Monday, October 25, 2010

Health Club wars

UPDATE: 10/26 Tuesday morning
So who needs reporters when we have Faceboook? Sounds like the meeting last night of Leading Edge "gym rats" at Basta e Basta was about as disorganized as the final days of the Club itself.

A former member reports:


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Original upload: 10/25 Monday afternoon

The Springfield Republican reports (via a Daily Hampshire Gazette reporter)

So I'll try to be a tad less critical of my friends at the Gazette and Republican as today's Business Section long form article simultaneously published in both is a pretty good analysis of the current state of the volatile fitness market in the healthy, Happy Valley.

Reporter Scott Merzbach did his homework and even took into consideration feedback posted to the original Gazette breaking story (as late as it was) on the sudden closing of 'The Leading Edge' gym in Amherst and the diatribe the same nitwit posted on my blog.

The Anon insists of course that the appearance of a low-cost chain outlet like 'Planet Fitness' and the $50 million Rec Center (otherwise known as the Deathstar) going on-line one year ago, had little impact on 'The Leading Edge' and the "real story" was the soap opera antics of the two owners Peter Earle and Joanne Delong. Yeah, and Santa Claus is Muslim.
All the average person need do to assess the impact of a 'Planet Fitness' or others of that ilk is to consider what would happen with their buying habits if suddenly a sparkling new gas station (owned by a regional chain) opened on Rt. 9 in Hadley charging only $.69 for Regular--four times less than the prevailing price of $2.79?

Sure, somebody with business sense might wonder "How can they do that?"; but as long as you get your gas at that ridiculously cheap price, why would you care?'Bally Total Fitness' pioneered the low-cost, high-volume, pack-them-in-price modality 40 years ago, but they were smart enough to tie consumers in for 24 to 36 months to an unbreakable contract.

And when they killed the other clubs in the market they would also raise their rates.

'Planet Fitness' doesn't do that (I guess that is to their credit.) They simply sell as many memberships as possible at give away prices and hope most of their clients never show, which is probably close to the truth.

But I have to admit the soap opera aspects of the recent demise of 'The Leading Edge' is kind of fascinating. Apparently after the two experienced Gold's Gym franchise owners in Boston (who had given Peter Earle his start in the industry with a sales job) wisely bailed in 2004 two years after founding Gold's Gym Amherst, Ms. Delong--an attorney not known for her level of fitness--came to the rescue and bought in as half owner.

Interestingly she used her ownership of a business condo at 30 Boltwood Walk in town center as the major payment "transferring" one-half ownership to Mr. Earle. Although the legal papers (probably drawn up by her) were not legal and now Mr. Earle has filed a lawsuit against her.

Either way, I had toured that particular location in 2004 just after Pruddy Gomez finally gave up on his boisterous bar Amherst wished to quash for a slew of zoning violations. Interestingly, Pruddy used his landlord Joanne Delong as an attorney, so she was making money off his rent and his legal troubles.

Regardless, the place was beyond a dump by that point. I think the asking price was about $200,000 and if it was in turn-key shape I probably would have purchased it, but the state of disrepair required another major investment to rectify. At the time the valuation was $200,500.

Thus half-interest was worth $100,000. Sweet deal to buy half of Gold's Gym back when it still had that Gold Standard name for essentially a worthless piece of paper. According to industry standards a recreation business is valued at about double annual sales, and I assume Gold's did at least $1 million in sales in 2004, thus making the value of the business $2 million.

It would be interesting to see how much cash Ms. Delong came up with in addition to the worthless $100,000 property deed?

20 comments:

Anonymous said...

Larry, Planet Fitness's strategy is nothing out of the ordinary. If I had a dollar for every time my wife signed up for 6 months at the Amherst Athletic Club, and only went once or twice, I'd already be retired.

LarryK4 said...

For sure (my prices were so extremely high).

She could just as easily have purchased a ten visit pass (which most clubs do not do) for $50 and you could now be retired.

Because even with their outlandish unlimited usage monthly prices six months at Planet Fitness will set you back a whopping $60

Still, there's a BIG difference between establishing a business based upon on non-usage and one where you actually want to serve your clients.

Sam said...

I cannot believe all the time you, and others, are wasting on this issue. Who the hell cares? These are stupid fitness clubs, filled with people who are apparently unaware that fitness can also occur OUTSIDE without paying any membership dues. Move on to some other non-important issue, Larry. Surely there is a stone, somewhere, that you have yet to unearth and shit upon.

LarryK4 said...

Actually there, "Sam" I'm a B-I-G fan of outdoor exercise and was an active proponent pushing for the Bike Path back in the day when it was pretty much a pipe dream.

Much to the chagrin of then Hadley Selectman Johnny Mitch.

And since you mention outdoor exercise that doesn't require "membership fees," I guess that leaves out, umm, golf.

Anonymous said...

