Strong Shoulders
have just told the applicants, ‘We’re putting you out of your misery. It ain’t happening, pal.’”
In February 2009, the new holder of the FAC loan filed a foreclosure action against FAC, and, in July of that year, the Fayetteville Athletic Club filed for Chapter 11 bankruptcy.
A CAUTIONARY TALE
Rick Caro, the president of Management Vision, Inc., an industry consultancy based in New York City, testified on behalf of the Shoulders during their bankruptcy proceed- ings. “Lots of businesses hit roadblocks when the economy goes sour,” observes Caro. “But who’s prepared for their bank to fail in the midst of an expansion? Typically, it’s your bank that you turn to for help in times of crisis, but the Arkansas National Bank had troubles of its own. So the rules of the game changed, and the Shoulders had no one to coach them.”
Still, Caro notes, the Shoulders’ saga is a cautionary tale. Entrepreneurs, risk-takers by nature, need a devil’s advocate in the conference room. “Questions about restructuring loans are almost beside the point,” he suggests. “You have to make sure you have sufficient working capital and resources to carry you through unex- pected rough periods. You can’t play things too close to the vest. With no wiggle room, problems began to cascade at FAC. Other clubs opened up locally, making the competition for new members tougher. Rumors started to swirl. And, once the FAC went into foreclosure, the press coverage didn’t help.” One of the more widely read stories was an article in The New York Times headlined “After the Bank Failure Comes the Debt Collector.”
WRAPPING UP BUSINESS
The Shoulders’ legal problems didn’t excuse them from continuing to run their club. “Bob never let any rumors or negative PR get to him,” recalls Katherine. “He went about his work, pleasant and positive. I was amazed, because there were times I drove up to the club, and I had to turn around and drive home. I couldn’t let people see me like that. Bob held down the fort.” But the strain was tough both on their relationship and their family. In 2008, the Shoulders’ elder son was 18 years old, a
senior in high school, and their younger boy was 16. “Our troubles spanned our sons’ high school years,” says Katherine. “It was horrible. Bob and I were so absorbed in trying to keep our business alive that we had no energy left over for our children. They were amazing— somehow, they understood this. I’d come home and tell my 16-year-old, ‘I’m sorry Patrick, I can’t deal with any- thing else right now. I just can’t handle any more stress. We’re on the brink, so you can’t get into any trouble—we just can’t handle it right now.’”
At his graduation ceremony, Katherine apologized to her son for not having been around. “He told me not to worry, that I didn’t miss much.”
46 Club Business Internat ional | NOVEMBER 2011 |
ihrsa.org It was against this backdrop of stress and pressure that
the Shoulders were preparing to do battle with SM-WLJ Asset in bankruptcy court. After depositions, but before the trial, SM-WLJ offered the Shoulders a deal. “After all we’d been through,” says Katherine, “when we looked at a deal that would let us get out from under Chapter 11, we decided to be done with it and move on.” SM-WLJ agreed to release the Shoulders’ personal guarantee on the loan. pay them a guaranteed manage- ment salary, and permit them to retain a 10% minority interest in FAC. Under the terms of the agreement, the Shoulders could have continued to work at FAC, but decided that would be awkward and chose, instead, to leave. FAC continues to operate successfully today.
INVENTING THE FUTURE
And so the Shoulders are considering leaving the empty nest and moving to North Carolina, leaving FAC behind, and ending their long reign as club owners and managers. “Will we ever run a club again?” Katherine ponders the question. “You know, you never know what the future may hold, but I suspect that owning and managing clubs is now a part of our past. Right now, we’re still a bit shell- shocked. We’re making the transition from being respon- sible for 150 employees and 7,500 members to being accountable to one another and Retention Management.” For his part, Ekstrom, of RM, couldn’t be happier to have the Shoulders on board. Customers since the firm was founded in 2003, Bob and Katherine have been a source of valuable customer feedback for the company. “They’re savvy club owner/operators, and they’re pioneers in member retention and the use of social media in the fitness industry. I can’t think of a suggestion they’ve made that hasn’t been valuable to use as we’ve grown as a company.”
Ekstrom’s current goal is to expand on RM’s e-mail platform. “When we started this business,” he explains, “e-mail really wasn’t being exploited in the fitness indus- try. Today, the same is true of social media. And all the research we’ve seen shows that combining e-mail and social media adds up to more than a sum of the parts.” But Ekstrom is quick to add that, for him, the hiring process is about much more than simply acquiring experience and expertise. “What gets lost in conversations like these,” he says, “is that I hired Bob and Katherine because they’re good people. Yes, they bring great strengths to our firm, but good people are hard to find; and when I find quality people, I find a way to work with them. The Shoulders are more than survivors—they’re thrivers.” After all that’s happened, Bob Shoulders remains
deeply optimistic, and he’s excited about the future. “When Rich asked us to join the firm, he told me, ‘Run- ning a club is so hard, and you’re out of it. You’re going to be so happy working here.’ “And we are.” —|
– John Halbrooks,
j.halbrooks@verizon.net
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