Disastrous Expansions – When Bigger’s Not Better

Disastrous Expansions – When Bigger’s Not Better

Posted on 31. May, 2011 by in Marketing Fitness


Expansion isn’t necessarily a good thing. Think about Kirstie Alley’s out-of-control ballooning “expansion” for one!  Yet, on the other hand, you can have a perfectly sexy woman like Gisele expand to bear children and drop every ounce of “baby fat” lickety-split. Well, alright, all weights aside, what I really want to talk about is BUSINESS expansion. I don’t want to talk about winners like Donald Trump (um, despite his outbreak of birther insanity that killed his potential run for the presidency) or winners like Oprah Winfrey (who is now retiring, leaving people literally in tears wondering, “OMG – Who will I ever look up to for inspiration now? How will I know what books to read? Who will tell me what celebrities are cool? Where else can I see Tom Cruise jump on a couch? How will I have a chance to win a car just for sitting in the audience of her boring show?”)

I’d like to look specifically at defunct fitness chains – fitness failures, if you will. Some of them are just downright shocking. How stupid do you have to be to fail at an upscale fitness center in Manhattan? You’ve got a captive audience of over 1.6 million people living in the most densely populated borough of New York City, making an average per capita income of more than $62,000 – nearly double the state average or the rest of NYC even. If you’re a thriving, profitable little enterprise, how do you possibly fail in your expansion? Here’s how… a simple equation for your consideration: More Growth ==> More Spending ==> Disaster. Time and time again very profitable small companies grow and the next thing you know, their expenses go through-the-roof and the company has no other option but to file for bankruptcy.

In the world of fitness centers, bigger is not necessarily better. That doesn’t hold true in every industry, mind you. Ask Jenna Jameson if she prefers Ron Jeremy or the winner of Howard Stern’s Smallest Pen*s Competition. Porn industry aside,  a survey by Consumer Reports found that, in the consumers’ eyes, a smaller independent yoga/dance/Pilates studio, the little gym at work or a local mom and pop fitness center outcompeted big chains every time. (My facility is the perfect example located within 2 miles of a 30,000 square foot 24 Hour Fitness and within 1.5 miles of 40,000 square foot L.A Fitness). The bottom of the list held places like Curves, Golds Gym, LA Fitness and the notorious Ballys Fitness – who filed for bankruptcy once in 2007 and, again, in 2008. The funny thing is, Ballys Fitness told  US News and World Report that they have “many satisfied and loyal long-term members” and that they invested $30 million in upgrades “since that survey was conducted.” Are your eyes bugging out of your head like Louis Armstrong’s too? THIRTY.MILLION.DOLLARS. Does it surprise you they did this just before filing for their second bankruptcy?

Let’s look at another gym – David Barton Gym… the upscale Manhattan fitness center that went defunct when it couldn’t pay $65 million in debts. This 19-year-old gym had thrived locally for years as revenue increased 18 percent to $28.3 million from 2009 to 2010. However, the gym’s failure was based on overzealous retail expansion during peak rent years. In 2009, David Barton opened an extremely expensive 40,000-square-foot monster of a gym in Astor Place. To give you a precise idea of this particular location, consider that it was named after John Jacob Astor, who was at one time America’s richest man. His neighbors included members of the Delano and Vanderbilt families.
According to fitness club industry analyst Rick Caro of the Management Vision consulting firm, “They’ve always been positioned as a high-end, unique offering, with an unusual design that is very theatrical,” said Rick Caro, president of consulting firm Management Vision, which analyzes the fitness club industry. “They spent a lot of money on atmosphere and environment.” You know what that says to me? WASTE.OF.MONEY.

I could have marble floors, Greek revival pillars and opulent golden spas in my fitness studio, but if my head personal trainer’s got a mouth like Gilbert Gottfried or Charlie Sheen, my front desk clerk has the brains of Casey Anthony then I am destined to FAIL.

What you really need is a clean, sanitary and professional-looking atmosphere that is the right size for your members. You don’t want them working out in a dog kennel, of course, but you don’t need the Ritz Carlton either… unless you plan on charging them for the Ritz Carlton, that is. Let’s get real. Spend your money where it matters. Hire quality people, develop programs and make your center the best local establishment it can be. If you find you’re ready to expand, don’t choose the slice of real estate with the highest taxes or the highest rent.

