan Fitness – a well-funded company founded in 2007 to build, acquire and operate Gold’s Gym franchise locations – is certainly that!

BACK TO THE BEGINNING
Growing up in Great Falls, VA, Jeff Skeen might have always known he wanted to be involved in business, but he was also the son of a lifelong military man who taught him to have a strong faith in God and to let that be a guide for every decision. While this road has not always been an easy one to follow, Skeen has stayed the course, holding onto his dreams – and his faith – becoming instrumental in the expansion, development and improvement of the Gold’s Gym brand.

After obtaining a degree in finance from Virginia Polytechnic Institute and State University, Skeen spent a few years running a pension software development company. Throughout this time, he worked out regularly at a Gold’s Gym location that was owned and operated by two of his best friends from high school. In 1992, Skeen was poised to accept a new job offer from a financial services company when his two buddies approached him about joining them in the health club industry. At first Skeen just laughed it off, but they kept bringing it up, which eventually led to a serious discussion about the possibility.

Skeen had always been athletic – he played sports in school and was dedicated to working out and staying in shape – but he never imagined he would wind up in the health and fitness industry… until the talks with his friends turned serious. “The more I thought about the idea, the more appealing it became, so I set up some guidelines for them to meet and promised to talk it over with my wife,” Skeen says.  The ground rules were pretty simple: He had to receive a salary, he would not work Sundays or Christian holidays and his wife had to agree. “After my friends and I had agreed on my salary and the days I wouldn’t have to work, I went home to discuss it with my wife,” he shares. “To my surprise, before I could even explain everything, she was telling me to go for it!”

GOING FOR THE GOLD
In February of 1992, Skeen became partner and CFO of the newly formed “G Group.” The original plan was to try it out for a year, during which time he planned to focus on setting up and streamlining systems, helping his buddies and just seeing what happened. “Our goal was always to open more facilities in the metro area surrounding Washington, D.C., but to do that I knew we would need to develop respectable systems,” he shares. “We didn’t have a certain number of clubs in mind, we just knew for sure that we didn’t want to stop with just one!” Skeen says he and his friends each had very different skill sets that worked really well together, helping them to open up and/or acquire 10 additional Gold’s Gym locations by 1998. This brought their total to 11 clubs, making them the largest and most profitable franchise in the entire company. In his new role, Skeen was responsible for continuing to develop and implement operational and technological systems that would assist in the growth of the franchise, a task that related well to his background in software development. At the time, Gold’s was still running on a DOS system and old-fashioned cash registers, so Skeen convinced his partners to put money together for the development of a Windows-based software application that would eventually unite every club under a unified enterprise management system.

According to Skeen, their success was due in part to the fact that they brought in a minority partner for each location after taking over, many of whom were old high school friends. “We wanted people we could trust, and we were all in our mid-20s at that time – the perfect age for them to get involved,” he shares. Each minority partner was also required to invest some money in the deal, even if he had only had $5,000 to his name. This served two purposes – it demonstrated a commitment to G Group, and it kept the organization lean, allowing Skeen to focus on developing operations.

When asked about what it takes to be a successful club owner, Skeen says he thinks the most important part is to do it for the right reasons. “My father always told me to focus on the customer, and the money will come,” he says. “You can’t just get into a business in order to take money from people and get rich.” Instead, he feels smart business owners always take the time to define what “success” means to them – whether it’s helping people, having a positive impact on the community or having the freedom to spend more time with family and friends – the goal can’t be just to make money. He points out that the club business is retail, after all, which means long hours (especially in the beginning) and a dedication to customer service. Many gyms are open 365 days a year, so if someone doesn’t love the business, they don’t survive.

Becoming well-capitalized and putting a strategic plan together have also been instrumental to Skeen’s success. He warns against excessively leveraging club assets and using the customers’ money; these practices – questionable during the best of times – have become downright dangerous during the current economic downturn, since members aren’t making as many large up-front payments because they can’t afford it. Part of his plan also involves choosing to open new clubs in good markets. Having a small number of competitors and a large number of potential customers remains a good recipe for success in the club industry, according to Skeen.

ONWARD AND UPWARD
By 1998, the G Group was growing restless – with a 40 percent EBITDA (Earnings Before Interest, Taxes, Debt and Amortization), things had become too easy, and Skeen was craving a new challenge. “I am always trying to improve myself and am driven to do more,” he says. “My father taught me to look for new challenges because he believed that it would help me continue to grow as a person, and I’m kind of wired that way.” So, when Gold’s Gym Enterprises (GGE) was put up for sale in 1998, the G Group decided to try to buy it, eventually landing a deal with the help of PricewaterhouseCoopers, one of the world’s largest accounting and business consultancy firms. “The president of PricewaterhouseCoopers worked out at one of our gyms in Virginia, and I think he was a bit surprised by how quickly we came back with a letter of intent once he agreed to help us,” he says, laughing.

