(Editor's Note: To hear more from Tony Ueber, CEO at 24 Hour Fitness, listen to the April Club Industry Podcast here.)
Tony Ueber has a big task at hand. As the new CEO of 24 Hour Fitness, he is leading a more aggressive growth strategy plan, is overseeing a transformation that the company had begun prior to him being hired in January and must overcome any skepticism that staff and others in the industry may have about yet another new face heading up one of the largest health club chains in the country.
At the end of April, 24 Hour Fitness, San Ramon, California, had 448 open clubs, almost returning to the 450 club number it had at the end of 2014, the year it purchased 32 Bally Total Fitness clubs. However, the numbers dropped to 433 clubs at the end of 2017 after some of those former Bally clubs closed and after the company sold its 19 Midwest clubs to Genesis Health Clubs, Wichita, Kansas, in 2016. That move signaled an exit by 24 Hour from the Midwest.
24 Hour opened 16 new clubs in 2018 and will open more than that number in 2019, Ueber said when he sat down with Club Industry in March at the IHRSA conference in San Diego. He declined to share exactly how many new clubs are planned other than to say a club will open every few weeks.
“That is a big part of the plan is net new club growth and getting back to a really aggressive growth profile,” Ueber said. “So, I know we have been stepping up the number of clubs we have been opening every year, and this year will be another record number over the past several years.”
The primary focus is on building their own facilities rather than growing through acquisitions, he said.
He wouldn’t give specifics on geographic growth targets other than to say that the company will enter some new markets.
“We are going to look to markets where we feel we can go in and can create a compelling value proposition and have density of clubs in a market,” he said. “We will focus on a few markets rather than many markets and making sure we build a network of clubs that can satisfy our members within a specific community. Without giving away any specifics on those plans, we will be entering some new markets in the next few years, compared to the ones we are in currently.”
The more aggressive strategy comes at the direction and with the support of the owners, which include AEA Investors LP, Ontario Teacher’s Pension Fund and Fitness Capital Partners LLC. 24 Hour reported revenue of $1.44 billion in 2017, an increase of 1.48 percent from 2016, according to its submission for Club Industry's 2018 Top 100 Clubs list. The company has not submitted its form yet for this year's list.
“We have an exceptionally supportive ownership structure that is really determined to see this company be successful, not just from a financial perspective but really from a changing the industry perspective,” Ueber said. “These guys truly believe in this profession and believe in this company as a company that can have an impact and do great things. So, they are super fired up and energized behind the business as well, which is great when you sit in my seat to have that type of support for what you are trying to do.”
Transformation Plan
That energy was put into action when the owners and the executive team developed a transformation plan prior to Ueber’s hiring that Ueber will now lead. The gist of the plan is to be more member centric.
Part of that plan involves rolling out more self-service capabilities, such as online joining options.
“People have a lot of information before they come into the gym,” Ueber said. “They don’t need to be taken around by someone on the traditional tour. They already know a lot about who we are and what we have to offer just through their own research. So, I think we need to be adaptive in those ways.”
Although there will be kiosks and online joining options, people who still want the traditional tour and a person to talk to will have that option.
“We want to be able to meet people where they are and what they need,” he said. “Not everybody needs the same thing. I think the key is being adaptive enough to offer a range of services and ways of interacting. I mean I can still go through the regular checkout line at Target if I want to. I am not forced to go through the self-serve checkout line. The same thing would be true for us.”
Does that mean 24 Hour Fitness has elimintated its sales positions, as rumored? Ueber said no, at least not at this point. In a follow-up email to Ueber about the rumor, he wrote: "We do still have salespeople today. However, as part of our transformation, we will be changing the paradigm, and the traditional definition of a 'salesperson.' More to come on that front in the future."
24 Hour added further that every employee in each of its clubs is there to help people—members and guests, regardless of their position—to achieve the fitness results they want.
Another piece of the transformation is the Fit Plan, which helps build a fitness routine for each member that works with their goals, interests and schedule. The plan is delivered into the member's mobile phone on the company's free 24Go app and offers digital "how to" guidance, schedules, reminders and instruction about what to do each day inside and outside of the club. 24Go also offers members curated content (fitness information, news and studies), hundreds of digital workouts and class suggestions. The app recommends workouts, adapting them to the user's needs, likes, location, workout history and the equipment available to the user at the time.
The company also is focused on its 28-day StepUp program, which launched in April 2018. The program is based on research from the University of Pennsylvania’s Behavior Change for Good (BCFG) Initiative, which 24 Hour has partnered with. The University of Pennsylvania program (led by Angela Duckworth, professor of psychology at the Penn School of Arts and Sciences, and Katherine Milkman, association professor of operations, information and decisions at the Wharton School) is researching what motivates gym-goers with the goal of creating lasting habits that can impact the global population. 24 Hour has partnered with the BCFG. The StepUp program offers a science-based interactive digital program that encourages more visits to teh gym, partially through specific mesaging and support that are based on their individual needs.
Challenges
One of the biggest challenges Ueber faces is communicating the plan and changes to everyone throughout such a large organization, he said.
He wants to ensure that people know who he is, understand his vision for the company, and see his passion and commitment behind the direction the company is moving. He came to the company from other multi-unit businesses, including most recently stints as CEO at Results Physiotherapy and Banfield Pet Hospital.
Ueber spoke to the various CEO changes that 24 Hour has experienced in the past six years and how that may concern team members as yet another new leader steps in.
Ueber replaced Chris Roussos, who was hired as CEO in May 2017 after Mark Smith left in March 2017. (24 Hour President Frank Napolitano served as acting CEO in the interim.) Smith had been appointed CEO in May 2014 when Forstmann Little and Co. sold 24 Hour to AEA Investors LP, Ontario Teacher’s Pension Fund and Fitness Capital Partners LLC. Prior to Smith’s tenure, Elizabeth Blair served as CEO starting in September 2013 after Carl Liebert left as CEO in May 2013. Liebert had been CEO since 2006.
Ueber said: “There has been a lot of change. If I were sitting in a lot of people’s seats, I’d say, ‘OK, here we go again,’ which sometimes happens for various reasons in an organization. I do have quite a bit of experience coming into new companies and coming up to speed really quickly. I think I have a bunch of different experiences that I can bring to bear here. I have joked I am not going to win anybody over with charisma, but I am extremely sincere. I have learned to not try to be Mr. Charisma but just rely on sincerity and being straight forward with people.”
Communication is key, he said. When people lack information, they don’t feel connected to a company’s plan, and they are left to fill in the gaps themselves.
“My challenge as the CEO and our challenge as the leadership team, is making sure that 24,000 people know what we stand for and why we are doing the things we are doing and how they need to get behind those things in order to make it a reality because, otherwise, we can think up all the big thoughts that we want to, but it is not going to happen without all those people,” he said.
For more from Ueber, listen to the April Club Industry Podcast in which Ueber and Tom Lapcevic, executive vice president and chief marketing officer, share more about the challenges that Ueber and 24 Hour Fitness face as a mid-priced club, the company’s growth plans, profitability of older clubs compared to newer clubs, career paths for trainers, and details about the Fit Plan and the company’s plan to be more member centric.
