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Largest Franchisee for Gold's Gym Moves On

Lexington, Ky — Now that Royce Pulliam, formerly the largest Gold's Gym International franchisee, has left the Gold's brand behind to create his own brand, Urban Active Fitness, a big piece of Gold's pie has opened in Kentucky, Ohio and Tennessee.

As of press time, Gold's Gym had not returned calls to comment on what will happen to Pulliam's three-state territory. The company could keep all or part for corporate facilities or sell the territory to one or several franchisees.

The thought of competition from his former franchisor doesn't seem to phase Pulliam, CEO of Global Fitness Holdings, Lexington, KY.

“Gold's has done a lot for us,” Pulliam says. “But at the end of the day, will we be competitors? We will be, but hopefully, we'll be very friendly competitors. We don't have any intent to go out targeting their markets and opening stores across the street. That's not how we do business, and I don't think they do either.”

Pulliam left the Gold's Gym brand behind after taking on Laurel Crown Partners LLC, a Los Angeles-based private equity firm, as a partner in the business. Both groups had separately and unsuccessfully bid for the Gold's Gym chain in 2004 before becoming partners. With the added backing and input from Laurel Crown Partners, Pulliam began expanding more quickly than he had in the past. He soon ran out of opportunities in his Gold's Gym territory, he says.

Beginning Dec. 1, all of Pulliam's 25 former Gold's locations will be renamed Urban Active. During the next three to four years, Pulliam plans to open 50 more clubs. He will soon have almost 40 clubs in Kentucky, Ohio and Tennessee, so most of the new growth will be outside those three states. However, he plans to stay mainly in the Midwest and East, so it will be easier for him to keep an eye on the growth, he says. So far, he has letters of intent on 20 locations outside those three states, and a few leases are even being prepared, he says. He expects the first clubs to open outside his old territory in late 2008 or early 2009.

In two years, Pulliam expects to report revenue of about $150 million, he says. That revenue won't come just from the new clubs. It will also come from a new retail piece that Pulliam is adding.

“With our branding, we feel like we now have a commodity,” he says. “We're looking to hire a top-notch player in the retail division to run our juice bars and design our clothing. We feel that's got some potentially big upside.”

Pulliam is thinking big, saying that in five years he can see the Urban Active Fitness name being as big as 24 Hour Fitness or Gold's Gym.

“My partners and I believe in our team that much,” he says. “We believe that if we stay focused and stay in our parameters and model — and if it doesn't fit in our box, we don't do it — that we have that potential. If you ask our members, they'll tell you the same thing.”

In the past 24 months, Pulliam has been going after a higher income demographic, and that probably won't change with the new clubs.

“We feel that's the sweet spot for us with personal training,” he says. “Personal training is about 25 percent of our business. We feel that education and income leads to a better business model.”

All pricing will remain the same at $49 to $59 per month in membership dues.

Pulliam has two prototypes for the Urban Active Fitness clubs that will appeal to that demographic, he says. One fits on 3 1/2 acres and the other fits on 6 acres. The clubs will range from 42,000 square feet to 58,000 square feet. The smaller clubs will have the same amenities as the larger clubs, including swimming pools, an indoor track, half- or full-court basketball, high-end locker rooms, tanning facilities, and a children's area with computer stations, equipment and games.

Pulliam's existing clubs will receive an internal facelift, including new color schemes and an update to a more upscale branding scheme, he says.

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