In August of 1999, GGE became Gold’s Gym International and Skeen became the company’s new chief information officer.  Up to this point, Skeen says GGE was really just one location in Venice, Calif. that had a licensing division and sold the rights for clubs to use the name only. It also happened to be the largest club chain in the world and had unmatched brand recognition that could be traced back to the independent documentary film Pumping Iron, which was released in 1977.

By 2004 and GGI (the franchisor) had grown from one to 38 locations. The software platform that Skeen developed, now known as the Gold’s Gym Information System, was integral to this growth. “It was a lot of work to put it all together, but it was necessary to allow our company to grow through mergers/acquisitions,” he says.  After the sale of GGI to TRT in 2004, Skeen thought he might slow down and semi-retire to spend more time with his family, but he half-jokingly states that, “After a very short ‘retirement,’ my wife and I both agreed that it would be best for me to get back out there and do something with my life!”

A NEW DIRECTION
Skeen had been thinking for some time about how to develop a system for new Gold’s Gym franchisees that would not only streamline the process, but would also attract a wider variety of qualified individuals to the franchise experience. With this in mind, he formed Titan Management Solutions – a consulting firm that partnered with Gold’s to assist franchisees in opening and operating their gyms. During this time, Skeen helped set a Gold’s Gym record by opening a new facility with more than 6,500 memberships sold during the pre-sale, and also turned around a club that was operating at a loss of $1 million per year to a projected annual profit of $700,000 within only three months.

When GGI began the process of consolidating its corporate offices in Dallas in 2006, some key executives didn’t want to make the move because of family ties, giving Skeen the opportunity to once again work with some of the best in the business. In 2007, he and his partners, who were former GGI executives, franchisees and a former PricewaterhouseCooper director, founded Titan Fitness. The company’s goal is to open and acquire more than 60 locations within the next five years. “My main concern with the new company was to secure funding that would not require us to compromise our family responsibilities, so we had to find equity backing with a great moral character to fund our purchases, ” he shares. Titan hired M&T Investment Banking Group to assist with securing private equity backing for the company’s growth strategy, and put a book together outlining their plans before deciding to work with WestView Capital Partners in 2007.

Titan Fitness currently has 16 facilities – six in Raleigh, eight in Minneapolis and two in Reno – and spent most of 2008 evaluating an enormous number of opportunities for purchase. They are choosing carefully, purchasing gym chains with at least two locations in attractive growth markets (Gold’s or non-Gold’s), then rebranding them as Gold’s Gyms if they are not already franchisees, and also building new stores wherever it makes sense. Titan plans to put significant money into its markets to improve acquired clubs and build new ones, as well as to acquire additional new locations that will fill out its footprint. The company envisions only five or six different markets total. Skeen says the merger and acquisition process is tricky, requiring a great deal of honest communication and one-on-one time with existing management to overcome the disruption. “We are excited about the chance to improve on and open clubs in a variety of markets, giving our company a chance to grow and allowing us to positively affect more people – both via membership and employment,” says Skeen. “Seeing people get healthier and achieve their goals is one of the best parts of this industry.” Skeen’s desire to see people grow undoubtedly stems from his Christian beliefs. He was taught from a young age to apply biblical lessons and principles to everything in life and to be honest about his own God-given gifts and weaknesses. “These principles have been the foundation for the rest of my life. Some people don’t believe money can coincide with helping others, which I believe is why so many business owners hold people down and try to keep them in certain roles,” he shares. Instead, Skeen focuses on empowering his employees by finding out what they really want to achieve and helping them to do it. In addition, he says that everyone at Titan holds one another accountable to the idea that no one is “above” anyone else – everyone is on an equal playing field.

LOOKING TO THE FUTURE
When asked about his thoughts on the industry today, Skeen says club owners can no longer look to the past when calculating profit. Instead, he advises looking forward, recognizing that the economy can blur the reasons why a business is not successful. To combat this, Skeen engages employees to find cost savings by sharing a percentage of the money saved, up to a fixed amount. “This empowers employees and gets them to think like owners,” he shares. “When times are good, we are all guilty of not pinching pennies where we can, or not evaluating superfluous expenses.”

Finally, Skeen says he hopes to make fitness even more affordable without sacrificing quality or getting into a price war that can devalue the product. One way he and Titan are doing this at Gold’s Gym is by promoting group personal training sessions – the number of people helps lower the pricing for members, but it can actually increase the amount trainers make – a win-win for everyone. Skeen is also working to develop more ways to get Titan’s clubs involved in local communities, which is another way he plans to stay ahead during the economic downturn. For example, his clubs will currently freeze membership dues for several months if a member is out of work, and Titan has let it be known to all employees that the company is very willing to give away memberships to benefit charitable organizations. “This helps the charity, attracts quality members, and builds a relationship between your club and the community,” he says. “I am a big believer in the idea that, by helping others, you eventually help yourself.”

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