Jul 1, 2007 12:00 PM

Lifestyle Family Fitness Inc., St. Petersburg, FL, is projected to gross more than $100 million in revenue by the end of 2007. It has grown from seven clubs in 1999 to more than 40 clubs in Florida, North Carolina and Ohio.

Geoff Dyer CEO and Founder, Lifestyle Family Fitness Inc., St. Petersburg, FL

Q: For someone who’s never been to a Lifestyle Family Fitness club, give me an idea of what your clubs are like and the look and feel of the facilities, programming and membership demographics.

A: Our facilities are typically in the 32-35,000 square-foot size. When we open in a new market, we would typically open five to 10 clubs, depending on the size of the area, and we would also build a 50,000-square-foot facility in that same area, so that we have the opportunity to provide multi-club access for those members who want to buy that. In our typical club, 32-35,000, typically we have a very large workout area, 10,000 square feet, a large cardio area, with approximately 100 pieces of cardio equipment. Group fitness is big part of what we do, and typically about 4,000 square feet for that area. In our group fitness area, we use all the Les Mills International programs, BodyPump, BodyStep, BodyFlow, BodyAttack. These programs are important for consistent experience across all clubs. Spinning room, we have tanning that we provide. We’re a Florida-based group and tanning is still important to Floridians, so we provide that service. Also, in the general exercise area, we’re providing a separate private training area for our members, where personal trainers and their clients can exercise in a separated area that requires a special key to access that area. We feature the Kinesis wall and more high-end finishes in that particular area. We’ve tested in one club, and we’re introducing it to more of our facilities. Locker rooms, typically we allocate about 10 percent of our total space for the locker rooms, and that would include a sauna and wood-faced lockers and things of that nature. We try to build our clubs with products that don’t show wear and tear. We stay away from carpeted materials that typically you have to replace or steam clean frequently. We try to finish our clubs in such a way that they always look clean and they’re easy to maintain. Our membership types are typically one-club facilities that are not yet fully mature, in other words aren’t filled to capacity, so we’ll have a one-club membership. We have a multi-club membership, which we call a passport, and we have a premier membership that is also available. All of our memberships are month-to-month. We don’t have any long-term contracts, therefore members can pay on a month-to-month basis and terminate their membership at any time with notice.

Q: That’s a big topic in the club industry: the long-term memberships vs. the month-to-month. It seems like the month-to-month contracts are more popular and easier for consumers to handle than long-term contracts. When you were forming your business model, is that something that you looked at and said, “This is what’s going to separate us from other clubs?”

A: I’ve been in this business now for about 35 years. In the first 15-20 years, we used to sell two-year memberships. If anyone’s worked in this business in the back office, you realize what those collectors go through, trying to collect on a two-year membership when a person really doesn’t want to pay. It makes you feel uncomfortable about the industry that you’re in. I’ve always had this dream of letting a member cancel but never had the comfort or the confidence to do that. And then in the late ’90s, as the business continued to grow, the evolution of EFT and the elimination of pre-paid memberships, we felt comfortable enough that our members wouldn’t all leave if we went to month-to-month. We made that shift in 1999 and we haven’t looked back. Certainly, members quit at a much faster rate, but we feel the integrity that we create by going that route is far better. There’s a much greater sense of pride amongst our employees because we let our members terminate when they don’t use the club. Obviously, when you go month-to-month, you have to watch your members a lot more closely. It focuses a lot more attention on customer service. We look attrition reports the way other clubs look at sales reports. It’s a true fact that it costs more to lose a member than it does to acquire a member because you have no commission involved. It’s cheaper to keep a member than to acquire a member is the point I’m trying to make because there’s no commission involved. Not a lot of clubs focus on the quitting member. Members who become inactive after three months, 5 percent of your members are not using it, and that can climb to 20-25 percent after six months. So it puts all your attention on keeping your members active.

Q: Your first club opened in 1982 in Lakeland, FL. Then your company doubled in size in 1991, doubled again in 1995. From 2000 to 2007, you grew from seven clubs to 40 clubs and $12 million to $100 million in revenue. How have you done it, especially the rapid growth in recent years? What’s been your main secret or main part of success?

A: When we started the company in ’82 until 1999, in those first 17 years we grew to seven clubs. Growing to seven clubs in the early days, I’m sure there’s a lot of other entrepreneurs out there that have gone through the same risks that we’ve had to take. You basically put your life on the line every time you open a club. You don’t have a lot of cash, and it’s difficult to borrow money because you don’t know how. For me, it was all about refinancing my home. Thank heavens I had a house that I could refinance. I refinanced it so many times, it was worth seven times more than I paid for at the end of the 17 years. Raising capital was a challenge in the early days and of course making all the right decisions as far as the clubs you open and trying to keep focused on hiring the right people. All those things were necessary in those first 17 years. In 1999, I had a chance to sell the business but instead went to someone I trusted who was a business builder, someone who had had some successes in the past. He agreed to invest in 2000, subject to me making a commitment to run the company at a much more sophisticated level and also being committed to growth. So I was excited to have the opportunity to get that kind of wisdom involved in my business. I knew I knew the sales and marketing side of it, so I agreed to that investment, which began in 2000. The first thing we did was we hired a CFO, a chief financial officer. When you move from a bookkeeper who was a controller back in that day to a chief financial officer, that was a quantum leap in the way we managed the financial side of the business and the ability to borrow money and grow the business. We had to hire an entirely new executive management team, which we did. We had a $12 million company. We committed a million dollars to the management team, so that was a huge risk and a big investment in people. But those people are really the foundation for taking us from $12 million to the $100 million that we’ll achieve this year. We made a big investment in systems and the way that those systems help us report on the way this company functions, going 100 percent paperless. We’ve spent probably $1 million to $2 million each of the last two years having a paperless membership enrollment system, sales force automation, all the accounting systems. So we tried to create an environment where it’s very easy to open new clubs and get away from a paper-intensive business. We also reorganized our clubs where before we used to have one general manager that ran the club, a very complicated role. I was told that you couldn’t grow quickly with a singular manager that had a very complex position. It would be difficult to find them, difficult to train them and difficult to keep them. So we split the general manager role into two managers, a sales manager and an operations manager. And they respectively had area managers and district managers and VPs to report to. That was a very difficult thing to do. The first year, everyone hated it. The second year, they liked it. The third year, it became a real advantage, a true differentiator for us. We were much more focused on the customer. We had double the career path opportunities for people to grow. And then two years ago, we created a third manager, which was the personal training manager. That became a catalyst for even more growth and better recruiting. We created a whole new side of our company that didn’t exist. That’s enabled us to achieve tremendous results there.

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