Lots of essential details in the busy holiday season..

Quite a few things happened this week. None of them were terribly eventful, but all were essential as we move towards converting our fitness club into a World Gym.

• We reviewed and signed off on the proof for my manager's business cards. This is our first promotional item and we'll use it to let others know that we are now a World Gym.
  
  
• I spoke to Todd, WG's website guru, about the steps needed to get our club on the WG website. Most important to me, we discussed online membership sales. I'm confident that this feature of my arrangement with WG is going to be one the biggest selling points among members, and the most beneficial to me. Having someone handle all the details associated with selling online will be great.
  
  
• We received several boxes of WG promotional items - dozens of t-shirts; hundreds of pens and stickers; along with some banners, signs, and window decals. These items were referred to as a 'starter kit'. I estimate the value at $1000 or so. The promotional products can be used as giveaways to get the community aware and excited about the "new" World Gym.
  
  
• I also finalized my equipment lease and put the equipment order in. We aren't adding much new equipment, just a couple of pieces of cardio, a couple of pieces of strength, a new tanning booth, and some rolled rubber flooring.
  
  
• Chris Rondeau and I also worked out the details of our first direct mail piece. We reviewed and approved the proof, and it should be in people's hands in the first week of January. I'll give you a follow-up at the end of February to let you know how much the piece cost and how many new members we think it brought in.
  
  

The next couple of weeks are going to be tight due to the holidays. I'd love to say that we're going to get a lot of work done on the facility, but I'd probably only be kidding both of us. I hope to complete at least the electrical work and sheetrock in our new tanning room, but that's probably about all I can expect. So stay tuned...

Blizzard Conditions

This week I scheduled a trip to Manchester, New Hampshire, to observe what's happening with the conversion of World Gym's corporately-owned club. My trip had a specific purpose based on one of my firm beliefs. It is this: when anyone claims to be an expert in a field, that claim needs to be backed up with "real world" experience.

Here's my reasoning. Consider this. Which would you rather receive business advice from- a) someone like a Harvard MBA who has never owned or operated a business a day in his life, or b) someone who's actually been "in the trenches", so to speak? My preference is for "b" because I trust experience more than theory. This is why it was important for me to see that the substance of World Gym consisted of more than just well-educated people with some good ideas. I wanted assurance that they were going to get in the trenches with me!

Finally, after a 12-hour road trip that normally takes only 6 (you may have heard about the wintry Nor'easter that hit the New England states at this time), I arrived at a Planet Fitness club in Manchester. This is the club that World Gym is converting to their "1440 All Axcess" concept.

I was glad to see that size-wise the club was almost identical to mine. It is also located in an unspectacular, somewhat blue-collar-looking plaza, as is my club. So I am encouraged by the fact that the first club undergoing the conversion mirrors mine so closely.

I met with Scott, construction manager for Planet Fitness. He provided insight into the planned structural changes that will accommodate the 24-hour access concept. Surprisingly, none of it is that extensive. In fact, Scott plans to have it completed within 2-3 days at the end of Christmas week.

Basically, they're removing a couple of interior walls, eliminating the check-in desk, and re-purposing one of the tanning rooms to make it a secured office. This is where the surveillance, security, and access computer will be housed. One other thing they're doing, for which I don't have the budget, is replacing all of their existing strength-training and free-weight equipment with brand new World Gym branded equipment, manufactured by Life Fitness.

Blizzard aside, it was a good trip that answered my questions. I got confirmation that the company is indeed in the trenches with me.

Legal issues behind us

I'm glad to report that the legal issues are behind us. My attorney instructed me to create a new LLC and a new DBA, which I have done.

The LLC is a form of corporation that insulates this particular company from my other companies, as well as from me personally. Because this is mainly a legal formality, the name of the LLC isn't so important - just as long as it isn't already being used by someone else. I've chosen the name TRP Fitness, LLC. TRP stands for Three Rivers Plaza, the current location of the fitness center I'm converting.

Of more importance is my selection of the DBA (doing business as) name. You may somtimes hear the DBA referred to as a Trade Name. I've chosen World Gym of Phoenix as the DBA. This name basically allows us to accept checks payable to World Gym, and to refer to ourselves in general as a World Gym.

I apologize for the time gap in these posts, but in actuality we've had a quiet spell in which there was no new information to post. If you have dealt with corporate legal matters, or worked with attorneys, you know that haste is not the name of the game. At $245 / hour, I guess you'd take your time too! But I also take it as an assurance of thoroughness, which is important.

At any rate, it seems that the legal back-and-forth is completed. Karin in Franchise Relations at WG Corporate has made the appropriate changes to the Franchise Agreement. She's sent it to me for signatures, along with a Construction Binder. In fact, I received it today (Saturday) via FedEx - so it's a good thing I stopped in at the office for a little bit.

The construction binder is great. It details many items related to construction that a club owner must know - right down to the color numbers for paint to be used at the club. They've thought of just about everything. This book would have been very valuable when I opened my first club and had to figure things out on my own. I remember being asked by the landlord how many tons of HVAC (heating, ventilation, air conditioning) I would need. How could I have possibly have known the answer? This book spells all of that out for you.

