Feb 1, 2008 12:00 PM

Mizes talks about branding, Kranking, corporate fitness and expansion for this California company on the move.

Q: How many of your clubs have Kranking?
A: We are in 12 of the clubs, but not all of them in the group fitness programs while we were testing it. By end of March, all of the clubs will have Krank cycles on the floor and in the group fitness room so that we can combine Spinning and Kranking in the room together. We will be the only club [to offer Kranking] until Johnny brings this to IHRSA in March. Then Johnny has to create a manufacturing agreement to move it forward.
If you think about the upper-body ergometer today, it’s something you see for physical therapy and older adults. I will tell you in our classes today that we have about four Krank cycles in a room with 30 bikes, so it’s a 1-to-5 ratio. People get on the Krank cycle for 10 to 15 minutes, then get back on the bike, and we will have literally 20 to 30 people with only four or five bikes get on a Krank cycle in a 45-minute class. We are very excited to be the first to bring Kranking to the industry. 

Q: Well, let’s move onto your wellness programming. How are you developing the wellness programming at Club One, and why do you place such an importance on it?
A: It stems from our work-site health and fitness channel of access, as we call it. Our corporate partners are asking us to provide programs to help their employees lead healthier lives. It’s not just about managing the fitness center for them; it’s how we connect with and impact the lives of their employees and complement the programs that their health care provider offers or some of the other programs that they have going on in their organization. The light bulb just went on with all of us, that all of these employees—some of them are members of our commercial clubs, so there’s great overlap—we felt we could take some of those programs and bring them to our members, which we are doing, and add value for our corporate partners by selling them to them at a very reasonable rate because we can leverage the 50,000 plus people we’re buying it for for our employees. So, again, trying to take our positioning and our core strength and leverage those to add value for the different channels of access that we serve.

Q: Are you seeing more corporations being willing to be open to the whole idea of fitness for their employees, and is that part of your business growing even more than other parts of your business?
A: I’m going to get on a pedestal for a minute and say this: When an organization’s leaders at the C level get behind a wellness program, it’s amazing how fast it goes in that organization. When an organization channels its fitness center into the world of procurement or facilities, then it’s strictly an employee amenity, and the ability to implement wellness programs has slowed down. The challenge we face and everyone faces is finding the right audience and demonstrating…the facts are there with respect to return on investment from an exercise program and a wellness program, getting people to move and make better health choices. No doubt. The challenge is getting to the top and connecting with CEOs and C-level folks and having them lead the charge. I can tell you that from our own organization. We are a bunch of health nuts in this company, but I certainly lead the charge in that, in terms of our own health care costs and programs and rewards for folks to lead healthier lives because I think it’s so important. But that isn’t necessarily the case across corporate America.

Q: But you feel corporate wellness is becoming more important to business leaders as they realize it’s helping to reduce their health care costs?
A: We are getting to the tipping point. I don’t think we are there yet. A key piece of this will be some of the new medical insurance programs offered by insurers that will reward healthier behavior. The more of that that we see, I think the closer we will get to the tipping point and see a great landslide of successes as we get to that point, but we are not there yet. There are a few states that have flipped the switch in the sense of raising the deductible for all employees, and then you can buy down, so to speak, or be rewarded for that deductible all the way down to zero for indicators that show you are leading a healthy life, meaning your weight is in line, your blood pressure is in line, your cholesterol is in line, you’re not a smoker, etc. When insurance providers offer it and organizations have the backbone to step up to it, I think we’ll see a significant change, but only when that’s the norm instead of the exception. Now, the companies that are doing that are written up all the time because it’s so out there, and that’s going to change.

Q: Is this a part of your business you plan to grow in the future?
A: Absolutely. As I said, the wave is coming. It’s just a matter of time. To give you a classic example, I’ve gone out and spoken at a number of human resource conventions as well as wellness conventions and showed people that at Club One…our health care costs relative to the other companies that our medical provider insures—we are the exact same age, so it’s not age based—we run one-third to one-tenth the norm on every single metric that they track. One-third to one-tenth, and it depends on the metric. That’s what a healthy lifestyle does.

I can show that to other HR leaders and facilities and procurement people. And we’re not effective enough. I wish I was more effective. And when I show it to senior executives, they’re amazed, and then they say, “But you’re a bunch of health nuts.” I say, “That’s exactly the point. Yes, we may be at the far end of the spectrum and you are somewhere at the different end, but you have to take steps to reward and look at your benefits programs because if you look at benefits that are offered in corporate America today...” This is the question I asked them: So let’s talk about the benefits you offer that reward healthy behavior with respect to movement and nutrition. And the answer is none in most cases. Yet we offer employee assistance programs, and we offer all these other benefits programs that don’t have as much value as one-third to one-tenth the norm because we’re a bunch of health nuts. So that message is beginning to resonate, but we’ve got a long way to go.

