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Interview with Carl Liebert, CEO of 24 Hour Fitness, San Ramon, CA

<b><i>As former Home Depot executive Carl Liebert makes a home for himself as the new CEO at 24 Hour Fitness, he is moving the chain into new markets on the East Coast, in Asia and into the world of children&#8217;s programming.</i></b>

Introduction: Hello. Welcome to the podcast of our interview with Carl Leibert, CEO of 24 Hour Fitness. I’m Pam Kufahl, editor of Club Industry’s Fitness Business Pro magazine, and we’re exited to have Mr. Leibert with us today. A transcript of this Q&A will appear on our Web site, and a shortened version of the Q&A will appear in our August 2007 issue.

Q: So, Mr. Leibert, thank you for joining us today. How are you?

A: I’m doing very well, Pam. Thank you very much.

Q: Great. Let’s go ahead and get started. I know that 24 Hour Fitness is celebrating an anniversary this year. And you also will be celebrating an anniversary of sorts yourself. You will be celebrating a full year with 24 Hour sometime this fall—I believe it’s in October. You have a background that’s not really from the club industry. You graduated from the Naval Academy and served in the Navy for five years. And then you worked for General Electric and Circuit City and most recently for Home Depot. So, maybe you can tell us what made you interested in the 24 Hour Fitness CEO position?

A: Well, first and foremost, I felt after my first initial meetings with Mark Mastrov and the time we spent together, I was incredibly inspired by what he had created with 24 Hour Fitness. And extremely humbled [by] the fact that he felt that it was the right time to bring in somebody from outside the industry to come in and take over his company. So, we hit it off together from a personal and professional relationship. And as I continued to do my due diligence about the space and about the industry, I became more and more excited just about the opportunity that was out there, specifically around changing people’s lives. I just really felt like this was a space that was going to be both fun, exciting and over the next five to 10 years very, very important to the members we serve but also the entire population as we fight epidemics like childhood obesity and some of the rising health care costs that exist in the space.

Q: So, with your past in the Navy and your work with Home Depot and General Electric, what in that past work experience do you think will help you with your new position? What can you bring to it from your past experience?

A: I’ve been privileged to work for some great leaders in my background. Certainly the Navy was a great leadership training ground for me and certainly working around organizations that you mentioned. One of the things you learn as a leader is [that] you’re very much dependent on the success of making sure you have the right people in your organization. Leadership comes down to selecting, hiring and motivating a team to [succeed]. And I felt like my background plays very well to our business. We have over 19,000 team members that want to serve our members everyday. And I think my job as a leader is to unleash that enthusiasm, potential and get people exited about taking care of members. And, certainly, I’ve been in some great organizations that have prepared me for that.

Q: Now that you’ve had almost a year working at 24 Hour and the fitness business, what has surprised you the most about the fitness business in general?

A: How difficult it is for me to get my body fat down to something that I’d be very proud of. That’s one of the things. I came in and got one of our personal trainers. I’m spending three days a week in our club getting trained by him. I’m amazed that once you get over 40, it’s more difficult than I ever imagined. So that’s the first thing on the personal side.

One of the things I’m most excited about is I think this space of fitness and wellness and going after changing people’s lives is a space that’s certainly wide open and that plays well to my experience of being able to create markets, being able to look at what I would call potential add-on businesses, add-on services whether it be personal training or retail or personal training at home or being able to enable our consumers 360 degrees by enabling it through a Web site. One of the things that is important for us to remember is that 65 percent of Americans are obese or overweight. As you look at what is going on in our country right now, everyone is looking to reduce health care costs. If we are able to bring affordable fitness and wellness solutions to people, I can’t think of any more satisfying way to really make your mark both in your career and in your company. We have a special task as well as an opportunity in the industry to be what I’ll call that guiding light. With 400 clubs worldwide, we can certainly make a difference.

Q: I know you are part of the [NBC TV show] “The Biggest Loser.” Is that one way that you can do that and spread the message further than just your club?

A: One thing that “The Biggest Loser” has done for us is allowed us a way to get in front of consumers and to talk about at a national level that through eating right, through working out, through having a desire to want to improve and improve your health, that it’s difficult because you have to go to work, but it’s achievable. I think “The Biggest Loser,” what it does is it gives consumers who watch the show hope. It’s amazing to me. We are only in 16 states in the U.S. but how frequently I’ll travel on the East Coast or I’ll be in Georgia or I’ll be on various business trips where people identify with 24 Hour Fitness through “The Biggest Loser.” It’s amazing where people will say, “When are we getting a 24 Hour Fitness? When are we going to have a club?”

