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Meeting the Chain Challenge

When health club chains
announce they are coming to town, what happens to the business of local, independently owned facilities? How can any small business compete when its resources and staff are dwarfed by those of larger outfits? Is there any way to prepare or to level the playing field when dealing with such formidable competition?

Be Prepared

One thing you don’t want is to be caught unaware, which was one club’s experience.

“We were floored!”

That’s how Evanston Athletic Club (EAC) manager Amy Whalen and her staff felt when they learned that the LA Fitness chain was coming to their town. EAC, a privately owned 50,000-square-foot health club facility, had never competed with a chain in such close proximity. But that all changed on September 22, 2006, when LA Fitness arrived in Evanston, Illinois, a diverse, close-knit suburban community just north of Chicago, and set up shop a block from EAC’s front door.

As many as 20 LA Fitness facilities will debut in Chicago alone this year, and 100 more are scheduled to open across the Midwest within the next 5 years, according to Jarvis Mueller, general manager at the new LA Fitness outlet in Evanston. “It was the right time and the right fit for the company to come to Chicago,” he says.

So what happened when the two businesses went head to head? In the months immediately following the opening of the LA Fitness facility, some EAC members did leave to sample what the 53,000-square-foot competitor had to offer. But others who left EAC have since returned, and new members have joined, all attracted by what Whalen calls the club’s “family feel.”

Here are 7 key strategies you can use if faced with the “chain challenge.”

Strategy 1: Define a Niche

According to the International Health, Racquet & Sportsclub Association (IHRSA), a typical commercial fitness
facility has 10–25 competitors in most major metropolitan markets. Consequently, it’s important for independent facilities to hone their specific appeal. One way to do this is to know your clientele and your
local demographics.

“Listening to members and assessing fitness capabilities are very helpful for determining programming options and equipment,” says Rosemary Lavery, IHRSA public relations representative.

Rick Caro, president of Management Vision Inc., an industry consulting firm based in New York City, advises small businesses to capitalize on their strengths, analyze them objectively—and then make sure consumers know about them. For example, if your club is known for three or four distinct qualities, use those niches to your advantage. “A niche concept starts out with analyzing the differential issue
of where your existing club is compared to where your large club is,” says Caro. “Capitalize on your strengths to build them into greater strengths.”

EAC describes its mission as being dedicated to providing each member with an experience that will “inspire, energize, relax and rejuvenate.” The club prides
itself on offering 150 fitness classes per week—including unique classes like “Super Spin Saturdays,” African dancing and Nia®, all of which are very popular among members of all ages. Whalen says the classes were a key component in defining EAC’s niche because members wanted a wide range of programming. While Mueller is proud of LA Fitness’s rows of new workout machines, he says he can’t accommodate a similar class schedule, as he has limited space and staff (EAC has three group fitness studios; LA Fitness has one).

“You can’t make everybody happy;
focus on what your club is good at,” says Lewis Small, assistant professor of marketing at York College of Pennsylvania. “Trying to promote yourself as being ‘all things to all people’ leads to being nothing to no one.”

Strategy 2: Offer
Reliability Plus Innovation

Owners of small health clubs can retain member loyalty by reaching out to their established customer base. Positioning facilities as being on the cutting edge of fitness trends and programs is also helpful.

Caro believes WOW! Work Out World—a small, family-owned fitness business based in Brick, New Jersey—is a “textbook example” of how to incorporate unique and innovative tactics into an established facility. The club uses its mission statement, which is also posted on its website, as a positive message for its clientele: “To provide assurance that our clubs will always meet the most stringent requirements for quality and effectiveness by offering the most up-to-date, scientifically developed programs and innovations available.” Then the business goes one step further by emphasizing and marketing the fact that it delivers “unique, fun” programs and services that inspire and challenge its customers.

“If all we are going to provide is exercise equipment and clean facilities, then you can get that anywhere,” says WOW! Work Out World club operator Steve Roma Jr. “The bare minimum—like TVs, equipment, staff, cleanliness and friendly people—is all you need to play the game. It might not necessarily mean you are
going to win, but you can still play the game. The stuff beyond that is figuring out what you can deliver that customers might not expect to receive.”