This upcoming week should shape up like this:

• I'll sign the agreement in front of a Notary on Monday, and FedEx it to WG to arrive on Tuesday.

• WG and I have already been working up versions of the postcard we'll send to announce the details about World Gym of Phoenix. We'll probably just need a couple of tweaks and can then determine a mailing date. It will most likely be close to January 1, so we don't compete with (or get lost among) all the in-your-face Christmas advertising that's currently going on.

• I'd like to obtain some business cards for my newly-hired manager. He can use them to begin introducing himself to members and prospects, and establish himself with the business owners in the plaza.

• Also, with luck, we'll quickly become part of the World Gym website. One of the most exciting aspects of this relationship is our new ability to offer online membership purchase through the website. A 24/7 club is able to operate unstaffed for much of each day, which of course is a major cost-saving advantage. But limited staff hours also means limited time for membership sales. So getting on the website addresses a huge need we've had - that of providing unlimited and convenient times for buying and renewing memberships.

Watch for me to say we're official by the middle of this coming week.

Legal questions slow things down

Today my attorney and I met to discuss the 30+ page franchise agreement and its various addendums. As mentioned in an earlier blog, many of my questions were related to non-competition clauses. These questions are probably unique to my situation because I already own 2 fitness centers (only one of which I am converting ... for now), as well as a company that sells products and services to other fitness centers nationwide.

In its original format, the agreement would put me in breach immediately since my second facility would be considered a 'Competitive Business', as would many of my current and future customers since they, too, operate fitness centers.

For their part, World Gym recognized this as a conflict for me and they created a new addendum to address the issue, redefining what a 'Competitive Business' is, and excluding most of my existing activities. Today's meeting was primarily to ensure that this issue has been adequately addressed from my standpoint. Ultimately, my attorney and I decided that it would be best for us to draft our own addendum - which I hope to have in my hands by Wednesday.

Most of the other provisions in the franchise agreement were pretty standard according to my attorney. Interestingly, he noted that even from a financial standpoint, the WG monthly franchise fee structure was fair. He based his assessment on comparisons to many other franchise agreements he has reviewed.

On another note, here's some advice that may be of interest to those of you who are considering a business venture like this one. I am being advised to establish a new business entity for this particular club, referred to as an LLC.

I know a fair amount about LLC's (Limited Liability Corporations), and, in fact, I recently advised my sister-in-law to consider forming one for her new business. But I hadn't really thought of forming one myself for this particular business entity.

At the risk of throwing too much legal jargon around - here it is in a nutshell. My fitness center is currently a DBA of an S-Corp I formed over 10 years ago. In fact, my second fitness center is also a separate DBA of the same corporation - as is my other company. I learned today that, although this structure enables me to open bank accounts under 3 different trade names, it opens up each of the businesses to shared liability. Here's what that could mean. Let's say, for example, that something catastrophic were to occur at one of my fitness centers and it was not covered by my insurance. The result could be the exposure of the assets of the other two businesses to the financial peril of the first.

So a word of caution is in order. As anxious as I am to get things moving ahead, I have learned that it does not pay to overlook the larger legal aspects of this type of endeavor. Before today, my goal was to be able legally to say that my club is a World Gym by the end of this week. However, after meeting with my attorney, I believe that it is more accurate to aim to have all of my legal affairs in order by the end of this week. Of course World Gym will still need to have their legal department approve of everything, so I'm thinking it's likely to be more like next week.

Some of the planning tasks we are continuing to do while the legal matters get ironed out include:
1) website development
2) laying out graphics for our company van
3) direct mail strategy
4) lining up contractors to do some remodeling work

However, I have not committed financially to any of these yet. But preparing in these areas will allow me to move quickly once the agreement is signed.

A Mountain of Paperwork

Here's the latest. I'm buried in paperwork and slowly working my way out. This list shows just some of the forms I've received to date:

1) Franchise agreement - (50 pages!)

2) Franchisee questionnaire and financial report

3) Copies of suggested membership contracts

4) Lease application + equipment quotes

So far, I've given full priority to numbers 1 and 4 on the list above--the franchise agreement and the lease application. I'm glad to report that I have completed reading the franchise agreement.

I've also created a spreadsheet with my concerns and questions cross-referenced to the appropriate pages and sections in the agreement. My attorney will get this today. There are a few sticking points to discuss with him, most of which are related to non-compete clauses. However, these points are unique to my situation rather than concerns that would be likely to affect most franchisees.

One legality requires a lapse of 10 days before a signed agreement can be sent back to the franchiser (World Gym). My guess is that this provides the franchisee ample opportunity to review the document thoroughly without feeling pressured by the franchiser - similar to a 'buyers right to cancel' a fitness membership.

The main reason why I've also kept the equipment lease front and center is that there are 4-6 week lead times for receiving most of the equipment. This means that even if I were to order everything today, I'd be unlikely to have it until January! I would love to have everything in place by January so that when the prime season for new memberships kicks in, we'd be well prepared.