So it’s been a really good partnership for us. What it does is it brings the issues that surround how difficult it is to lose weight and to become healthy and it puts that in a form where a consumer can say, “Yes, I can do that.” That really falls in line with our corporate mission and really standing out in the fitness done right. It’s been a great ride for us and we value that partnership.

Q: With the items that you mentioned about what surprised you about the fitness industry and your partnership with “The Biggest Loser” in mind, what sort of changes do you plan on implementing at 24 Hour Fitness as CEO?

A: I think number one for us for changes is that I don’t want to disrupt some of the great past that we have. We have 24 years of what I call an incredible reputation for being laser focused on really improving people’s lives. Mastrov believed when he created the company that trainers and fitness were a valuable part of our success. We have over 3,000 trainers that are certified through NASM [National Academy of Sports Medicine] that are employees of 24 Hour Fitness. One of the things that is an important success factor and foundation builder for us is to continue to develop that aspect of personal training and showing people the right way to train and the right way to eat, the right way to diet, making sure that we leverage every capacity as a company.

One of the things that I see as a big opportunity is that we own a nutrition company by the name of APEX and the ability to partner with APEX and to bring affordable nutrition supplements to our members and make sure we are able to do that either online, to your door or in the club is a great opportunity.

We most recently launched what we think will be a terrific tool to help you manage your weight loss and that’s the BodyBugg. It’s available through our Web site, it’s available through our club and it’s available through our trainers. So we are going to continue to look at ways to enhance what has already been started as well as leverage new ways to bring fitness solutions to people.

What that means to me is that we see big opportunities in what I call the children/youth space. The youth space for us means being able to do classes that support the kids of our members to do training of children and kids that parents would like to add on services whether that’s basketball, soccer or swimming lessons. We see there is an incredible opportunity out there. Our members are asking for these things, and what we want to do is be able to respond to members in a way that enhances their overall club experience. So we are spending quite a bit of time in the business development side creating a model that allows us to replicate some of these kids programs throughout the country, and I think it’s going to be very, very exciting.

We’ve launched a youth basketball platform in several of our clubs under the brand Hoopology. It’s both basketball camps for kids and it’s private training sessions for kids. Parents can sign up if you want to enhance your skills, if you just want to learn the game. We have all sorts of kids from all sorts of walks of life that are coming into our club now and using our gyms at off-peak times that our members aren’t using them and taking advantage of the ability to use court space.

So we are very excited about those kinds of things. I always say in a retail, consumer-based business, you can really tell the success of your brand when you look around either your stores or clubs and you see kids in there. Because those kids grow up to be future members, and if they are comfortable being in there and training in there, they are going to be future members for us and advocates for the 24 Hour Fitness brand.

Q: I would say that’s a major change with 24 Hour because in the past I would not have associated 24 Hour Fitness with being a family-oriented facility with lots of children’s programs. I know you have childcare facilities in there. How do you make space for these children’s programs? With basketball you can use your basketball courts. Are there expansion plans for some of your facilities to make room for children and children’s areas that may include interactive gaming or other equipment specifically for children?

A: Yes. I think you’re touching on a fascinating subject for us. I’m a father of three boys and I have a 17-year-old, 15-year-old and a 12-year-old. They want to be in the gym with me. They want to be a part of where I’m going to spend time. And I think one of the things that we’re blessed with is over 300 of our facilities have basketball courts or gyms. One of the things that is important is we’ll have members who come in and play in the mornings and members who come in and play in the evenings, but usually during the day in the summer, those gyms aren’t occupied. Maybe one or two folks come in. So, what we’ve been able to do is put together some programs that don’t inconvenience our current members but also provide add-on services for stay-at-home parents to actually bring their kids and give them something to do in the summer. We’ve actually had a fun summer of incubating several of these ideas and bringing them to life.

In addition, we feel like our trainers play a very valuable role in this. Our trainers can talk to these kids about nutrition. They can talk to them about diet. Then, they can begin to introduce at what stage do you start personal training, at what stage in your growth and your maturity is it appropriate to start lifting weights and exercising and those kinds of things? We’ve found that our members—at least our members who are parents—are pretty excited about these programs.