Strategy 3: Expand
Your Physical Presence

Although LA Fitness may not offer as many classes as EAC, it can still boast some powerful numbers, with 110 individual cardio exercise machines, 5 lines of cardio training equipment, 20 tons of free weights and a four-lane, 25-yard lap pool. Whalen says EAC does not have as much equipment, but it carries the same Lifestyle brand. In addition, she notes that some elliptical machines in EAC are hooked up to TV monitors.

EAC is currently undergoing construction that will expand its facility to 65,000 square feet. The decision to increase in size was triggered 5 years ago, when, according to Whalen, “members faced long wait times at machines and complained about locker space.” The club has a million-
dollar budget for its expansion, which is scheduled for completion by late spring 2007. The new space will include more equipment, a juice bar and a second yoga studio. “The key is to fulfill members’
requests,” Whalen says. “We are not just doing this to attract new members.”

Arena District Athletic Club, which opened in December 2004 as a 10,000-square-foot facility, caters to an upscale clientele in downtown Columbus, Ohio. The club offers cardio and conditioning equipment, Hammer Strength free weights, an indoor cycling room, a cardio room for fitness and conditioning classes, a massage therapy room and well-appointed locker rooms.

General manager Bill Brown says Arena District Athletic Club members are “pretty particular about the product and level of service.” That’s why he is always looking to do something that sets his club apart. Since most members are busy professionals on the go, the club provides bathroom toiletries and laundry service. Parking can be a hassle in any urban environment, which is why Arena District offers its members free parking.

“Our motto is ‘Working out shouldn’t be hard work,’” Brown says. “We make it as easy as possible for people to get in and out.”

Arena District Athletic Club competes with two major commercial chains in the Columbus area, namely Lifestyle Family Fitness and World Gym. Needing more floor space for its personal trainers to
focus on functional-style work with members, Arena District decided to add another 745 square feet of space. This was used to build a new, larger cardio room and to enlarge the weight and training area. The expansion took approximately 3 months and was completed in December 2006.

“The advantage that it gave us was people’s initial impressions of the club when they took a tour,” he says. “For members, the expansion created a much roomier feel, and they could spread out more, whether it was finding a place to stretch or to do lunges.”

Strategy 4: Offer
Service With a Smile

Keeping members happy and satisfied is crucial to retaining customers. At WOW! Work Out World, Roma gets his employees to “live it.”

“We have a philosophy that members might start coming to a club to look or feel better, but that’s not necessarily why they keep coming back,” Roma says. “They keep coming back because of the relationships they make at the club with other members or staff.”

According to Jon Morris, PhD, chief executive officer of AdSAM, a system and a group of consulting researchers that specializes in emotional response modeling, small health clubs need to find a way to separate themselves from large gyms. “Small clubs can’t offer memberships valid to other clubs around the country, but they can offer a more personalized service or personal trainers at a reduced price or for free,” says Morris, who is also on faculty at the University of Florida.

That’s not to say that chain operators are not building bridges with their own members. “I like to check people in at the front desk,” says Mueller at LA Fitness. “It helps put a personal touch to the club I’m running.”

And at Chicago-based Bally Total Fitness, the company markets itself at local festivals, athletic events and street fairs in order to attract more family-oriented members. Knowing that small clubs can easily draw in mothers with children or senior citizens, Bally regional vice president Mike LaManna prioritizes addressing members’ needs. Once those are identified, the club can proceed with “providing customer care and recognizing members’ dedication to fitness,” he says.

To counter this, management at small clubs must offer consistent service, even if staffing is limited. People are “creatures of habit,” Morris notes, but no matter how many years a mom-and-pop operation has been in the area, members will leave if they are not satisfied. Independent facilities need to encourage what Morris calls “a warm feeling or excitement about a place that gets people feeling interested.”

Strategy 5: Stay Connected

In his book How to Prevail in Competitive Markets: An IHRSA Guide for Health Club Operators (2006), former IHRSA president John McCarthy cites connectivity as “the number-one advantage that existing clubs enjoy over powerful new entrants into the market, so it needs to be leveraged to the hilt.” Making members feel comfortable in their workout environment is an operational basic, so you really must strive to please customers in other ways.

“We have a unique recipe for our success: our atmosphere is nonintimidating and community-like,” says EAC’s Whalen. “We don’t have aggressive selling techniques or charge for extra services, such as towels.”

