Interview with Mark Mastrov and Jim Rowley, New Evolution Fitness Co., Lafayette, CA

In time, Mark Mastrov and Jim Rowley may build their still relatively nascent New Evolution Fitness Co. (NEFC) to a level that rivals their former company, 24 Hour Fitness.

Mastrov, the founder of 24 Hour Fitness, and Rowley, a former division president at 24 Hour, have made a big splash in the fitness industry with NEFC. Earlier this year, the Lafayette, CA-based company announced a partnership with the Ultimate Fighting Championship (UFC) to begin a string of clubs around the country.

Then in May, NEFC announced it planned to purchase Crunch, New York, from bankruptcy, a transaction that was completed in late August. The company teamed with private equity firm Angelo, Gordon & Co. for a purchase price of approximately $40 million.

Including a less publicized investment with a nationwide yoga chain called Yoga Works, NEFC quickly has added three brands to its stable. Three's not a crowd for Mastrov and Rowley, however.

“This is just a small sampling of what we're up to,” says Mastrov, who writes the On the Mark column for Club Industry and is a member of the magazine's advisory board.

No matter how many brands NEFC accumulates over the years, Mastrov and Rowley always will be associated with 24 Hour. That's especially true of Mastrov, who sold the company in 2005 to Forstmann, Little & Co. for $1.6 billion. Mastrov initially stayed on as chairman of the board, but he left in January 2008 in a wave of executive departures.

Time has moved on, and so has Mastrov, who founded 24 Hour in 1983.

“I don't know that I've spent much time worrying about it or thinking about it,” Mastrov says about leaving 24 Hour. “I had a beautiful 25-year run there. I had a hell of a sale at the end of the run and made a lot of people wealthy. The new buyer came in and wanted to run a different play, and I figured, hey, time for me to go out and do some other things. I had no non-compete [clauses] and could do what I wanted to do. I wish them well. I'm focused on what we're doing.”

Mastrov knows the history of the fitness club business and understands he's not alone when it comes to change.

“If you look at our industry as an example,” Mastrov says, “every great leader that has built any brand of worth in this industry eventually has moved on at some point, whether you want to talk about Don Wildman or Ray Wilson or Rudy Smith or Jack LaLanne or whomever. At some point, somebody else comes in. Younger, hungrier, brighter people get involved, and they try to go down their path. Whether they can succeed to the level you did or top what you once did, that will be seen in time.”

Rowley, the north division president at 24 Hour, resigned in April 2008 to pursue other opportunities, mainly, NEFC. He had spent 17 years at 24 Hour. Like Mastrov, Rowley has no regrets about leaving.

“Some level of my fitness legacy will always be associated with 24 Hour Fitness,” Rowley says. “I created a lot of elements that are still associated with how they practice their operations there. I look forward. I don't look back. I have a great deal of respect for what we did at 24 Hour Fitness as a team. I'm still connected to a lot of people that both helped me develop at 24 Hour Fitness and [people] I'd like to think that I had a hand in developing there that remain there. We wish that company a great deal of success. I personally look at that company with pride.”

With the Crunch acquisition, Mastrov became the chairman of the company while Rowley is its new vice chairman and CEO, replacing Tim Miller. For years, any news associated with 24 Hour had Mastrov's name on it while Rowley remained in the background. Now, as CEO of Crunch and with the UFC venture, Rowley will step into a bright spotlight. It's a role he doesn't mind.

“I don't see it as a particular challenge,” Rowley says. “It will be fun and allow me to extend my skill sets outside of leading NEFC and our other brands. I'm not much of a spotlight guy — Mark isn't either. The spotlight finds him. In my last role at 24 Hour Fitness, I had 225 clubs, $750 million in revenue and nearly 8,000 employees. To have 19 clubs at Crunch,to me, is rewarding. It keeps me very close to the business that I love.”

Angelo Gordon, along with Marc Tascher, a co-founder of Town Sports International, bought Crunch from Bally Total Fitness for $45 million in 2005. (Bally bought Crunch from founder Doug Levine for $90 million in 2001.) Before the NEFC acquisition of Crunch, Angelo Gordon had already retrofitted most of the Crunch clubs, Mastrov says, allowing NEFC to direct its expenditures in other areas.

“Pretty much all of [the clubs] are in very good condition, along with brand new equipment,” Mastrov says. “The portfolio looks really good right now. There isn't any big plan to come in and put additional capital to work. Most of the capital will probably go into new locations. The company itself is performing extremely well. It is profitable on a standalone basis. It is debt-free now with a tremendous amount of cash on the balance sheet.”

For the time being, Mastrov and Rowley plan on keeping the irreverence for which Crunch has become known. Actually, that was one of the attractions of Crunch, known for things such as pole dancing classes and live disc jockey sets.

“Both Mark and I had had some admiration for Crunch and what they've been able to do in terms of developing their brand recognition from a small footprint,” Rowley says. “I had an opportunity to compete against Crunch [at 24 Hour], and even through competition, had great admiration for the brand and its uniqueness.”

Mastrov adds: “We've known Doug Levine for a long time. I've had the opportunity to sit down with Doug twice in the last six months to pick his brain and get his take on how he built the brand and where he found success. I had a chance also to sit down with [former Bally CEO] Lee Hillman, who bought the brand from Doug, and get his take on what he thought were the best ideas that they were going to leverage at Bally that didn't come to fruition for a whole bunch of reasons after he left. I've also talked to Tim Miller. We're going to try and continue to build off of the legend that Crunch built, which is that irreverence, inclusiveness, cool, hip, kind of funky brand that it is.”

The Crunch company is a pared-down version of its former self, emerging from bankruptcy with 18 clubs compared to the 28 clubs it had before entering Chapter 11. Crunch also went from six major markets to four: New York, Los Angeles, San Francisco and Miami. The company closed clubs in Chicago and Atlanta. Expansion back into these two markets isn't likely, Mastrov and Rowley say.

“We've got a big appetite,” Rowley says. “We've got a lot of exploration that's happened over the course of the last six months. We have interest in operating outside of those [four] markets as well, but the foundation to Crunch's success in the future will be those four core markets.”

Crunch was scheduled to open its newest club this month in Danville, CA, in the San Francisco area. Mastrov says NEFC will probably double the number of Crunch clubs over the next year. Exactly how many Crunch clubs will open remains to be seen.

“Sit back and watch,” Rowley says. “You'll see Crunch continue to embrace its irreverence and continue to attract new people to fitness.”

Working at NEFC has allowed both Mastrov and Rowley more freedom than they had at 24 Hour. They don't have the same concerns they had at 24 Hour, which included more than 400 clubs, more than 3 million members and many attorneys, accountants and board members. Flexible hours have allowed each more family time. Mastrov has four children ranging in age from 18 months to 8 years. Rowley has three children between the ages of 8 and 13.

“Mark and I have found a way to pace ourselves both professionally and personally,” Rowley says. “Our company is free flowing. It's creative. There's no hierarchy at NEFC. Everybody is included. It's the most liberating year that I've ever experienced in my life, and we had a great run at 24 Hour Fitness.”

Mastrov still hears jokes from colleagues about why he went back into the fitness business.

“A lot of people say, ‘Hey, with all the money you made from your exit at 24 Hour, what the hell are you working again for? Why don't you just enjoy life?’” Mastrov says. “My view is, I am. The quality of life that I have now is greater than it's ever been, and I'm happier than I've ever been. The reality is, there are a lot of things that one can do in life. I love the fitness business. It's a lot of fun. It's what I know. It's all I know. It's pretty much all I can do.”


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