In addition, just like every fitness club, we have group ex classrooms. We have scheduled classes that…quite frankly, we feel there are times that we have an empty classroom. Could we be doing something else inside that classroom that is fun for kids? Could we have a kids’ fit class that you can bring kids in to do aerobics, make working out fun for children? So we’re experimenting and playing with the concept of taking these rooms that at certain periods of times of the day don’t have a scheduled class, could we use it? Could we use it to bring additional classes, services, training, awareness to some of our members’ children? We think it’s a big idea and a big opportunity for us.

As you start to expand it, then we’ll have to look at our club format, the size of clubs, the amenities we offer inside our clubs. This is clearly not our core business, but we believe in order to better serve our core members, it’s something we’ve got to be open to as we continue to evolve as a company. Some of the pilot programs we’ve run this summer we’re pretty darn excited about what it means to us and what it will mean down the road. And we may change the size of our gyms, the size of our pools or change the workout space. I think it’s going to mean some great things for us because I think we’re going to continue to evolve.

Q: Well that sounds like a big initiative for you guys then. Are there other key initiatives that you specifically are interested in spearheading and getting implemented?

A: Yeah, I think what we’ve launched and one of the things that is important to me is to really stay grounded in consumer research and make sure we understand emerging trends. We’ve got several what I’ll call pilot programs around designing what the club of the future looks like for us. So we are testing various concepts that are out there from juice bars, to retail space, to Web kiosks to being able to leverage the members that we have but also to be able to reach what I call potential intenders to bring them into a club. What’s interesting for me and I’ve seen it so far in the industry is there is sometimes a little fear in joining a club that everybody who works out at a club has to be beautiful or has to be pretty or already has to be in shape. So we are working diligently with local communities and partnerships and high school and PE teachers to be able to say, hey, the reason you join a club is you want to live better and have a better life. You don’t have to be a movie star or a model or somebody who can run a 4-minute mile to join a club. So we’re working with our marketing department and our consumer insights group to actually begin to reach out to those consumers or what I call potential intenders to join our club and trying to provide a non-threatening way for them to want to be a part of our product offering.

Q: So does that mean your advertisements will feature more realistic-looking people than a lot of health club advertisements generally do?

A: This is one of those things. My marketing department will kill me for this. I grew up in the Midwest. I was fortunate enough to play high school basketball. I came from a very, very small town. I played college basketball. I never considered myself much of an athlete, but I always considered myself a hard worker. I think the best commercials we have in our clubs are the people’s lives that we changed. You asked me what I learned. It’s funny. When I was at Home Depot, the best commercial we had was when we told a story that one of our team members told us about. It was a story where somebody came in and did something special—the tree house commercial where the dad came in and built the tree house and Home Depot helped him or enabled him to do that. It was one of our best consumer marketing campaigns because it really made do-it-yourself projects realistic and it made them impactful. You will begin to see—certainly from me and from my team—the ability to leverage our brand and all the members that we have touched over the last 24 years. Twelve million plus members have touched our brand in one way, shape or form over the last 24 years. One of the things I think—and really “The Biggest Loser” has enabled this—is being able to change people’s lives. So you’ll begin to see us talk about how we changed people’s lives, and if I have my way, you’ll see us be able to use real-life examples of folks’ lives that we’ve changed. And we’re pretty excited about that.

Q: We’ve been talking about bringing in new members. What are you planning to do to increase member retention? Because I know for a lot of clubs, that’s a main problem that they deal with is once you get the member in there, how do you retain them? What are your plans there?

A: Number one is we’ve added and put in place what I call some diligence around focus on that member and really the team member for us. It’s interesting. As I look at the clubs that have the best retention of members, those clubs also have the best team member retention. In other words you really like to see the same person when you come into your club that’s at the front desk. You like to see the same trainers. My clubs with the lowest team member turnover also have the lowest member turnover. I’m sure people listening in on the podcast or reading the interview are saying, “Well, gosh, Carl, that’s not really rocket science.” It’s one thing to understand that. It’s another thing to go after that and then understand the drivers of why people leave your club.

So one of the things that we’re spending a lot of time with our consumer insights group is to make sure we understand what are the key drivers of member satisfaction. What’s interesting is you can get that through a whole host of ways. So you go out and do surveys. Members say that they are leaving because the club isn’t as clean as they like or the equipment they want is not available or it’s too crowded or it’s not convenient or I’m moving. So one of the things we see as a big factor in making sure our members stay with us is the ability to really leverage our trainers and making sure that personal training in some shape or form is involved with our members. For example, in the month of June to celebrate our 24th anniversary, we ran a special for the month: Bring a friend in to work out for free. There was a great article in USA Today last week where it talked about your influencers. And the group that you associate yourself with has an impact on whether you are in shape or you are obese. For us, we wanted to create a hassle-free way that if you wanted to bring a guest with you for the month, you could.

