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Pulliam Leaves Gold’s Fold

LEXINGTON, KY -- 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, the company announced today.

As CEO of Global Fitness Holdings, Lexington, KY, Pulliam held Gold’s Gym franchise rights in Kentucky, Ohio and Tennessee. However, after taking on Laurel Crown Partners LLC, a Los Angeles-based private equity firm, as a partner in the business, Pulliam began expanding quickly and soon ran out of room in his Gold’s Gym territory, Pulliam says.

David Schnabel, CEO of Gold’s Gym International, says, “We have enjoyed our mutually beneficial relationship with Global Fitness Holdings over the past seven years, but after extensive discussion, it became clear that we were following different business models. We wish them well in their new business endeavors.”

As of Dec. 1, all of Global Fitness Holdings’ 25 former Gold’s locations will be renamed Urban Active. During the next three to four years, Pulliam plans to open 50 more clubs. Within the next year, he will have almost 40 clubs in Kentucky, Ohio and Tennessee, so most of the new growth will be outside those three states, he says. However, he plans to open the new clubs close by, mostly in the Midwest and East, so he can better monitor the growth. So far, Pulliam has letters of intent on 20 locations outside those three states, and a few leases are being prepared, he says. He expects the first clubs to open outside his old territory in late 2008 or early 2009.

Because Global Fitness Holdings has already begun to ramp up its club openings—having opened 12 clubs in the past 13 months—Pulliam says his company won’t have a problem growing to 75 clubs in the next three to four years. He also is confident he will be able to fill the new positions created by the growth.

“We’re getting a lot of phone calls from people in the industry who want to get onboard,” he says. “So we feel pretty confident that we’ll have the manpower to roll out these things—10 to 12 stores a year.”

In two years, Pulliam expects to report revenue of about $150 million, he says. That revenue won’t just come from the new clubs—it will also come from a new retail piece of the company.

“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 the Urban Active Fitness name could be as big as that of 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 says.

Pulliam has two prototypes for the Urban Active Fitness clubs that will appeal to that demographic, he says. One will fit on 3 ½ acres and the other will fit 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, indoor track, half- or full-court basketball, high-end locker rooms, tanning facilities, and a children’s area with computer stations, equipment and games.

All of Pulliam’s existing clubs will receive an internal facelift involving new colors and a more upscale branding scheme, he says.

With Pulliam's departure, Gold’s Gym will now have a large territory opening in the three states, but the company has not said whether it already has franchisees committed to take over the territory.

“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.”

Laurence E. Paul, a partner in Laurel Crown Partners with his brother, Stephen Paul, says the firm decided to invest in Global Fitness Holdings after studying the exercise business, its economics and its direction. The expansion of the company “is not capital-constrained in any way, and we are extremely excited about the opportunity to introduce our company to cities that are eager for a high-end fitness and wellness experience,” says Paul. “With the quality of our product, our people and the experience that we provide, we look forward to playing an integral part in the lives of the members of these new communities.”

Prior to becoming a Gold’s Gym franchisee, Pulliam had owned and operated six World Gyms throughout the three-state region.
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