When it comes to personal training studios or boot camps I much rather invest my money in some Ninja Marketing tactics than on location.

My facility is across the men’s prison for God sakes.

 

Location, location, location might be the slogan for residential real estate BUT for personal training studios I would say low overhead, great service, Learn how to market,  and build a community.

Bottom Line:

Don’t worry about spending a bunch of $$$ on couches, rugs, mood lighting, disco balls, live sets by international DJs, Russian baths, steam rooms or individual TV screens for every cardio machine. There’s nothing wrong with trying to differentiate yourself from the masses.

Differentiation yourself with offering better service, better results, better energy, better vibe, etc……..

Before you make the bold move to expand, you need to do a little soul-searching. If Russian baths and DJ Keoki are a MUST at your club,  then you’d better hold off until your revenue jumps another 18 percent. 8-)

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12 Comments

Leanne

31. May, 2011

Yess! I’m all about growth vs. expansion. And forget all the shiny objects and foo-foos. Just deliver results, build a community, and create an overwhelming amount of value. Period

Kaiser

31. May, 2011

Killer post big dog – my place is bare bones and I think I still built out too much. You don’t need all that shit. Just a WOW training product and a smile – that’s it.

Kaiser Serajuddin

31. May, 2011

And once you know how to make it once, making it all back again is much, much easier.

Georgette

31. May, 2011

Good article! and timely for me…value and customer service first…

CK

31. May, 2011

Hey Bro,
Great post and so, so true. O viously we learned as time passed that we could have passed on certain things and Horton more of this or more of that…lucky for us we didn’t go overboard on too much of anything. We did go classy and high end but we were bargain shoppers…lol!

Our only mistake.i wish we could really take back was when you talked about location not being a big deal….we got caught up in that and paid a premium because of it…well, not as premium as a few streets over but a nice chunk of change…

Anyways, great advice and keep em coming homie. Looking forward to you next Chi-Town visit…

Ken Roetman

31. May, 2011

Great post Sam and so very true! All i have right now is a 1250 sq ft warehouse with white walls and indoor outdoor carpet.
Although my clientele is some of the wealthiest people in South Florida and could train anywhere, they come to me because of the workout and the results that they see. Its all about being in the black not the red!

Rob

31. May, 2011

Great post Sam!

Couldn’t agree more!

A few years ago I almost went out of business as well. I had a thriving retail store, I opened a 2nd bigger more expense, prime space store (3 times the overhead) and it almost sunk me.

Lesson learned, bigger is NOT always better.

Great post and thanks for the insight.

Rob
http://www.RobKingFitness.com

Michael Duivis

31. May, 2011

Sam this was an AWESOME quality article, I think we all sometimes get too caught uo in wanting the best for our clients… but in the end it’s what you said -> ninja marketing, cult-like community following, and awesome results.

Armando

31. May, 2011

Very true Sam. thanks for the insight. As always bringing the true uncut version of what works and what doesn’t.

Christian

31. May, 2011

Great post Sam, it’s all about attracting the right people, converting those people into paying clients and keeping them to stay and to refer their friends. Great reminder on not to spend too much on the “bells and whistles”
I used to work for the corporate offices of Bally’s here in California and their is no wonder why they are going out of business, just upgrading for no reason.

sam

01. Jun, 2011

Thank you all for your feedback. I truly appreciate it.

Zach

03. Jun, 2011

Boy do i know this lesson all to well. We had outgrown our first location from both a boot camp and a personal training perspective. Instead of opening up another, larger facility we opened up a second facility. it’s been a harsh reality, but we got spread out way too thin and we’ve had to re-evaluate how to have our original successful vision in one place be successfully duplicated over 2 places.

We developed a system based on the primary owners consistently being available doing the selling and quality control. That stopped working when duties were split over two locations. We are adapting fast, but the lesson has been learned.

Dan Go mentioned it previously, develop a kick ass system and location first, optimize and systemize the place then consider expansion, or a bigger location.

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