In addition, in the month of July, we took four days and said bring a guest to your personal training session with you. So while the trainer was working with you, the trainer would work both of you out during this four-day period. Because one of the things we know—and we have great data around this—is when we teach people the right way to work out and we do that in a way that is non-threatening and we attach that to what I think is one of our best assets and that’s our personal trainers, those folks never leave us. So we are focused on making sure people that come in our doors are exposed to the opportunity to train and to receive the right amount of training from personal trainers. So, we are so focused on it that in many cases we are giving that away to let people experience that because it’s one of those things that you really have to touch.

The other thing is as we look at and benchmark ourselves against other service brands—and I think this is one of the things that my team spends a lot of our time on—is that customer retention or member retention really comes down to a mindset within the club that you are going to take care of your members no matter what. We spent quite a bit of time and energy reorganizing our field structure to make sure we support the member and that’s really making sure our club managers who run these clubs understand that their most important role everyday is to support the members they have. I’m not sure if that was always the case. I think sometimes we get caught up in acquiring new members. But we really know that keeping the members we have is a big deal because those members, they recommend us to a friend. And one of the things that we’ve spent a lot of time and energy on is understanding how many of our members would likely recommend us to a friend. In the clubs that we get the response where they would recommend us to their friend, those clubs have the highest retention rate. So we are diving into those clubs. We’ve got quite a few resources doing some human resource analysis as well as service analysis to make that happen.

Thirty days ago I announced the hiring of Michelle Crosby, who was the senior HR professional for Starwood Hotels. She spent over 15 years of her career in the hospitality space. I went out and found her because I felt like fitness is a lot like hospitality in that most of my members they come and stay in my club three to four to five times a week. It’s a lot like a hotel in the importance of seeing the same people, getting the quality experience, making sure the equipment I need is working, making sure it’s clean and kept up to date. I just felt like Michelle could come in and add a lot of her experience in the hospitality space. I think it’s going to play very well toward member retention and team member retention because that’s a big, big focus for us.

Q: As you mentioned, you are in 16 states now, but you’re moving into New York, and Washington, DC, and Baltimore. What attracted you to those regions, and what sort of challenges do you anticipate facing there?

A: One of the things you started the interview asking [about was] my experiences. I’ve had the privilege to run Circuit City and Home Depot stores in every state, in Canada, in Mexico, in China. One of the most exciting things about when Mark talked to me about 24 Hour Fitness was we’re mostly a West Coast-based company. Having run stores and run markets on the Midwest and the Eastern side of the U.S. for most of my career, I felt like it was a significant opportunity for us—and not just from club opening perception—but a significant opportunity to go learn some new things. One of the things I always try to emphasize to my team is that competition makes you better. And competition, if you’re a company that gets excited about the competitive nature and being competitive, one of the things I know that New York Metro and the whole Eastern seaboard, DC, and even if you went down into the Carolinas, the competition and the fitness base is terrific. And there are great fitness companies that occupy those areas. And I think if I look at my company, one of the things we can get better on is there’s still a lot we can learn. We’re 24 years young, but there’s a lot that we can learn from the folks in New York metro, in DC, Baltimore, Boston, in Florida. As I look at what we need to improve upon, I do know that the consumer, or intender or perspective member in New York or Delaware or Baltimore they’re a little different than the average California consumer. I think it’s going to make us a better company. And in turn, I think that competition is not only going to make us better, but it’s going to make our competition better. And if we are doing our jobs as a fitness industry, more people will join clubs. More people will live a healthier lifestyle. I kind of say, we’re going to raise all boats. And so as we come into these markets, it’s going to expose, we hope, more consumers to the offerings that we, 24 Hour Fitness have, and in turn that’s going to allow our competitors to continue to succeed. I think it’s a win-win all the way around the industry, certainly, but also for consumers. If we were a country full of saturated workout folks [with] 95 percent fitness penetration in fitness club membership, it would be a little different. But as I mentioned, obesity is a huge issue. So I think it’s going to be a fun opportunity for us.