I remember the day Pete and Joanne bought each other brand new black BMW's. Joanne was bitching and moaning about how she was "not accustomed" to such a paltry car (her trade-in was a Jaguar). They paid cash.

Pete bought his wife Megan's parents house with cash. They built an addition and bought a boat. Also with cash.

The gym was doing well.

The only reason it closed was because Pete was hiding cash from Joanne and she caught him, hence the lawsuit.

It had nothing to do with the economy or competition or any of that other crap. The gym was doing well.

LarryK4 said...

I'm beginning to wonder what else they were selling to make THAT kind of money.

If the business was so super profitable why did the original two experienced owners (you know, the ones who gave Peter Earle his start in the industry)get out so early on?

And if the business was so super profitable why did Peter Earle then sell/trade 50% of it to Joanne Delong for a half-interest in a weathered business condo in Amherst town center?

Ed said...

Larry, you might be onto something about what else may have been sold down there. It has happened before.

And as to Pruddy Gomez, well it is bad luck to speak ill of the dead and you need to remember that.

However, serving as the attorney for your tenant, isn't that a conflict of interest under the bar regs?

Anonymous said...

Black BMWs? I thought health club owners only drove PT Cruisers?

LarryK4 said...

Actually these days Nitwit, I'm a "Soccer Dad" so I drive a Chrysler (same company) Town and Country Van.

Anonymous said...

Larry,

Muslin is a fabric!

spell check

spell check

spell check

Anonymous said...

Joanne treated her employees like dirt, as in not paying their worker's compensation claims, after they got hurt on the job.

Anonymous said...

I'm not sure what your complaint is? That Planet Fitness is smarter than you? That they figured out a better business model than you?

I belong to PF. Some months I go a lot and some months I don't go at all. The cheap price makes it worth staying a member even when I don't have time to go. I know a lot of my friends feel the same way. We are not being taken advantage of when don't go. It's called flexibility.

BTW, A high price doesn't seem to guarantee staying in business so their cheap price means if they do go under Im not out anything.

Face it, they just figured out the wishes of the modern consumer rather than the one from 1979.

Anonymous said...

Hey Larry,

You fail to comprehend a few important things in your analysis of the role of Planet Fitness and the UMass Rec Center. First, PF is a bare bones facility--no aerobics classes, no yoga, no pilates, no spinning classes. Second, the UMass rec center is not open to the public and is neither cheap (except for undergraduates) nor convenient even for those who have the necessary credentials to buy a membership. The rec center doesn't open until 10 am on Saturdays and no until noon on Sundays and there is no parking nearby. It's a great place to workout if you are a freshman living in the Southwest dorms. Not so great otherwise.

Leading Edge captured a market that no one else did and it should have been making money. There were definitely enough members. 150+ people showed up at a meeting Monday night in downtown Amherst to try to keep it open. How many people showed up to protest when you closed your health club?

LarryK4 said...

Leading Edge did not capture any market different from Ultimate Fitness or Kidsports.

And come to think of it, Ultimate went out a few days before Christmas but then members and one investor came together and they reopened January 8, and then died for good six weeks after that.

I believe a former Director of Marketing for Gold's back when they were in their glory years posted on this blog a couple years ago that they did indeed hit 3,000 members (possible I suppose).

So 150 represents a paltry 5%. And this was a meeting held before rigamortis had even set in.

All in all, not very impressive.

Anonymous said...

Grapes + Sour = Larry

LarryK4 said...

Sour about what?

A glitzy (meaning W-A-Y too expensive overhead) Health Club operation that never should have opened in the first place--especially with the franchise fees Gold's Gym requires--finally getting their comeuppance?

I'm DEAD, so why do I care in the least if 'The Leading Edge' miraculously comes back to life?

Greg Boisseau, lead architect for this Lazerous revival, married into the richest, most influential family in Amherst: The Jones Empire.

And nobody, well, except maybe for Barry Roberts, keeps up with the 'The Joneses.'

Why doesn't Mr. Boisseau talk them into buying the turkey and making it profitable, rather than rely on fellow "gym rats"?

Anonymous said...

I already answered your questions about the former owners, Larry, but you deleted my comment.

Why should I do it again?

LarryK4 said...

Nice try Nitwit.

The only comment I have deleted in the past three months was 10/20 on my initial breaking news upload 'Another one bites the dust' (that beat the Gazette by an eternity) concerning 'The Leading Edge' going belly up.

And it was MY OWN comment hence the remaining term "This post has been removed by the author."

And the reason I deleted it and then reposted the comment 4 minutes later is because it needed slight editing (and I'm ever so aware of folks like you who come here to nitpick).

So that would make you a liar.

But feel free to jump in now anyway and TRY to explain about the former owners.

Anonymous said...

Sounds like they were dealing "steriods" in the locker rooms to afford such luxuries!

Anonymous said...

yawn.