Q: The economy is in an uncertain state. Club One is positioned as a middle-priced club company. A lot of people have said that to survive, you will have to be low priced or high end. How do you plan to stay in the business and be profitable as a mid-priced club?
A: I must be a contrarian. The middle is where the meat is. So I would say we can compete very effectively in the middle by playing our strengths, continuing to add value to the programs we offer inside the club and outside the club, and, most importantly, continue to understand what our members want, which are results— however, they define them, not how we define them—and deliver against that. Because when you do that, the price in the middle is certainly less relevant because I’m achieving something that I’m looking for. There are very few people who can determine a program for themselves, find their joy in exercise, and I think that’s the challenge with the low-price leaders. There is always a place for the high-end, and there’s always a place for the low and the middle. I think the key is to understand who you are and play your strengths.
 
I think you can clearly see from the phone call, we have a plan and are adding programs and services that can add value for our members. We’re just not sitting still at all. That’s for sure.  

Q: You have really gotten into managing other clubs, particularly JCCs. What are your goals for Club One’s management company?
A: We continue to leverage our strengths. Our strengths are obviously in running mid- to high-level clubs, our people and our back-office processes. So our nonprofit groups have begun to see that the JCCs—and we manage an India community center here in the Bay Area as well—that club management is an area that is important to their other mission-based services, and they know it’s not anything they do well. So they’ve contracted with us to manage that piece and to improve the profitability and drive the revenue of those programs so that they can spend it all back on other mission-based services in the community.

We have three JCC contracts today that we manage, and we have numerous consulting arrangements with them. We’ve even developed programs, taking our service training module and branded it for the JCCs so that it’s a little bit “hamisha,” which is a Yiddish term and reflects the culture of the JCCs that we can then turn around and leverage and provide to the JCCs across the country to elevate their service game. So again, we are just going to play our strengths, which are service to others, all the back-office systems, great people and programs. Where we can find partners who see that that strategy benefits them as well as benefits Club One, we’re interested in pursuing it with them.

Q: How has the mix of a for-profit and nonprofit working together been, especially when so many are at odds?
A:No, actually here in the Bay Area, the San Francisco JCC, six years ago—so it started before I came on board—approached us as they were building a new building because they loved what we did in our clubs and thought that we had the systems and people to help them as they were opening up a brand new facility. And we successfully did that. That, of course, led to other JCCs here in the Bay Area and throughout the country to inquire more about what we do and how we do it and how it is favorably impacting the Js. And, of course, we like it for what it does for our business. Here in the Bay Area it’s an incredible complementary business. And what I mean by that is the JCCs close on certain holidays, and all those people have access to our Club One clubs during those holidays. Of course, when we’re closed on Christmas, and all of our members have access to the JCC on that day.
So we’ve actually created here in the Bay area complementary memberships and discounts on guest fees. If a member of the J wants to visit any Club One club, they have a discount and then this open access on days in which either site is closed for either renovation reasons or religious reasons. So we’ve leveraged that again, turned what is historically an issue into a strength.
In each of the community centers we serve, in most cases our name is not out there. We’re perfectly fine that the members love that the J is run well, and we can silently pat ourselves on the back and provide all the credit to our partners, which is where it belongs. It’s a great model of servant leadership. 

Q: Where do you plan to take this part of the company? Do you plan to grow it by 50 percent in the next five years or at what level?
A: I’d love to be able to grow at that level. The management-contract business on this size of a program is really about our partner organization coming to the realization that perhaps there is someone else who can do it differently and better and enable us to focus on the things we do better—meaning the partner organization. And that’s a process that we can influence, but part of it takes place with our partners or prospective partners. So we continue to use the crawl, walk, run program, meaning that’s why we develop these consulting programs that we can demonstrate value to prospective partners. That’s our crawl phase. And then perhaps [we can] take a larger role on the way to a management business where we free them up to focus on their programs and we deliver greater returns for them to spend back to the community. It’s a slower process. We are not in total control as you are when you build a club and away you go.

Q: Your company is dividing into three pieces: has its own facility, does corporate wellness programming and manages other facilities. Which brings in the most revenue?
A: Clearly today our clubs, owned and managed—by the way, some of our clubs that are branded our club name, we manage [but] we don’t own them—but our clubs are our first [in revenue generation], our work-site health and fitness locations are our second, and our community centers are growing rapidly, and they are third today.

I know where we are headed is to increase the profitability and revenue from our managed sites. And whether those are community centers, that’s great. Whether they are work-site health and fitness, that’s also wonderful, and if they’re branded clubs that we manage, that’s wonderful as well.

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