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Health Clubs of the 1990s

Health Clubs of the 1990s

By Pamela Kufahl (

The fitness industry in the 1990s was still young but slowly maturing. More people were joining health clubs, and the number of facilities grew with them. By this decade, many people had accepted that exercising improved their health, but the focus of most health club members was still on how to improve their appearance.

The industry faced some challenges in this decade, especially in the early 1990s as the savings and loan crisis helped spur a recession that caused money to be tight and caused some club closings as well as the Chapter 11 filing of four Naiman Co.-owned Sporting Clubs. Still, the health club industry held steady, and by the end of the decade, was going strong with some consolidation of clubs.

The decade also was a time when true brands were created with companies such as 24 Hour Fitness, Bally Total Fitness, Wellbridge and Family Fitness Centers.

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24 Hour Fitness, San Ramon, CA

The San Ramon, CA-based 24-hour chain continued to grow in the 1990s under Mark Mastrov's leadership. Mastrov says that the 1990s was all about the equipment and programs at his facilities, but it was also a time of tremendous growth.

In 1995, Mastrov made a call to one of his biggest competitors, Ray Wilson, who had 68 Family Fitness Center clubs in California. Mastrov, with 34 clubs located mostly in Northern California, had begun to see some Family Fitness Centers, which had been confined to Southern California, spring up as competitors. Mastrov suggested to Wilson that the two make a deal. After some negotiating, the deal was done, and Mastrov had purchased Wilson's larger chain of clubs.

The purchase of Wilson's clubs propelled 24 Hour into a much stronger position in the industry, but the company was still mostly focused in California. Soon, however, Mastrov started expanding outside the state.

In 1998, the 24 Hour name was so well known that Magic Johnson reached out to Mastrov to partner with him on clubs in inner cities. Mastrov agreed.

"I had no thought process beyond having a partnership with him," Mastrov says, but that soon changed as more well-known athletes came to 24 Hour to set up their own signature clubs.

In the late 1990s, Mastrov also created a division called Team Sports, which was created for high school athletes to use 24 Hour equipment in the afternoon for free. That program eventually led to a relationship with the U.S. Olympic Committee.

By the late 1990s, 24 Hour was large enough that Mastrov began marketing on television.

"We were very focused on the entire market," Mastrov says about the company's marketing efforts.

The company ended the decade with more clubs than any company but Bally Total Fitness, and often rivaled Bally in revenue, despite not yet having locations in many states. Still, the club company was poised to become even bigger after the turn of the century.

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Bally Total Fitness, Chicago

The 1990s didn't start out well for Bally Total Fitness, which was still called Bally Health and Tennis Clubs (HTCA) at that time. The economy was having an effect on Bally Manufacturing, the health club's parent company. Bally's Holiday Health clubs agreed to a $9.5 million settlement in a class-action suit admitting racial discrimination against African-Americans. The Internal Revenue Service alleged that the company owed $29 million in federal income taxes due to improper accounting in 1983 and 1984.

Don Wildman, HTCA's CEO in the early 1990s, decided to move the company away from short-term sales to a membership/cash-driven model that emphasized improving member services and that would standardize membership policies. In the early 1990s, the company had 311 clubs nationwide, many of them coming from various acquisitions and still operating under their original names or variations of those: Holiday Health, Jack LaLanne, Scandinavian, and Bally Matrix, Bally's Health and Fitness, Vic Tanny.

"The idea is that ultimately, all the divisions will be called Bally's," Wildman told Club Industry in 1991. That plan finally became reality in 1995. Bally also then began a national marketing campaign featuring the slogan "Turn on Your Life."

By 1996, Bally Entertainment spun off Bally Health and Tennis Corp. as Bally Total Fitness Holding Corp. Lee Hillman took over from Michael Lucci Sr. as president and CEO of the company, charged with making the company profitable on its own and increasing shareholder value through more expansion.

But by then, the company had about 340 clubs, so expansion came not so much in increasing club numbers but in expansion of products the company offered — namely, fitness apparel and vitamins/supplements. The company also began offering physical rehabilitation services through a partnership with ContinueCare Corp.