Q: I would think that most people would see the Northeast as probably one of the most competitive markets in the U.S., but as you stated only about 14 to 15 percent of the population actually belong to a health club. There’s obviously people out there who aren’t being reached by the fitness facilities there in the Northeast already. When you move into those markets, what markets will you be moving into? Will it be the suburban markets, or the urban markets, or a little bit of both? And what sort of club model will you be using there mostly?

A: Great question. You know, I think having operated stores both in New York metro and in the boroughs, and certainly Long Island, and up and down the Eastern seaboard, what happens in the Eastern part of the United States is commuters and traffic—what I call this hustle-bustle style of living. This is an opportunity for us to make both clubs that are convenient for the folks who are on a commute and who are working within the city or near their homes, but also for those parents and/or members who aren’t commuting to have an affordable place to work out and receive the amenities that are important to them.

You’ll see us with a variety of formats. One of the things that has been so beneficial to us [has been] to be in Asia with our California Fitness brand. We open our first club in about eight weeks in Beijing under that brand with our partner Yao Ming. It’s really allowed us to learn how to design and operate clubs in what I call high-density, urban populations. Our Hong Kong clubs have been exciting learning laboratories for us as we get ready to go into the urban markets, and I think it’s going to play well for us as we think about the New York metro and Manhattan. But we’ve also had a privilege, in some of the new territories, for example in Hong Kong, of being able to put a club in what I call the residential area and provide amenities that are important for people [who] in the evenings or on the weekends want a great place to work out at. The great news is, I think you’ll see a variety of formats from us for a typical city kind of club. We’ll be working diligently with our construction and real-estate teams to make sure that we’re in convenient spots for the traffic—and that includes public transportation. That also includes important arteries. But also it plays well into making sure that we have clubs that are open 24 hours a day and that they have the amenities that those members want. A broad brush to your question, Pam, but I think it gives perspective that I don’t think there’s one single strategy that you can implement on the East coast that will allow you to be successful. It’s the breadth of strategy that allows members to say, “Hey, I want to be part of that fitness network.” I think what we’re talking about as we go East is making sure we leverage that 24 Hour Fitness brand and reach. When a person joins our club, we feel like we should be able to talk about, “You’re going to be part of 400-club chain that is quickly expanding worldwide. Regardless of where you travel, we hope to have a 24 Hour Fitness near you.” That’s really the plan.

Q: You mention people wondering when you’re going to move into their area next? So, what are some of the next areas that you’re planning on moving into both in the U.S. and worldwide? As you mentioned, you’ve been in Asia a little bit, but where are you planning to move to next?

A: Those are great discussions. There are no secrets in the space, just like there are really no secrets in any retail space. We are looking for, obviously, real estate on the Eastern seaboard. Obviously, we’d love to be in Manhattan. We’d love to be in the island and in the boroughs. We’ve made no secret that we like DC, Baltimore and that whole corridor. One of the things is that convenience and location are so important to our members. It’s a little difficult to predict which market, which city we’ll go into first. We are working on numerous real-estate deals and relationships on the East Coast. We know we’re coming. It looks like in 2008, we will open some clubs on the East Coast other than Florida. We’ve been in Florida for several years now.

I would look for us mid-year 2008 to be able to “crystallize” that East Coast expansion strategy because, what I didn’t want to do is put all my eggs in one market and say, “Okay, we’re only going to do this market because our members really value that all-club membership.” I really wanted to make sure I didn’t put all my eggs in DC, Baltimore and all my eggs in New York, and then be able to say we won’t open our new club until 2009.

Look for us on the East Coast sometime in mid-2008. As the industry knows, as soon as we get the official leases done and we start construction, the word’s going to get out which market will open first. We’re pretty excited about that.

The second side of that is globally, we feel that mainland China is a terrific opportunity for us. Our first club I mentioned in Beijing, we’ll open with our partner Yao Ming, and that will open in the September-October time frame. And then we’ll be following closely with our first club in Shanghai shortly thereafter. We see the Chinese marketplace as a great marketplace for us over the next five to 10 years. Our experience in Taiwan, our experience in Hong Kong, certainly our experience in Singapore and Malaysia are all very valuable as we enter into the mainland. We see that as a big initiative for us as well as we continue to expand our brand in Asia under the title California Fitness.

Q: What makes Asia so attractive? Is it mostly the large population and the lack of fitness facilities there, and how do you determine which regions to move into generally overseas as well as in the U.S.?

