By watching the daily fluctuating stock market it would be difficult to make any substantial judgments as to the U.S. emerging from its recession. Regardless, when looking at the health and fitness industry, a ray of hope is found.
Aaron Lieberman, the chief development officer for Titan Fitness, a Gold’s Gym Franchisee, said they have seen growth and profitability emerging in the fitness industry. “We feel like the last half of 2009 the economy started to improve and the industry numbers have started to improve,” Lieberman said.
Not only is Lieberman seeing growth within Titan Fitness clubs, but also he has noted growth in many clubs throughout the U.S. In fact, growth has been so prevalent in their eyes that they have resumed their search for club acquisitions.
“We sat down recently after taking a lull the last six months or so and we decided we wanted to aggressively get out there and start looking again,” Lieberman said. “When we went out to the private equity world, our business plan was 60 locations. That’s still our stated objective and we feel that would be a great accomplishment. That’s what we’ve told our investors we want to do and we are going to push to get there.”
Titan has seen the industry performance improve as unemployment rates have steadily submerged. “That is an economic factor we are looking at in the markets we are exploring,” Lieberman explained. “For us to enter a new city or market, we are typically looking for a cluster of four to 10 stores that are in the same geographic area. We want them to have a profitability of a million dollars, we want to see capacity for that market to be expanded and for more gyms to be brought in.”
Lieberman said Titan is looking for clubs with management teams that have a desire to stay involved with the club. Clubs will be transformed under the Gold’s Gym banner, but they wouldn’t necessarily lay off any staff. “We really prefer that the management team stays in place and wants to run the gym,” he said.
For clubs that aren’t in the same geographic location as other Titan clubs, they are searching for stores that have been well maintained and have quality employment and membership records. Also, Titan is looking to add onto their existing markets in North Carolina, Nevada and Minnesota. “We would look at a deal as small as one or two stores that would add onto existing chains,” Lieberman said. “We’d be willing to look at pretty much any market in the U.S. We are sensitive to highly competitive markets and markets where the real estate is over priced.”
Lieberman said the biggest challenges have been two-fold. “Many of the chains we have looked at have had declining performance trends,” he said. Some of the smaller chains didn’t keep the best financial records, which made it hard to understand the business.
“Acquiring an existing business can be tricky,” Lieberman said. “From our standpoint, we try to build a close relationship with the seller during the process so that they are still a cheerleader for us when they speak to their members and employees. For most employees they haven’t been through a sell of the business they work for and there are a lot of rumors and fears going around. The truth is, the employees are what make the business work and they have to be in the right mindset to make the acquisition work.”
Following any acquisition Lieberman said the best idea is to keep as much consistency in the daily routine. Consistency allows the members and employees to get used to the new management and possible structure of the business. “Slowly over time if there are things that need to be adjusted, we work with them and discuss with them why changes are being made,” he explained.
Titan’s move to acquire new clubs may not be a convincing factor that the bettering economy is gaining momentum, but it must at least give the industry hope that there is a prosperous time just around the corner. -CS
