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News > The Next Step
 
Sep 01, 2011
The Next Step
Club Solutions

The Next Step

After 24 months of scouring the U.S. for the perfect situation, Titan Fitness has acquired the seven-location club chain, Fitness Connection. Jeff Skeen, the president and CEO of Titan Fitness, decided to use his team’s wealth of knowledge they consumed in nearly 20 years of owning Gold’s Gym clubs, to attempt their hand at extending the Fitness Connection brand nationally.

Skeen understands the hurdles, but he also is a man that understands himself and knows when it’s time for a change. In 1992, Skeen needed a change. He said he had hit a stale point in his career at a pension software development company. When the idea of becoming a partner in a fitness club was pitched to him by some high school buddies, he said he only needed three things — to get a steady paycheck, have Sundays off and, most importantly, clear it with his wife.

Arriving home, he had a hunch that his wife would quickly eliminate the club idea. Skeen believed that she would be the one that would keep him from committing career suicide. But, she didn’t respond the way he expected. “She told me to go for it before I even got the whole story out,” Skeen said. “She said, you’re in your 20s, take a shot and if it doesn’t work out, you can get back to where you are now.”

Being a faithful husband, Skeen followed his wife’s directions he joined his buddies at the G Group in owning their first Gold’s Gym; then another, and then another. They continued to grow and Skeen found himself at the helm of a Gold’s Gym franchise.

The Connection
Skeen and his partners at Titan Fitness searched for nearly 24 months, and looked into over 200 clubs before deciding to acquire Fitness Connection. They wanted to find clubs that had at least $1.5 million in regional EBITDA (earnings before interest, taxes, depreciation and amortization). The club’s market had to have potential for growth and was considered one of the top three club chains in that market. Fitness Connection, which far exceeded their criteria, would move under the Titan Fitness ownership, but each Gold’s Gym under Titan would be converted to a Fitness Connection. Unlike their past acquisitions, Titan was able to create a partnership with the Fitness Connection ownership team to develop the Texas Market. “We were especially excited about this transaction because we were able to form a partnership that allowed us to work with some of the best operators in the industry,” mentioned Skeen.

“The great news about this acquisition is that the chain had many of the same systems in place that we already use,” Skeen said. “One of the exciting parts about buying another company, especially one that has very talented operators like the Fitness Connection management team, is that we are able to build a company that incorporates the ‘best of breed’ thinking.”

Many of the players in the acquisition have been in the fitness industry for 20 or more years. Skeen’s team realizes that what they may have done then to achieve success may not be the same today.

Skeen has taken a hard look at the changes in the industry since 1992. Like many others, he has noticed the necessity of cooperation with the medical community, between doctors, hospitals and insurance companies. Wellness is the new frontier for health clubs. “We will still continue to offer state-of-the-art workout facilities — however, we are looking to expand our current services to help attract the 85 percent of the American population that has been difficult to reach,” he said. “We are in the process of speaking to a number of companies which we will plan to either acquire or strategically partner with to expand into areas such as corporate wellness, nutrition and wellness coaching and medical services.”

The challenge that lies ahead for Skeen and company is the branding of Fitness Connection in cities and states outside of Houston, Texas, the founding location of Fitness Connection. However, after 20 years of club ownership, Skeen has learned many of the secrets to developing a global brand and has nurtured partnerships with vendors that actually assist his branding efforts.

Both Fitness Connection as well as Titan Fitness’ clubs already use many of the same companies, like Fiserv and SupplementRX. Skeen said that SupplementRX in conjunction with Visual Fitness Planner would be crucial in the implementation of wellness programs.

“We know 70 percent of someone achieving their fitness goals is through nutrition,” Skeen explained. “We are big advocates of supplementation in someone’s diet. SupplementRX is a company we found that not only had supplementation, but they also have technology that helps prescribe what supplement someone would need based on their goals. We are looking to take that part of the business and plug it into our nutrition counseling, that we are looking to do — we are interviewing nutritionists as we speak to come on board and take the nutrition part of their program and implement it into a person’s health.”

In addition to a nutritionist and cooperating vendors, Fitness Connection’s personal trainers will play a role in the overall health of its members. “Personal trainers for the most part know that nutrition is critical,” Skeen said. “You will find trainers that will go out and help people with their own meal planning and thinking about supplements. We want to go out and find the best products possible and have a consistent product that we could offer to our consumers.

