To Succeed, Clubs Must Play the Numbers Game


When the fitness club industry first started to gain momentum in the late 1960s and early 1970s, most were opened by fitness enthusiasts who wanted to own a business that involved doing what they loved to do — working out.

Yet many of these clubs were not run like businesses with proven sales, marketing and accounting procedures, and they fell by the wayside. These failures helped cause bankers to take a dim view of health clubs — a view that holds true even today at some banks.

Despite that, the industry continues to grow because of demand. A lot of big money has entered the industry, and with it has come chains with strong business practices.

In the 1950s, the famous business productivity educator William Deming promoted a practice for business called Quantitative Statistical Analysis (QSA). This process indicates that all practices in a business operation can and should have a numerical accountability. Constant monitoring of the numbers can result in better decision making, resulting in more profits.

The United States business environment was slow to adapt to Deming's recommendations, but the Japanese, trying to rebuild after World War II, welcomed it with open arms. Their auto companies especially embraced it. They approached operations with more discipline and now dominate the auto world in profits while U.S. auto companies, which eventually “copied” the Japanese in this area, are behind. (In a recent survey by Fortune magazine, business leaders named Toyota one of America's Most Admired Companies for the second year in a row.) A term used in the fitness industry is perhaps most appropriate here: “Cut the fat and leave the muscle.”

What's the lesson for clubs? Whether it's opening a new club, expanding an existing club, deciding on a marketing program or structuring a commission schedule for sales people and trainers, every decision has to be made with a focused attention to numbers. This part of the business is not fun for most club owners and requires a lot of work that has nothing directly to do with training, equipment or dealing with members.

Yet numbers have everything to do with how well a club provides fitness. This does not imply that only numbers matter. After all, health clubs are a service-oriented, people business. It just means that good numbers come when a club provides good service that helps members meet their goals, thereby increasing clubs' numbers in growing revenue.

All clubs, especially smaller, individually owned operations, must operate as disciplined businesses. This requirement may mean that at times club owners will have to make unpopular decisions related to staffing and programming.

The growing number of overweight people has resulted in more clubs but not necessarily in more clubs making money. This also applies to club personnel. Many clubs (both chains and individually owned facilities) have been cutting the salaries of managers, sales people and personal trainers.

The need to change to a new mode of business operations is inevitable. As Deming put it, “Learning is not compulsory, but neither is survival.” The club business is forced to work with a new set of rules to succeed and that goes for successful companies in all business fields.

The good news is that as our industry continues to mature, club profits are strong and an increasing number of clubs are operating with specific business procedures. These clubs are truly taking advantage of the growing need for improved fitness for more than 200 million Americans.

Bruce Carter is the president of Optimal Fitness Design Systems International, a club design firm that has created about $420 million worth of clubs in 45 states and 26 countries.

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