I suspect that things will remain quiet for the next week or so. My attorney should respond in 5 days. And meanwhile we are busy gathering prices from contractors, and determining what steps to take once the agreement is signed.

Other than organizing these "big picture" tasks, I don't plan to do much regarding financial commitment until the franchise agreement is in place. That's because we aren't a World Gym until all the "i's" are dotted and "t's" crossed.

Quotes start arriving immediately

I've been told in the past that I move fast - but World Gym moves faster! Today, I received equipment quotes from 3 WG approved vendors, lease applications from 2 companies, and World Gym branded promotional products from somewhere else. But what's even more astounding than that - I already received the first draft of the postcard we plan to mail out in late November from Chris! It looks great - I would post it, but I'm sure WG would not approve of that, since it considered proprietary information.

It basically announces that we are renovating and becoming a World Gym and promotes a special offer that prospective members can take advantage of by stopping by during staffed hours, or by visiting http://www.worldgym.com/. I've always felt that being able to offer people a way to join a club online has been a great idea, but I never knew how to go about it. World Gym has already designed the back end, allowing members to enter their credit card information and join instantly. Then a branded mailer is mailed to the member along with some promotional supplies and their key tag, which will get them into the club 24/7. I would guess that this could all take place in as little as 24-48 hours. If you own a 24/7 club, you know first hand how difficult it is to determine which hours to staff your club - but the one thing you know is that when people want to purchase a membership. - you want them to be able to do it immediately. The web site seems to be a perfect solution.

Promotions, EFT's, and wall colors

In the past few days, I've been in contact with Ben, Chris, and Karin at Planet Fitness / World Gym. Karin coordinates a lot of the franchise activities and she overnighted me my UFOC (a requirement for companies to be able to sell franchises), along with my franchise agreement, and a couple of questionnaires designed to gather personal and financial information about me and my company. I have already begun reading the agreement, making notes about things questions that I need answered either by World Gym or my attorney. My goal is to get the entire things read and understood by this coming Monday and then to get it into my attorney's hands for his review. I hope to be ready to send it back to World by one week from Monday.

Today, Chris and I got into some very in depth discussions about our current membership statistics (number of members, current prices, etc.). I have never been great at paying regular attention to the numbers, especially as long as our bills are being paid and we have money in our checking account - but I've taken an Entrepreneur's Boot camp at Syracuse University for the past month, and I am committed to really understanding my financials. Chris asked me for several things:

• number of paid in full members (180)



• number of EFT members (12)



• number of expired members (190)



• EFT pricing ($39)



• Annual paid in full price ($419)



• 3 month membership price ($149)



• Age of club (1 year)

He suggested some pricing and promotion strategies, and we came up with a plan to have our first direct mail piece hit the Monday after Thanksgiving. He's going to have World Gym's mail house get started creating the mail piece so we can have it approved and ready to go. We're also planning to send a letter to our existing members at the same time. Chris really helped educate me on the value of the EFT memberships. I've always thought that having a solid EFT base is a good business strategy, I've just never followed through on implementing a strategy to build the base. It sounds like all that is going to change once we convert fully to the World Gym format.

On another note, Chris faxed me back my site plan, marked up with his suggestions about changes to wall colors, what WG graphics need to be installed on what walls, and a list of the specific colors - which are available at Sherwin Williams. I was really excited to start to get a vision of how things were going to look, so while I was at lunch, I stopped by the local SW and picked up a few color chips of each of the spec'd colors. The colors are really nice - they're bold, but soothing colors. I really think WG's new brand identity is going to be around for a long time, and it is such a marketable brand as compared to the older image of an ape and a bent barbell. I was also glad to hear that my mother liked the logo - after all there is so much more to this industry than body builders.

How I first heard about World Gym's plans

For several years, I've owned an independent 24/7 fitness center, and in fact, I've helped over 100 other independent club owners convert their clubs to 24/7 access. As much as I have enjoyed being responsible for all of the related decision making over the years, I've often thought that it would be nice to be part of a larger organization. The fact is, I have a couple of friends who own franchised businesses - and they attribute much of their success to the fact that they have this corporate support system.





I've seen several 24/7 fitness franchises pop up in the past few years, and while I've considered affiliating with them, I've also wondered "How are these companies, and what can they do for me?". I was especially wary of affiliating with a business group that comes on strong and then flames out. If I affiliate with a company, it needs to be one that I think is still going to be around for years to come.





Then in early October, I read in an online fitness magazine that World Gym was jumping in to the 24/7 club market [I've put the link to the article at the bottom of this post]. I thought to myself "Now there's a company I've heard of". I began trying to find out more by visiting their website, and making some phone calls. Eventually, I received a phone call from none other than Mike Grondahl. If you haven't heard of Mike, he's the founder of the wildly successful Planet Fitness chain based in New Hampshire that bought the World Gym brand about a year ago. After talking to Mike for a bit, I was put in contact with Ben Midgley and Chris Rondeau, the Presidents of Planet Fitness and World Gym respectively.





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