“As it pertains to wellness, the other thing we are working with our trainers on is talking with the medical community.” As well as pushing the club GMs and management staff discussing partnerships with the medical community, Skeen pushes his trainers to build relationships with a new doctor, or someone in the medical field, each week.

“We are working with our trainers at some point to get them additional certifications that will help them better work with the consumer. Unfortunately, not only nutrition is a big issue, but also the psychological part is an issue. The trainers need to understand that there is a psychology that you need to be aware of in helping someone achieve their goals. If you can’t be sensitive to the fact that they are dealing with other issues, your customer won’t be successful.”

Skeen is also a realist. He understands that proper care for a member isn’t cheap. “Although, I think that pricing one’s memberships to increase volume is part of the solution, I feel that if an organization is just going to focus on price and not offer products and services to help people get healthier, we as an industry have failed in our mission to truly help people get healthier to end our impending health care crisis. What I mean by that is, that if a de-conditioned person buys a membership because it is a low price point; but, they don’t get professional assistance from a personal trainer or nutritionist, they are going to become discouraged and go back to their sedentary lifestyle.”

In order to continue as a wellness company, Skeen is relying on everyone around him, from vendors to his management staff and club team as a whole. Although, companies like ClubCom and Advecor don’t directly affect the club’s pursuit of wellness, throughout the changeover to Fitness Connection, these companies will provide a major role in developing brand and pushing the wellness mindset.

“ClubCom, we’ve known the company since 1999 when my business partners and I at the G Group bought Gold’s Gym International,” Skeen explained. “To this day we use their product. What they do is, they provide the ability to have a self-contained entertainment system that you plug into your network and it’s music videos that are played over the TVs. It also provides you a way to sell advertising, either on a national basis or to local businesses — it also provides you with another way to communicate with your customers.” If Fitness Connection is having a special on supplements or other programs, they can notify members through the ClubCom system. “We work with Advecor to provide direct mail and social media network services which will be very important in assisting us in communicating our wellness message to members and prospects” Skeen further explains.

Visual Fitness Planner is another company that Titan uses to assist them achieving in achieving their success. The Visual Fitness Planner is a tool used by the sales staff and personal training department at Fitness Connection. It helps both sides give more professional sales pitches to potential members or potential personal training clients by providing them with a presentation that can walk them through the process of landing a client.

“This is a way to give a professional look towards how our teams present information,” Skeen explained. “When you have a new sales person come in, they actually have something that is a presentation that can help them walk the prospect through buying a membership.”

On the personal training side it is used primarily in the same format. “At this point, once they’ve joined, now we are doing a consistent presentation on why personal training and nutrition is so important. And, it helps to sell personal training and nutrition services.”

The Acquisition
According to Skeen, Titan Fitness is always on the lookout for new acquisitions. The Titan business plan revolves around the process of purchasing relatively successful club chains around the country.

“Getting into the industry now is far more challenging than it was 20 years ago,” Skeen said. “20 years ago there were less competitors. When I got in the business, there were 12,635 health clubs, and in the early 90s, 10 to 12 percent of Americans used health clubs. Now, there are 29,980 locations with 15 percent of Americans using them. It’s become more competitive, and it’s not easy to get into.”

Skeen said back in the early 90s when they opened their first store it was about 17,000 square feet and fitness only. “We thought, this thing is huge,” he said. “Now our stores are 40,000 to 60,000 square feet with all types of amenities. Nowadays, it’s a whole other business.”

“We got into it and we opened our second location and by 1998 we had 11 locations and we were in the most profitable gym chains in the world with Gold’s Gym,” Skeen explained. Gold’s Gym International came up for sale in August of 1999, my partners and I purchased GGI with the help from a private equity firm.”

The Gold’s Gym brand is something that still means a lot to Skeen. “It’s something, but when you look back it was a great ride as a Gold’s Gym franchisee, I still have a great relationship with the organization, but now we, my partners and I, get an opportunity to do something different. To be able to take an unknown brand and mold it into something that we feel good about that represents our desire for wellness. The separation wasn’t easy, but we are looking forward to taking the brand and growing with it.”

Skeen said he would cherish the days he spent with Gold’s Gym. “It is amazing and I’ll cherish those days very much. But, in business, 20 years is a long time to do one thing, and now we get to sharpen our teeth on something else.”

