existing clubs and a proven business model. A few club companies fully exited the industry. The challenge is that independents are still hoping for values last seen in 2007 and are not committed to trans- actMions at lower levels. There are few


several have gained FDA acceptance or have gone through various trial stages.


the non-profit sector. But, during these recent years many there are fewer club transactions than


of the components from that sector have seen little to no expected at this point. Also, the inde-


recreation centres, JCCs and military base recreation cen- marketing their stories to outsiders


Club Corp had an IPO of 2013, so there are now three public compa-


any in the industry f el the threat of competition from buyers willing to overpay, so overall


The key question for the club in- dustry is the potential impact of the Affordable Care Act. All elements of the local community, including insur- ance companies, employers, medical practices and hospitaltsr, are trying to figure out the opportunities. The club industry may have a role, but it is not yet clear how it will benefit.


growth, including hospital wellness centres, local parks and pendents have not been successful in


tres. Few new YMCAs have been built, but they have taken who are currently not immersed in the al communities.


The one category with meteoric growth is on-campus nies (Club Corp, LifeTime Fitness and


population. The concern is whether they will then open jor club owners from outside the U.S.


them up to the local community at below-market rates. have entered the market here. Only Equinox has ventured outside the


university fitness centres. They often involve $60-$90 mil- Town Sports International). No others


over the operation of other failing non-profits in certain lo- club industry.


The legislative challenges for the


club industry are continuing, espe- cially at the state level. All clubs need to monitor pending legislation which may impact them negatively.


source of borrowing, as it currently lends to seven of the pressed with the industry’s recurring


arger club companies. It is impressed with the indus- revenue, strong free cash flow and


EBITDA at mature locations. It accepts the fact that the in- It accepts the fact that the industry is


y’s recurring revenue, strong f ee cash flow and positive positive EBITDA at mature locations.


dustry is recession resistant. It highlighted the huge avail- recession resistant. It highlighted the


ability of funds and the need to deploy them. Multiples of huge availability of funds and the need


EBITDA were rising, allowing for more debt availability for larger club companies. to deploy them. Multiples of EBITDA were rising, allowing for more debt availability for larger club companies.


three other brands (9 Round, Kos ma and Steele). It saw a Fitness as well as three other brands


li n facilities, which are overbuilt for today’s size of student are likely candidates in 2014. No ma-


The key question for the club industry is the potential U.S. into the United Kingdom with a


Key conclusions from the IHRSA Financial Panel There were a wide range of insights


from TSG Consumer Partners, Piper Jaffray, GE Antares Capital and TZP Capital Partners. TSG owns Planet Fitness, a high-


al community, including insurance companies, employers, sors have continued to grow overseas.


impact of the Affordable Care Act. All elements of the lo- club-owned business. Several franchi-


portunities. The club industry may have a role, but it is gional players to expand both with new builds and local acquisitions, es- pecially with the availability of growth


Other related news The club industry is always worried about the quick-fix solution to weight


Key conclusions from the IHRSA Financial Panel


medic l practices and hospitals, are trying to figure out the opThe market seems to be ripe for re- not yet clear how it will benefit.


The leg slative cha lenges for the club industry are con- capital. The industry has yet to see any


trepreneurial spirit). Some of its issues involve the lack of investment in different sub-sectors,


sion via company-owned stores, need for an active social capitalization of the entrepreneurial


tinuing, especially at the state level. All clubs n ed to mon - meaningful investment by strategic


tor pending legislation which may impact them negatively. partners from analogous industries.


volume, low-price provider. It now has over 750 clubs and serves over 5-mil- lion members. With its existing region- al franchises, it sees growth of over 175 new clubs in 2014. Piper Jaffray studied some of the macro trends. It focused on the 25- to 54-year-old, which represents 67% of


membership options and tech ological innovation.


TZP Capital Partners bought SNAP Fitness as well as TZP Capital Partners bought SNAP


variety of advantages in investing in the club industry (e.g., (9 Round, Kosama and Steele). It saw


growing market, investment in different sub-sectors, brand a variety of advantages in investing in


identification, free cash flow and capitalization of the en- the club industry (e.g., growing market,


consistency of product, an ever-evolving industry, expan- brand identification, free cash flow and


media presence, and potent al safety and liability concerns. spirit). Some of its issues involve the


Looking forward Most financial experts see the club industry as likely However, until unemployment levels really decrease and Affordable Care Act, there are no likely home runs expect-


to benefit from a slightly better 2014 than the recent past. training, flexible membership options and technological innovation.


until clubs find meani gful ways to t ke ad ntage of the


There were a wide range of insights from TSG Consumer loss. But, commercial diet centres are tners.


