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Business Observer Thursday, Dec. 9, 2021 8 months ago

Weight for It: Gym entrepreneurs muscle up for growth

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Geoff Dyer and Vince Julien are gung-ho to grow their portfolio of membership-based clubs, capitalizing on the industry’s pandemic-based upheaval.  
by: Mark Gordon Managing Editor

CR Fitness CEO Tony Scrimale’s high-energy, can-do spirit doesn’t only work in the gym, in achieving fitness goals. It’s also a fit on the corporate side, in climbing the corporate ladder. This is a gym rat, after all, who started his career with a broom, cleaning floors and locker rooms in gyms in Sarasota. Two decades later helps oversee a multimillion-dollar operator of multiple Crunch fitness locations, on both Florida coasts and the Orlando and Atlanta areas.  

Named CEO in September, Scrimale, 43, is primed to use all the rah-rah enthusiasm he can muster in guiding CR Fitness through its next growth phase. The plan? Go from 34 locations now to 50 by the end of 2022 and 100 by 2025. At a cost of about $2 to $3 million to open a club, including at least $1 million in gear and equipment to open a Crunch location, it’s a hefty investment. Scrimale says the company intends to open some locations in markets it’s already in, with others going in nearby markets. Most Crunch locations do $3 million in annual revenue per gym — and every CR Fitness Crunch location that’s open so far, executives say, is profitable. “We’re not looking to grow recklessly and go halfway across the country,” Scrimale says.

Brandon-based CR Fitness has a lot of factors in its favor, starting with a hands-on leadership team. That includes some of the most successful gym operators ever in Florida, in Geoff Dyer and Vince Julien. CR Fitness is also backed by private equity, with Greenwich, Connecticut-based North Castle Partners making an undisclosed investment in Dyer and Julien in July 2019. And the Crunch strategy — to make serious exercise fun by fusing fitness and entertainment — was one of the leaders in the high-volume, low-cost gym model for a decade prior to the pandemic.

On the flip side, COVID-19 crunched in-person gym memberships, with many gyms shutting down for at least the first month of the pandemic. That made way for for a boom in at-home fitness, with brands like Peloton. NordicTrack and Echelon Fitness gaining significant market share. Online/digital fitness industry revenues, for example, grew 40.61% in 2020, according to a report from Club + Resort Business. The niche is projected to be up 66.32% by the end of 2021 in comparison to pre-pandemic levels, the report adds. It’s also projected to have the highest compound annual growth rate of the overall $160 billion fitness sector, at 33.10% per year through 2028.  

Revenue from the gym and health club side, meanwhile, dropped 58.30% in the first year of the pandemic, the report shows. In 2021, gyms remain down 22.5% from pre-pandemic revenue levels in 2019.

Mark Wemple. Longtime gym executives and entrepreneurs Vince Julien and Geoff Dyer have been working together opening Crunch fitness franchise locations since 2014.

To Scrimale, Julien and Dyer, the drop cloaks an opportunity for top performers to seize market share. To that end, CR Fitness recently spent millions to renovate three original Crunch franchise locations. Two are in Sarasota, on Bee Ridge Road and University Parkway, and the other is Land O’ Lakes. CR Fitness executives also consider the rise in digital home-based fitness a complement to membership-based gyms, in that it broadens the customer base of people who value exercise and wellness. CR Fitness’ equity partner, North Castle, also has a stake in Echelon — so there’s some money to back that belief.

Julien, who co-founded Shapes, a chain of fitness centers for women, before getting into Crunch in 2011, says another advantage is how the team defines what Crunch is — and isn’t. “It’s really closer to the entertainment business,” Julien says. “Exercise is obviously the way we get people in. But it’s really all about keeping people engaged.”

People first

Julien, 60 and Dyer, 68, have shared similar philosophies on the gym industry for at least 30 years.

Dyer, who grew up in Australia, founded Lifestyle Family Fitness. Under his leadership, it grew to 55 fitness centers, in Florida, North Carolina, Indiana and Ohio, and about $135 million in annual revenue. He sold his interest in Lifestyle Family Fitness in 2012 and bought a pair of health clubs in Columbus, Ohio, rebranding them Aussie Fit.

Julien, when he was with Shapes, did some promotions with Dyer, and the pair didn’t directly compete for customers. Forming a friendship, they met for lunch every six weeks or so, usually at J. Alexander’s in Tampa. The core of their belief system: company culture trumps any business model or strategy. “People have to come first,” Dyer says. “It’s not unusual for any business to say that — but it has to be paramount.”

Julien says New York City-based Crunch, with its “wild and zany” marketing program, was best positioned to grow its brand. Julien rang up Dyer soon after investing in his first Crunch, reasoning, he says, “the best way I had to grow was to go get Geoff.” Companywide Crunch, founded in 1989, serves at least 1.3 million members with over 300 gyms worldwide in 30 states, Puerto Rico and four countries.

“We always kidded around about being in business together,” Julien says. “Both of us have grown a lot of clubs and both f us…have made a lot of mistakes. Everything we’ve succeeded at, we’ve also failed at.”

One of the lessons both have learned in opening dozens of gyms is to keep debt as low as possible. Another one: hire ahead of growth. “If you want to open 100 clubs,” Dyer says, “you have to hire people who have done that.”

Frontline leaders

Dyer and Julien teamed up officially in 2014, after Dyer’s non-compete agreements had expired.  

The main challenges the team faces now to meet and exceed its ambitious growth goals are twofold: hiring and retaining top-tier talent and finding top-tier locations to open new Crunch gyms.

‘People have to come first. It’s not unusual for any business to say that — but it has to be paramount.’ Geoff Dyer, Crunch

On a strong location, must-haves, the CR Fitness executives say, include visibility, accessibility and good egress and ingress — in other words, a parking lot with multiple entrances and exits. “If you don’t have easy access to your gym,” says Scrimale the new CEO, “you are dead in the water.”

Choosing locations, Julien adds, doesn’t include scoring some big wins to overcome a few locations that drag down margins, like some others in the industry sometimes do. “We don’t have any loser clubs,” he says. “We don’t believe in any loser club philosophy.”

On hiring, Scrimale epitomizes the kind of hire the company seeks: someone who gets the brand, is a team player and a versatile problem solver, among other traits. Scrimale recalls Julien took a liking to him early on in his career, which opened many doors. “I’m a people person,” Scrimale says. “I’m the kind of person who knows everyone by their first name. I didn’t know much about how to manage except that I knew how to lead from the front.”

Scrimale has since hired dozens of people at Crunch, from front-desk personnel to salespeople to personal trainers. He hires, he says, with the approach that you “can’t teach attitude and you can’t teach personality,” but if you have the right mix of both, “we can teach (you) the gym business.”

“I have a big rule when I hire people,” adds Scrimale, a parent of an 11-year-old boy and 16-year-old girl. “If I won’t have them over for dinner with my wife and two kids, then I won’t hire them.”

Going back to Dyer and Julien’s belief in running a people-first business, Scrimale says that means hiring right, at CR Fitness’ Crunch locations, requires humility and mutual respect. And upward mobility. Not only in new positions of leadership, like Scrimale, but in earning potential. Some personal trainers at CR Fitness’ Crunch locations make six figures a year.

“My vision,” Scrimale says, “is to have many more opportunities for others just like Vince and Geoff created for me.”

 

 

 

 

 

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