A: Great questions. For us, these are emerging markets in some cases. One of the things Mark did several years ago is he recognized the opportunity in Asia and really went in the markets with high density population and put clubs in where public transportation was very popular. Our clubs in Hong Kong, it’s amazing, people would say, “They’re too close.” But they’re packed, and they’re doing very well. And they’re at places where people want to work out. What we’re seeing in mainland China is the increased opportunity of people wanting to be more fit. China has similar issues to the United States in obesity and overweight population, not quite to the magnitude that we have, but as you start to look at some of the factors affecting their growth and culture, we feel like—and we know from all of our consumer insights work—that’s a market that people are going to be moving toward, improving their lifestyles through fitness. I’ve been traveling to China now for about eight years of my career, from everything from suppliers to putting in stores and various activities. It’s amazing every time I go to one of these Asian cities, the amount of growth, the amount of population as well as the amount of folks that really want and can speak a multitude of languages including English. As we’re building these clubs and bringing fitness into some of these cities, they’re pretty darn excited about it. When they see the designs of our clubs—and we’ve got some incredible designs coming, especially for Beijing—we see that as a real important step for us as we prepare for the Beijing Olympics that are coming in 2008. Folks are getting pretty darn excited there.

Q: The design of the clubs over in China, are they significantly different from the design of the clubs here in the U.S., and in what ways?

A: It’s funny. You learn a lot. One of the things that I was able to learn with Home Depot and certainly Circuit City is that not every consumer is the same. While there are similarities in business models, one of the things Mark and I talk about all the time is going into China with the ability to open two clubs and then learn a lot. One of the things we know in Asia is that group exercise is very important. Group ex for us is big in the United States. I would say group exercise instructors in Asia are short of rock-star status in the communities in the clubs that they operate in. People just love a kick-fit class, a Tae-Bo class, an aerobics class, a spinning class. One of the things that we see in our clubs in Asia is we have to spend a little bit more time and energy and creativity in those group exercise rooms. They are incredibly busy most of the day. We have to make sure we select the right people to teach those classes that are enthusiastic, inspirational and those things. The clubs really center around those types of experiences. We also know that that population is very excited [about] new technology, making sure that all our equipment has viewing monitors, that it feels new, it feels exciting, it feels inspirational. Music, a little bit louder, maybe a little more edgy, that inspires folks. Every time I go to our clubs in Asia, you just feel an enormous sense of energy. You just don’t get the chance to work out or see clubs that are this busy with 80 treadmills and 40 exercise bikes with everybody on them. To see a group exercise class where there are 100 people outside waiting to get into the next class, it’s absolutely exciting when you go and be a part of that and that design of the clubs [is] very, very important to enable that.

Q: At Home Depot, you opened about one store a week. What is realistic in 2008 for 24 Hour Fitness in terms of development?

A: Great question. We opened three stores a week at Home Depot, 175 stores a year for almost five years. My team, we’ll open somewhere between 40 and 50 clubs this year, and we’re working toward that. I’ve challenged my team that I know how to open three stores a week. I’d like to have the ability someday to open three clubs a week. That means we’ve got to crank up the real estate, the construction side of the business. We’re a long way from that, though. We have an enormous amount of work to do. One of the things that enabled me to do that in prior lives was we were already in all the states when we started that strategy, so it was really an infill opportunity. As we enter into these new markets, what I want to be very thoughtful about is that as we enter in a new state, a new city, a new demographic, is that we take time to learn what’s working and not working so that we can leverage that across the enterprise. Certainly, a club a week would be the first goal that I’ve set in front of my team, and eventually down the road, I’d like to see us opening two clubs a week. I think that would be a lot of fun for both us externally, but I think our team members would get pretty excited about it—the growth opportunities that are going to be provided for our managers, our district managers, our regional vice president and even a team member coming in to just join and start a job right out of high school. One of the things I observed that I was so excited about at my prior experiences in retail was the opportunity for an 18-year-old to come in and start a career and spend 20 years with a company and rise from just out of high school to an executive vice president or even president, and we had many of those. I think that’s going to be a great, great opportunity for us. By providing more clubs and more growth, I think it’s going to enable a lot of folks to come into 24 Hour Fitness and have a great career.

Q: One other area that you dealt with was staffing enhancements at Home Depot. Keeping qualified and dedicated staff can be difficult for club companies. How will you improve upon staff retention and professionalism?

