Who TO WATCH: Whipped into shape

Who TO WATCH: Whipped into shape

Lewis, Morgan Jr

John Janszen had seen all the schemes. A 20-year veteran of the health and fitness club industry, Janszen witnessed – and participated in – enough of the highpressure sales pitches to make his fit body squirm with discomfort.

Over two decades, he watched salespeople use sneaky promotions to lure prospects into joining clubs, tie them into two- and three-year financed contracts, then ignore them after they signed on the dotted line. Fed up with the practice, Janszen started to make plans to go out on his own. And then, opportunity knocked.

In 1996, U.S. Total Fitness Centers, a chain of 13 health and fitness centers in the Cleveland, Akron and Cincinnati areas, declared bankruptcy. The parent company, known as USTF Inc., sought the court’s protection from 20 creditors who were owed a combined $6.9 million. Janszen and business partner Patrick D. Petrecca joined with a group of investors to buy nine of USTF’s fitness centers for $725,000.

The group renamed them Fitworks, under the company Fitworks LLC, based in Richmond Heights. U.S. Total Fitness also had clubs in New York and Florida, which the Fitworks team didn’t buy.

The partners cleaned up the clubs, added fresh paint and carpet, fixed old equipment and invested in new, state-of-the-art machines. But the owners also recognized that it would take more than a facelift to turn the beleaguered fitness chain around.

“Our main objective was to stabilize the company,” says Petrecca, CFO and co-executive vice president. “Any time you purchase a struggling company, you need to stabilize it and make it profitable. Our objective was not to grow initially. Until recently, we didn’t really have growth objectives established.”

Last year, Fitworks opened its first new club in Parma. Two others opened this year. Janszen says he and Petrecca plan to open a new club every 90 days, as long as they can maintain stable membership numbers at all of their other facilities. With health club memberships at an all-time high nationwide, it’s a goal the duo is confident it can reach.

When Janszen and Petrecca acquired the clubs in 1996, there were 14,000 members. Today, there are more than 40,000. In a ranking of more than 15,000 health and fitness clubs and club chains nationwide, Fitworks is one of the fastest growing businesses in the industry.

It has jumped from not even placing in the top 100 in 1996 to No. 35 this year. Here’s how Janszen and Petrecca turned around the ailing company.

Eliminating the bait-and-switch schemes used at other clubs to get people in the door was the first step Janszen and Petrecca took to transform the struggling chain into a health and fitness club powerhouse.

The club’s policy is to let everybody use its facility for 30 days for free. And, although potential customers do get a sales presentation their first day, there’s no obligation to join. If they want to join, they can sign up for a month-to-month membership or a one-year membership, the longest offered. The club used to offer two-year memberships, but those were phased out after being deemed too long a commitment.

“Let them come in. If they like it enough, in two or three or four weeks they’ll join because they really want to,” says Janszen, COO and executive vice president. (The two men share the titles of president and CEO.) “The trial period has always worked for us. Other health club companies don’t understand it because they want to enroll people on the first day.”

Janszen says the business model in other health and fitness clubs is to sell as many memberships as possible and invest a lot of money in advertising. While it has been successful for some chains, Janszen says he saw a lot of dissatisfied customers who were badgered into a long term financed contract and forced to pay fees to get out of the agreement.

Fitworks business model is a different – and some would gay more ethical – approach.

“Treat them right today and they’ll be back tomorrow,” Janszen says. “If we line up with what the customer wants, it’s going to be much more successful for us in the long run.”

The model appears to be working. About 65 percent of those who use the trial period sign up for a membership within the first 30 days. That doesn’t include the ones who return to sign up after the trial period is over, because those are difficult to track.

Health and fitness clubs are notorious for high employee turnover, which is bad for business. Fitworks’ owners found that members are more comfortable seeing the same faces every time they visit the club and therefore, more likely to keep their memberships.

To encourage employees to stick around, Janszen and Petrecca instituted an employee-ownership plan for the managers. And, instead of referring to them as managers, the company calls them owner-operators. While it may seem small, the job title has had a big effect on employee morale and performance.

“Everyone has an ownership interest from the management level in the club up,” Janszen says. “So when we go to recruit someone new they understand the potential opportunity to help us to grow and to run a business correctly. It’s much more costly for us to find somebody new than to keep the people we have.”

The average amount of management experience at Fitworks is 10 years, and several employees are working their way toward becoming owner-operators.

“We looked at our competitors, they were maybe turning their managers over every year, or even sooner,” says Janszen. “We work very hard to make sure the employees know that they’re No. 1, and if the employee is No. 1, then they take care of our members.”

Petrecca is a Clevelandarea native and Janszen is from Cincinnati. Bob Hoge, recently hired as the company’s director of business development, is also from the Cleveland area. For now, the company’s founders plan to grow in the markets they know and expand slowly.

“Our strategy is to look for sound sites, and I’m conservative in nature,” says Petrecca, who has not only owned his own accounting firm but spent two years working in the finance department for one of Fitworks’ competitors. “I don’t want to overexpand. I know what overexpanding can do. We want to make sure we can find good sites that are affordable, and that we know we can generate some member traffic and have a community that wants fitness, and, at the same, obviously as any business, make money.”

Just because the company is looking at expansion opportunities doesn’t mean the owners have forgotten about their current facilities Reinvestment is an important part of their business strategy. Grand openings are an annual event at the chains existing facitlites, with new equipment and infrastructure improvements unveiled each year. It is always looking at current clubs that might need to expand due to high member traffic or locations that might be more accessible for its members.

After allm, no one wants to wait in line to exercise.

“We want to run this business the way we think people want to be treated, and the way we want to be treated,” Petrecca says. “We saw things that maybe weren’t done right in other companies in the past and we want to do things that are done right. Have we done everything right? Hey, maybe not, but we know we have to improve on something. So we keep looking,” How to reach: Fitworks LLC, (216) 289-3100

Copyright Small Business News, Inc. Jan 01, 2001

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