Brown notes that Arena District Athletic Club offers a rewards program that allows members to earn points and gain merchandise. “It is a retention tool a lot of members appreciate,” he says.

“ [Customers] keep coming back because of the relationships they make at the club with other members
or staff.”

—Steve Roma, Jr.

Professor Small of York College, who has experience researching health club strategies, believes every club should use three primary retention tactics for keeping established customers. First, stay within your comfort zone and avoid making radical changes to the environment, program offerings and procedures unless a large number of customers request such changes.
“You have inertia on your side, so use it,” says Small. Second, base any discounts or special offers on the long term; lock customers in so they won’t be tempted to leave. Third, hold customer appreciation events on a regular basis to let your members know how important they are to you.

Strategy 6: Stay in
Touch With Members

Another way to stay engaged in your community is to use tools like your company’s website and e-mail. While WOW!’s Roma admits that his club’s website needs some updating, he says it’s a good way to generate leads and keep in touch with members. “I think the website can be used as a tool for customers to do business with us,” he says. “Giving them an opportunity to change their billing information, offer feedback and check class schedules is useful.”

The more helpful information you can post for members, the better. “If we had
a group fitness director start a forum or a blog on the website that talked about the latest health craze or fitness [news], then that would be considered helpful,” says Roma. “Our customers are coming to work out every day, so it’s important to remember how the website can relate to them when they are not here.”

E-mail is an efficient and inexpensive way to get targeted information to current and prospective members. However, try to avoid mass, impersonal messages: “Writing an e-mail to every member of the club is not nearly as effective as if you aim for just one member of the club who is very active,” says Caro.

In a sign of the times, Arena District Athletic Club now receives most new-member inquiries through its website. Therefore, Brown says having a website is not only helpful but also critical when it comes to competing with the chains. Designed to be user-friendly, Arena’s website offers members additional tools, such as nutrition support systems and a club finder [for members who are traveling].

“If you don’t have the resources for a website, you need to find them,” Brown advises. “People are turning to the website for whatever products they are looking for.”

Strategy 7: Reach Out
to the Community

Fitness is about making friends and building relationships, so getting involved in civic events, hosting fundraisers and assisting local charities can easily get your club’s name out there.

At a combined club called Ultima Fitness/Xtreme Tae Kwon Do in Wellington, Florida, owners John and Jill Merrell believe that community involvement has played a “very active part” in their club’s growth over the last 18 years.

“Part of being a community is giving back, and that relationship is what brings a lot of referrals to us,” says Jill Merrell. “People would leave our business a lot quicker than they would leave our relationship.”

A Wellington resident since 1979, Jill attributes Ultima’s success to its members and its history of “giving back” to the region through sponsorships and community service. For the past 10 years, Ultima Fitness has served as both a presenter and a committee member for the town’s annual run/walk event. In addition, the club actively participates in Wellington’s Adopt-A-Street Program and voluntarily conducts litter removal to help ease the load of work crews. And partnership with Xtreme Tae Kwon Do has enabled the club to host events such as “Stranger Danger,” a class offered with the help of the Palm Beach Sheriff’s office to teach children safety skills.

In Evanston, EAC has formed associations with local schools, businesses and civic groups, organizing structured exercise programs for students with physical and behavioral disabilities and offering its facility as a collection site for FACE (the Food Assistance Center of Evanston) and the annual Toys for Tots campaign, among other things. “Over and over, I hear people say it’s like a home here,” Whalen says. “It’s more community-like, and that’s what ultimately draws attention.”

To reach out locally, Caro suggests going to soccer fields and talking to parents about enrolling their kids in the children’s programs at your facility. Another option is to have your fitness director write tips for a church’s monthly newsletter and invite parishioners to an open house at the club. “[Then, people] don’t feel they are coming in on their own without a support group,” says Caro.

Build on Your Strengths

Cleary, every health club has its strengths and its weaknesses. Independent health clubs can succeed even when faced with the competition of a strong fitness chain. For some small facilities, survival means coming to terms with what the competition offers and identifying a strategy for competing using limited resources. For Whalen and Merrell, the proximity of a large chain in their backyards gave them a real wake-up call. And even as LA Fitness is building its business and reaching out to the Evanston community, Mueller recognizes the need for the new kid on the block to overcome an incumbent’s advantage: “a personal connection that you can’t put a price on.”

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