A: We have really set out a strategic vision for the company—kind of three pillars. Number one is enhancing the member experience. Number two is re-dedicating ourselves to the team member experience. Number three is executing the basics with redundant and repeatable processes. So that middle pillar—that team member experience—we see that as a key pillar in our operating strategy. As we look at the things we’re investing in and dedicating ourselves to you’ll see us continuing to grow inside our clubs and what we call the learning platforms, digitized e-learning for us to be able to train our team members better, faster. I mentioned already my experience with customer satisfaction. The highest correlation to customer satisfaction in all my prior jobs was associate engagement. If you had engagement and energized associates, they are going to take care of our members, and so we’ve got to invest in things as simple as uniforms and making sure they are cool, they feel good and our folks love them to learning, e-learning, ways for people to learn through the Web at home, through their iPod, and then the third piece is career growth. You know, most of our folks [the best way to get them to] stay with 24 Hour Fitness is to provide great opportunities. What we’ve got to figure out is how to articulate very clearly through our teams the career opportunities we have. [When] we get to the point some day where we’re opening two clubs a week, we are going to create a lot of great leadership opportunities for some young people that are just starting their career. And as I said, I watched careers form in my prior two roles where we made dreams come true for people. In most cases, the overarching thing that associates say to you or team members say to you in their career process is they don’t quit companies, they quit their bosses. And one of the things we know about keeping our team members happy is we absolutely select and retain the best club managers, and so we are beefing up the training, the learning and the development of those club managers because if we hire the right club manager, it’s amazing how well that team stays in response to us and how low the turnover is.

Q: You also led initiatives in customer service at Home Depot. Are you implementing any similar customer service initiatives at 24 Hour?

A: First and foremost, it’s awareness, making sure our clubs know what their customer service scores are and what their net promoter scores are. The net promoter scores [are] defined as would your members recommend the club to a friend? And so we have and we are investing in technology that will provide a more digitized way for our club managers to get feedback from our members. Right now, that process has been incredibly cumbersome. It’s been paper based, it’s been through a phone, it’s been through a letter. It is the ability to connect our members and our club members through a digitized form of feedback. We know that our members are most satisfied when our club manager can respond to them within 24 hours. The challenge for that though is, we don’t have really good vehicles for our club managers to respond within 24 hours. We know we’re not going to be perfect, but like in a lot of things, it’s how you recover from when you make the mistakes that says a lot about your service model. We know we have some vehicles to put in place at our club level that allow our club managers to feel more empowered and for them to be more aware of some of the service issues that come up from time to time in a club. We will be rolling those out in the next six months, and I think the first step of that strategy was really the reorganization we went through over the past 60 days and making sure every club has a club manager and that all those club managers are going to be going through what I call a “revival” around members and member experience. We’re training them now, and in two weeks we are bringing all of them to Las Vegas to spend two-and-half days with me and to go through some eight hours of what I call leadership development training all centered around improving, maintaining and insuring that we provide the best member experience to our members.

Q: Sounds like a big monetary investment then in customer service if you’re bringing them all into Vegas for training.

A: Well you have to invest in it if you want to get results on that side. You have to be willing to invest in it. And we have to believe that is important in our industry, and we have to be willing to put some money where our mouth is.

Q: Also at Home Depot, you led the implementation of initiatives such as self-checkout and back-end automated receiving. What role does technology play in 24 Hour’s future? What changes do you anticipate in terms of back office systems, online options for members, technology and entertainment options on equipment at the clubs?

A: I’ve done this before, and it’s really got to be Web enabled, but it’s also got to be simple. I call it the call, click or visit strategy so we’ve got to have a mechanized way for a member to send an e-mail or send a text message or just get out and give us some feedback. We’ve also got to have a way to prioritize those issues in a way that our club manager stays focused on the most important things.

No matter what we do, we [will get complaints]. We make the hot water hotter, and we get complaints from some members. We make the hot water cooler, and we get a few complaints. The temperature of our pool is a hot topic for us. So what we want to be able to do is to create not only online electronic version to being able to create that but also give a way to prioritize that for our club managers because the last thing I want to do is distract those club managers. They have tough roles. I mean, some of our members are very demanding—and they should be—so I want to make sure that the tools that I provide to the club manager to drive customer satisfaction, member satisfaction are tools that are in such a way that keep them focused. And so, yes it’ll be a digitized electronic feedback mechanism, but we won’t step away from the old “see me before you leave,” “if you’re angry come talk to me,” and you’ll see us do things similar to what other great customer service companies have done, and you’ll see manager pictures and phone numbers so that members who want to get access to their club manager, they can. In the past we haven’t always made that as clear as we should have.