Hillman had a five-year plan that in 1997 led him to close some of the company's least profitable clubs and renovate other facilities. It also involved building new facilities with designs that offered more space for weight training and cardio equipment but less space for pools, racquetball courts and basketball courts.

The company also opened 40 BFIT Essential stores inside its clubs as a way to sell its clothing apparel and later its own BFIT energy bars, vitamins and meal replacement shakes.

In the late 1990s, Hillman got the company some television exposure by signing an agreement with Baywatch Production Co., which produced the syndicated TV show "Baywatch," to promote the fitness center. One episode of the series was even filmed at a Bally club.

In May 1998, the company received $83 million through the sale of shares of its common stock and used those funds to expand through new clubs and acquisitions, including Pinnacle Fitness and Gorilla Sports Club chains in California. In 1999, the company acquired 10 Sports Clubs in Canada and the George Brown clubs in California.

With the company's expansion in clubs, products and services, Bally ended the decade on a high note, but it's next decade would prove as turbulent as this decade had begun.

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Club Sports International (Wellbridge), Denver, CO

Club Sports International spent the 1980s managing fitness facilities, but by the 1990s, the company wasn't satisfied just managing clubs.

"At that time, we thought we needed to get into the ownership side because more and more properties were bid out on a year-to-year basis, and whomever was cheapest got it," says Ed Williams, CEO of Wellbridge, which still went by the name Club Sports International (CSI) at that time.

In 1997, Wellbridge created a strategic partnership with Chilmark Partners and Starwood Capital Group to help it purchase 13 clubs in Minneapolis.

The purchase had a big effect on the company, Williams says.

"Now, there was Wall Street money in the industry, so there was much more attention to detail and financial reporting and timely financial reporting," he says. "So, we learned how to look at business differently, how to appraise the information, how to report the information so we were ahead of the information rather than behind it."

The company continued to manage facilities, but with club ownership experience now in its repertoire, CSI was able to offer better reporting to the owners of the facilities that it managed, Williams says.

"So the owners of those facilities started to see more timely information from us," says Williams. "We always felt we were running 30 to 45 days behind the information. By the time you get the information out, you are halfway into the next month before know you have a problem. The managed club owners saw benefits from our more timely reporting."

The timelier reporting was mostly due to better technology that was available to CSI because of the funding from Chilmark and Starwood, he says.

"Where we would look and say that [the better reporting technology] will cost us $50,000, they would say that it will only cost us $50,000," he says.

In 1999, CSI purchased several Wellbridge facilities from Monsanto. Because the company's executives decided the industry was moving more towards a wellness model, CSI took the Wellbridge name, Williams says.

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Family Fitness Centers, La Mesa, CA

Ray Wilson's Family Fitness Centers were still going strong in the early 1990s. An October 1991 issue of Club Industry reported that the chain was opening its 54th club, spending $2 million on the 15,000-square-foot facility.

At that time, the chain was the largest health club chain in California. The company grossed $45 million in revenue in 1990, and Wilson indicated to the magazine at the time that the company would gross more than $60 million in 1991.

Wilson had separate owners for each of his clubs — local managers and Wilson. General managers and district managers owned 10 percent of an individual club, and regional management owned 29 percent. Wilson and affiliated corporations held the remaining 51 percent.

Wilson noted that employee ownership was one reason for his success because it gave employees incentive to grow.

By 1995, Wilson had grown his company to 72 clubs. Some of those clubs were in Northern California where Mark Mastrov had been growing his 24 Hour Fitness empire. The new competition caused Mastrov to call Wilson to discuss a deal, Wilson says.

"He said, 'You don't know me, but I know you. I don't want to have to compete with you,'" Wilson recalls about the conversation with Mastrov. Initially, Wilson wasn't interested in selling, but then Mastrov received $100 million from McCowen Deleuw.

"I was stronger than him, but with that much money now, we would have had a real war, so it made real sense to sell," Wilson says. Later that year, he accepted Mastrov's offer for $95 million, and his clubs were merged into the 24 Hour Fitness brand.

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