Partners, Piper Jaffr y, GE Antares Capital and TZP Capital sti Palrl lacking long-term success with- out an exercise component. The pro- verbial diet pill has not been a serious


TSG owns Planet Fitness, a high-volume, low-price pro- threat; several have gained FDA accep-


vid r. It now has over 750 clubs and serves over 5-mil- tance or have gone through various growth of over 175 new clubs in 2014. Many in the industry feel the threat of competition from the non-profit


Piper Jaffray studied some of the macro tr sector. But, during these recent years


lion members. With its existing regional franchises, it sees trial stages.


ds. It fo-


cused on the 25- to 54-year-old, which represents 67% of many of the components from that


the memberships in the club industry. It noted that this sector have seen little to no growth,


demographic segment was growing less in employment i tncluding hospital wellness centres, lo-


went elsewhere for cycling, yoga, swimming and group they have taken over the operation of


the increasing trend toward we rable technology. cal communities.


The one category with meteoric


growth is on-campus university fitness centres. They often involve $60-$90 million facilities, which are overbuilt for today’s size of student population. The concern is whether they will then open them up to the local community at below-market rates.


ing. Consumer confidence was lagging. Its own primary and military base recreation centres.


“THE ONE CATEGORY WITH METEORIC GROWTH IS ON-CAMPUS UNIVERSITY FITNESS CENTRES. THEY OFTEN INVOLVE $60-$90 MILLION FACILITIES, WHICH ARE OVERBUILT FOR TODAY’S SIZE OF STUDENT POPULATION. ”


ed. Singles and doubles are more likely. There is optimism but no expectations that the industry as a whole will return to 2007 levels.


Rick Caro is president of Management Vision Inc., a club consulting com- pany with expertise in helping clubs with club financials, club valuations, market feasibility studies, expert witness testimony, member surveys and club sales/purchases. For more information, call 800-778-4411 or visit mgmtvision@gmail.com.


###


han other sectors. However, disposable income was grow- cal parks and recreation centres, JCCs


research indic ted that th se who did not belong to a club Few new YMCAs have been built, but


weight training on a “pay as you go” basis. It highlighted other failing non-profits in certain lo-


Piper Jaffray emphasized that strong cash flows, high


the memberships in the club industry. It noted that this demographic seg- ment was growing less in employment than other sectors. However, dispos- able income was growing. Consumer confidence was lagging. Its own pri- mary research indicated that those who did not belong to a club went elsewhere for cycling, yoga, swim- ming and group weight training on a “pay as you go” basis. It highlighted the increasing trend toward wearable technology.


Piper Jaffray emphasized that


margins on membership dues and the lack of need for working capital were all club strengths. However, it also noted the challenges involving high initial capital costs, high attrition rates and high ongoing maintenance capital needs.


GE Antares Capital saw the club industry as an attractive


strong cash flows, high margins on membership dues and the lack of need for working capital were all club strengths. However, it also noted the challenges involving high initial capi- tal costs, high attrition rates and high ongoing maintenance capital needs.


Rick Caro is president of Management Vision Inc., a club consulting company with expertise in helping clubs with club financials, club valua- tions, market feasibility studies, expert witness testimony, member surveys and club sales/pur- chases. For more information, call 800-778- 4411 or visit mgmtvision@gmail.com.


May/June 2014 Fitness Business Canada 25


Looking forward Most financial experts see the club


industry as likely to benefit from a slightly better 2014 than the recent past. However, until unemployment levels really decrease and until clubs find meaningful ways to take advan- tage of the Affordable Care Act, there are no likely home runs expected. Singles and doubles are more likely. There is optimism but no expectations that the industry as a whole will re- turn to 2007 levels. FBC


It liked the amazing trends in small group training, flexible lack of consistency of product, an ever- evolving industry, expansion via com- pany-owned stores, need for an active social media presence, and potential safety and liability concerns. It liked the amazing trends in small group


GE Antares Capital saw the club in- dustry as an attractive source of bor- rowing, as it currently lends to seven of the larger club companies. It is im-


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