Q: What other technology advancements do you plan on implementing?

A: You know it’s funny. That’s probably one of the staples of my career is being able to simplify processes and digitize many, many things. Certainly the industry and at least people that know my background know some of the automated things that we were able to do. I envision a day that we are not chained to a desk and that when a member comes in—or a perspective one that wants to join—that we leverage hand-held technology, that we are walking around with that member on a tour talking about the features and benefits of our club, leveraging personal training, being able to sign a member up on a handheld, for example.

We have a tendency to have somebody sit down, and we know that the consumerism in business is much different nowadays and the ability to walk around and talk and chat and experience. I think you will see us move toward the more wireless ability inside our clubs, and you’ll begin to see us leverage the ability to use kiosks inside our clubs, for really two things: Number one so our team members can have a place to go for a trusted resource for workouts, fitness, health club experience, address, phone numbers, training, but also for our members to go and say maybe, “I have a question on Creatine. Is that good or bad? Where can I go to get some information?” And they ask a trainer. And I see a day where the trainer walks over and says “Hey, here is the APEX Web site, and here is what we believe about that.”

And you’ll see us leverage some technology inside our clubs that [will] allow our team members and members to be shoulder-to-shoulder solving problems instead of face-to-face solving problems. And I think, sometimes, we create barriers with the desk in front of us or walls in front of us, and we know our best member experiences are when our team members are right along side our members in solving problems. So I think a kiosk enables us to do that. And then you’ll see us also invest in…we’re piloting—and it’s no secret—in many of our clubs what we call “easy-in” where you come in and put your fingerprint down and punch in a four- to five-digit code, depending on what you’re comfortable with—some people use their phone number—and you go right in. And so we are actually testing easy-in, similar to what Disney has done, in several of our clubs in California. So far, members seem to be liking it. That’s a pretty exciting technology for us, but we want to be thoughtful in how we go do something like that.

Q: Yeah, that sounds like a nice option. It’ll be interesting to see if that is implemented in a lot more clubs in the future.Your company is celebrating its 24th anniversary, not generally a milestone year, but considering your company is named 24 Hour Fitness, you are celebrating big this year. Please give us some details about what you have in place for the year to help celebrate the anniversary.

A: I’ll tell you it’s funny. We actually pulled the archives, and when Mark signed the papers and borrowed the money to actually do the deal on the company, it was a day in June. It was really Mark’s idea. This is our 24th year. It’s not about a day; it’s about a year of celebration. We rolled out some of the old T-shirts back into the clubs back when Mark was in charge of the clubs and head of marketing. We had some fun with that.

Our convention, coming up in two weeks, is what I call a quasi training session, learning session and bracketing a unique celebration of what I consider our proud past and our bright future. If I told everything we were going to do at the convention, then it wouldn’t be a surprise for Mark Mastrov, but it’s going to be a very special two-and-a-half days for us. We may bring in a few characters from the past that have helped create this great company. We’re going to share in some of the meetings some of the documents, and we’re going to celebrate what I call this wonderful heritage of 24 years at 24 Hour Fitness.

You know, I started out saying we’ve got to have Kiefer Sutherland and should have this “24” theme and thought that would be fun, but it got a little expensive. But every month we may expose our members and our team members to maybe an additional surprise or two—a roll out or two—and maybe roll out a technology solution and some added enhancements. We’ve got a monthly calendar of the things of where we will be putting in clubs. I don’t want to give all those way, but what we are hoping for is to surprise and delight both our members and team members. And each month we have a little something special to roll out and celebrate it.

My biggest fear is most people celebrate their 25th anniversary so I don’t know what I’m going to do to top the 24th. So you’ve got a lot of pressure on me right now.

Q: Well thank you very much for taking the time to talk with us. I really do appreciate it. I just want to remind our listeners that we will be doing additional podcasts in the future with various executives in the industry. Feel free to let us know who you would be interested in hearing from. Thank you again, Mr. Leibert, for getting together with us. We really do appreciate it.

A: Well, thank you very much, and make sure you stop in when you are out this way.

Q: I definitely will.

A: Thank you.

Q: Great, thank you.

A: Ok, bye.

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