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Locally Based Fitness Club Chain Exercises Its Options

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By DAVE SIMANOFF, The Tampa Tribune

Published: January 17, 2008

ST. PETERSBURG - If you work out at Lifestyle Family Fitness, you might find Todd Bright.

You won't, however, find him flaunting his title.

"When people ask me what I do, I usually say I'm in charge of helping you," he said. "One time, someone said, 'That's good, because we need batteries for the toys in the kids' play area.'"

Bright is president and CEO of closely held Lifestyle, based in St. Petersburg. The company boasts more than 54 locations in four states, 2,000 employees and could top $100 million in revenue in 2008.

As Lifestyle expands and considers its options for the future, Bright remains dedicated to the customer-focused culture that he thinks sets its clubs and employees apart from competitors. That means listening to members, maintaining a local focus, building an environment that's engaging for fitness enthusiasts but not threatening for newcomers, and understanding that no one - even the chief executive officer - is too important to run out for batteries.

"Anybody can build a club that's 32,000 square feet and put state of the art equipment in it," he said. "You need a passion for making a difference - for making things the best they can be."

Since 1999, when it had eight locations and $9.6 million in revenue, Lifestyle has managed to roughly double in size every three years.

It has expanded through most of Florida and is now pushing into North Carolina and Ohio. Recently, it opened its first location in Indiana, in a suburb of Indianapolis.

Bright said the company's expansion has been steady and calculated: Decisions to open new locations or acquire existing fitness centers were made after consulting reams of demographic and real estate information. Locations are approved by a five-member real estate committee.

The process is conservative and painstaking - "it's probably too scientific" - but produces excellent results, Bright said.

Industry Brought In $17.6 Billion In 2006

Lifestyle is growing, but it remains one of many small players in a massive and expanding, but fractured, industry.

Scott W. Hamann, an equity research analyst who tracks the fitness club industry for KeyBanc Capital Markets in Cleveland, said there were 29,000 fitness clubs in the United States at the end of 2006. Combined, those clubs received $17.6 billion in revenue, he said.

The fitness club industry is not monopolized by a single company or divvied up among a handful of dominant companies.

The largest player is closely held 24-Hour Fitness Network, which accounted for approximately 7 percent of all revenue in 2006. Nonprofit organizations, such as YMCAs, collectively represent about 41 percent of the industry. Private fitness centers, which typically have just one location and are found in places such as country clubs, make up about 10 percent of the business.

During the past decade, revenue for the entire fitness club industry has grown by an average of 8 percent a year while membership has grown about 5 percent annually, Hamann said. The industry is growing because more people are viewing exercise as an important component of healthy living, Hamann said. Also, a growing number of insurance companies and employers are providing incentives for people to join fitness clubs, such as discounted memberships.

"Our thesis is that fitness is becoming more of an everyday necessity, as opposed to a discretionary expense," Hamann said.

Growth Might Take Company Public

Lifestyle is not the only fitness center with expansion plans.

Two publicly traded fitness center companies have both set aggressive expansion targets: Life Time Fitness by 10 percent a year, and Town Sports International by 15 percent a year.

As the fitness center industry continues to grow and mature, larger chains may take customers and revenue away from smaller operators that have a handful of locations and can't provide the same kind of amenities, equipment and environment, Hamann said.

Lifestyle is backed by three investment groups: Quantum Capital Partners, Ballast Point Ventures and the Burton Partnership. It costs about $2.5 million to $3 million to open a new fitness center, and the typical new club is about 32,000 square feet, Bright said.

The company might consider opening itself up to shareholders in the future. "We've positioned ourselves with our growth to go public, or we can continue to be private," Bright said.

The option that's not on the table: offering Lifestyle up to be bought by another company.

"We don't think of being acquired," Bright said. "Our objective is to continue to excel and perform and do what's made us successful."

Reporter Dave Simanoff can be reached at dsimanoff@tampatrib.com or (813) 259-7762.

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