Interview with Royce Pulliam, CEO of Lexington, KY-based Global Fitness Holdings and its 30 Urban Active clubs

When Royce Pulliam talks about his company, he often uses the word "we" rather than the word "I." That word choice may indicate that he really believes it when he says he hasn't been a lone wolf in building Lexington, KY-based Global Fitness Holdings and its 30 Urban Active clubs.

"I've had a lot of really good people hooked to my hip that helped me lead and guide this company in the right direction," he says.

Part of Pulliam's team is his staff — from Glenn Gordon, the president, to Martin Stein, the COO, to all the managers, personal trainers and front desk staff.

Part of that team is Laurence E. Paul and his brother, Stephen Paul, who own Laurel Crown Partners, a private equity firm that has been partners with Pulliam in Global Fitness Holdings since 2006, when Pulliam was still a Gold's Gym franchisee with 15 clubs.

"They invested in our company, in our team, in our executive management team and in myself. They believed in us," Pulliam says.

Pulliam is passionate about what his team has created.

"We believe that members today want a great value, including a lot of energy," he says. To create that excitement, Pulliam makes sure something is going on in every room, from the kids room to the locker room to the smoothie bar café.

"Our objective is that we have a lot of young people in our company, and their goals are to continue to grow what we feel can be one of the best and most energetic fitness companies in North America," he says.

To pull that off, it takes quality people who believe in what the company does, have the same culture, have a strong work ethic and have energy and passion, Pulliam says.

The company will need that energy and passion to pull off Pulliam's plans to open six to seven clubs this year and 10 clubs next year. By 2010, Pulliam plans to have 50 clubs.

During the next 36 months, the company will open clubs or sign deals in the East, the Midwest and the South, he says. Planned locations include Omaha, NE; Des Moines, IA; Raleigh, NC; Charlotte, NC; Kansas City, MO; and St. Louis.

Pulliam also has plans for a club in Pittsburgh, PA, which is the hometown of the Paul family. In fact, the Pauls recently became part owners of the Pittsburgh Steelers football team, but Pulliam says it's too early to say whether that ownership could translate to any deals between Global Fitness Holdings and the Steelers.

Pulliam and his partners determine their club locations based on competition, income of the market and real estate availability.

"Real estate is a big key to us right now," Pulliam says. "We like building [clubs] from the ground up. We really like creating our own vision, our own energy, our own passion and our own product."

Acquisitions are not part of the current plan.

Global Fitness Holdings has its own real estate development arm and works with three preferred developers to build its clubs, Pulliam says. He adds that the company owns 50 percent of its real estate, and the other 50 percent is owned by the preferred developers who lease back the property to Global Fitness.

Pulliam calls the real estate part of the business "a nice additional investment for us." However, he says that to build the number of clubs that he wants to each year, the company will have to continue to partner with developers because of the manpower required. Also, because the credit crunch is especially hurting the real estate market, he's had to scale back expansion plans — at least for now.

Still, Pulliam says the economy isn't affecting his clubs much because he says they are priced right, are convenient for their middle class market and offer programming and amenities that members want.

Pulliam expects his company to do about $100 million this year compared to $30 million when he left Gold's Gym in 2007. (See Largest Franchisee for Gold's Gym Moves On, Nov. 2007.) He anticipates an annual growth rate of 25 percent to 30 percent a year for the next two to three years.

Much of that increase in revenue will come from the new clubs, but personal training is adding a lot of ancillary revenue, too, he says.

"Personal training is a huge piece of our business," Pulliam says. "It's a big piece of the membership and how we retain members. We feel like our retention is fairly strong because a lot of our people buy training, and they're successful with their training."

Group training hasn't made a big splash at Urban Active yet. Pulliam says that 99 percent of the company's training business is still one-on-one. Rather than making training more affordable by offering group training, Urban Active is offering 30-minute personal training sessions.

Pulliam says another key to growth for his company is the addition of a three-story club model, the first of which opened in December in Columbus, OH. The three-story design allows Urban Active to go into densely populated areas where land is scarce without sacrificing any of its amenities, Pulliam says.

"If there's only 3 1/2 acres, we didn't want to have to cut out the track, basketball, the pool," he says. "We wanted to be able to provide what we do, but be able to fit it in an area where there's only X amount of property available."

Despite the growth that Pulliam has planned and his background as a franchisee with Gold's Gym and World Gym prior to that, Pulliam insists that he will not franchise Urban Active.

"You lose control of the product, the quality of service [if you franchise]," he says. "It gets so fragmented that you end up losing control of what you've built up."

However, Pulliam says he might partner with experienced operators who share his vision and carve out territories with them for some Urban Active clubs.

Pulliam also initially dismissed the idea of going public some day, saying that the Pauls own many businesses and few are publicly traded. However, he then added that he couldn't predict the future.

"Our mission is to keep our head down and continue to do what we do and not deviate from our business model at all and operate business as we know it," he says. "Whatever happens, happens."

Pulliam doesn't have an exit strategy from his company like some club operators have. He just wants to exit the business "before he dies."

"People do have exit strategies and exit plans, but 90 percent of those exit plans never come to fruition," he says. "No one can read that crystal ball, and we just haven't tried to."

For interviews with other executives in the fitness industry, visit the Executive Insights section of the Web site.

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