Club One Speeds Up in the Economic Slowdown

Club One Speeds Up in the Economic Slowdown

The club chain has completed a $24.4 million recapitalization program.

SAN FRANCISCO — In the midst of an economic slowdown, Club One Inc. has still managed to complete a $24.4 million recapitalization program. Through this program, the West Coast chain was able to issue a new class of preferred stock, substantially exchange all of its pre-existing preferred stock, and facilitate additional investment, while providing for working capital needs, states Club One's CFO, Eric Markell.

Considering the state of the economy, is this program an indication that investors still see the fitness market as viable business? Not necessarily, says Jill Kinney, co-founder and COO of Club One.

“Our financing was…really targeted very specifically on our company's performance needs and not based on the economy,” she explains. “We're growing and [the industry] is such a capital-intensive business.”

That being said, Kinney states she's glad the company refinanced when it did. “It's a very awkward time for all of us [in the club industry],” she says. “At the very least, it's a wait- and-see environment. It's unlikely that [the industry] is going to get any big financing for a while.

“The banks are all just sitting back to see how deep this slowdown goes,” Kinney continues. “Everybody's got their brakes on for the moment. But maybe having the brakes put on is not such a bad thing. We're [as an industry] growing so rapidly, it's kind of nice to stop and catch your breath and take the time to focus on the customer again.”

Still, Club One hasn't exactly stopped. The chain saw 400 percent growth last year, according to Kinney. And, through the club's refinancing program, the growth will continue.

“This financing will help sustain our growth momentum and support our fourfold growth strategy,” states CEO John Kinney.

John Kinney describes the strategy this way: “one, to obtain improved performance from our core commercial club holdings; two, to grow our professional club management business unit; three, to execute value purchases of existing operating assets; and four, to selectively develop new club properties in markets that will help cement our market leader position.”

When developing these properties, Club One will focus on its three major markets: San Francisco, San Diego and the Silicon Valley. Economic slowdown or not, Club One doesn't plan to stagnate.

Jill Kinney does express some concern about the economic slowdown, but she is confident that the fitness industry will thrive. Although consumers may cut back on their discretionary spending in times of financial stress, they tend to “focus their spending [on services] with extremely high value,” claims Kinney.

Fortunately, dedicated members see value in the services that clubs provide. Besides, nothing beats stress about the house mortgage or job layoffs like a good old run on the treadmill or a bout of strength training.

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