In acquiring Fitness Connection, Skeen and company looked at many varying factors for about 24 months. “We like to have a handful of stores,” he said. “Right now we would love to have more East Coast acquisitions, but Texas is a great market where they are located and there is an opportunity to grow.”

The population surrounding Fitness Connection originally attracted Skeen to the idea. “The Fitness Connection model has shown to do extremely well, even with a lot of competitors. They’ve gotten their model down for that market. Will that model work in every market? Probably membership pricing won’t, necessarily. But, the way they operate their facilities and the pricing, they’ve figured out that Houston market and where they’re growing. The owners of that chain have about 11 sites they have already located as possible new openings.”

All the new openings are in Texas, but all of Titan’s locations in Nevada and North Carolina will be changed over to Fitness Connection — instantly, Fitness Connection becomes a national brand.

Skeen said Titan is still looking. They are in the market to acquire, and they plan to continue their acquisitions. For the first five years, Fitness Connection will stay a national brand, but Skeen said it’s the dream to become an international brand. “Why not think big?” Skeen said. “The international markets are just exploding. There is incredible opportunity in the international market. They’re 10 to 15 years behind the U.S. as it comes to sophistication. The international markets have incredible opportunity.”

As a company in the short term, Titan isn’t exactly looking to go international. However, Skeen said they wouldn’t turn down an offer. “We are actually considering some right now,” he said. “But, we’d have to feel very comfortable that there was a strong management team in place that could run that, because it changes the whole dynamic of how you operate. For the most part, the U.S. is going to be our playground for the next five years.”

The Future
Skeen joined Gold’s Gym in 1992 through the encouragement from friends and family. He used the venture to escape a career path he didn’t truly enjoy. “From Gold’s Gym it’s all I’ve known since I got into the fitness industry,” Skeen said. “The biggest thing to take away from Gold’s Gym is you can’t undervalue the brand, and the messaging of the brand, and what the consumer and the employees take away from that. The Gold’s Gym brand is phenomenal. It’s well recognized throughout the world and so taking pride in that, which will be something we will be working on with the Fitness Connection brand. It’s exciting because it’s an unknown brand in the industry, but it can have a lot of meaning and we as an organization find it’s exciting to try and grow something that is relatively unknown on a national basis.

“We hired a branding team, people that have a tremendous amount of experience working with large brands. And, we’ve already started the process July 1 after we separated from our previous franchise. They’ve taken us through a process of thinking about what we want the brand to mean. What we think someone should consider when a member joins, what it should say to them. For us it’s defining what Fitness Connection is going to mean.”

The word “Connection” is going to play a major role in the brand of Fitness Connection. “The one thing we have seen is, you have about 85 percent of the population that doesn’t belong to a health club. They are disconnected from fitness and we find a lot of health clubs are disconnected from the community.” Skeen believes that a lot of health clubs are only focused on how many drinks they sold or how many memberships they’ve received that month.

Skeen realizes that at the end of the day money is a major factor. However, he believes that the key to building the Fitness Connection brand, must be building connections.

“The word connection is a really neat word that we can play on to start building brand equity. We’ve already started implementing nutrition; we’ve started interviewing dietitians and different companies that provide corporate wellness. We are looking at any kind of thing that will help expand the fitness element into wellness. We are also looking for possible acquisitions into the wellness space.”

Although, being a franchisee was an amazing adventure for Skeen and Titan Fitness, the recent separation has sparked a feeling of liberation. “We aren’t a franchisee, we don’t have any restrictions on what we do. In that aspect anything is now a possibility. That’s what’s exciting, not only are we looking at buying health club chains — we are actually looking at buying synergistic businesses. That’s a really exciting part of what we are going to do.”

It’s an exciting time for Skeen and company. They get to embark on a new journey full of possibilities. The fact that they spent nearly 20 years as a franchisee says a lot for that brand, but by them being able to so easily transition to an independent with the desire to build another brand, shows the education that comes from a part of being a franchisee with Gold’s Gym.

Fitness Connection may be the newest and could potentially be the fastest growing wellness facility in the U.S. and eventually the world. With Titan’s success over the years, and the quickness at which it started in 2007, it will be an adventure to see where they are in five to 10 years. -CS

By Tyler Montgomery

 



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