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The Club Operator's Guide to Consolidation

SPECIALTY MARKETS: North on Executives

Last year, Larry North committed to high-end clubs that cater to affluent executives, particularly baby boomers. His business plan is paying off, with three facilities in Dallas, and a brand-new location in South Beach, Miami.

"Our model is 9 to 12,000 square feet, which enables us to be a full-service gym with a strong emphasis on one-on-one service," North says.

North finds that his model is welcome in high-end developments that are too risky for a typical club. Millions of dollars go into these developments, and the developers don't want a large, mass-market club, according to North. He explains that such a club can take up 30,000 square feet of space; if the business folds, then the developer is left with a 30,000-square-foot eyesore. His clubs, on the other hand, are smaller, and much less risky. Furthermore, he has a track record for performing well in high-end developments in affluent areas.

Even if a big mass-market club did enter his territory, North doesn't think he would lose much business. His members don't want to be part of a mass-market club; they want exclusivity and one-on-one attention. "You will never have a small-club feel in a large club," he explains.

Like a country club, North's facilities cap their memberships at 1,500 people, and there are 20 to 30 trainers, on average, in each facility to serve the members. That cap may seem small, but given the size of the facilities, overhead is low. "I don't need a lot of members to be financially successful," North says.

North doesn't force contracts on members, and the initiation fees and monthly dues (between $50 and $60) are very affordable. These low costs leave plenty of discretionary income for additional club services. They also encourage people to keep their memberships during economic downturns. According to North, people want to look good when times are tough-to keep their images up.

If the South Beach club does well, North will have proved that his model can succeed outside his native Dallas, where he has become a well-known fitness celebrity. His next goal would be to open 10 to 20 clubs across the country in the next three to four years. He believes that there is still plenty of room for clubs like his-even though the bigger club chains will continue to get bigger. In the end, he sees the consumer really benefiting, with affordable options for everyone.

"As an industry as a whole, we've never been this good," he says.

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