By: Connie Brown

We know, as a club owner or manager, you are always looking for ways to differentiate yourself from the competition. 

Attracting new members is hard, keeping them is even harder. It takes a lot to retain a member with all the competition.  At ABC Financial, the Club Marketing team is committed to offering cost effective marketing tools designed to help health clubs get members and keep them.  With that objective in mind, we are happy to offer an additional program designed to create member loyalty in a very unique way:  enabling members to reduce their membership dues without affecting your club’s bottom line.

ABC Financial has partnered with Billaway, the first rewards program of its kind that allows members to earn cash rebates from everyday shopping and then apply those rebates directly to their club membership bill.  The result to the member is a reduction in his or her out-of-pocket costs while your health club still collects 100% of the membership revenue.

This unique membership rewards program is available to the 6,000 clubs served by ABC.  The clubs, in turn, are able to offer the program to their more than 4.5 million members throughout the United States.  The program enables members to convert qualified spending to cash rewards by shopping at more than 25,000 retail locations and 3,000 online websites such as CVS, Macy’s, Staples, Walmart, and Target.  Additionally, the program is easy to implement.

It goes without saying that most consumers appreciate the opportunity to save money on the bills they have to pay.  We view the Billaway program as one more way to enhance your relationship with your members and differentiate your club from the competition.

If you would like to learn more about the Billaway program, please contact:

Connie Brown at cbrown@billaway.com

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By: Jonathan M. Hill, Esq.

New Years is a time for honest reflection and (hopefully) decisive action.  As a health club owner, it’s easy to look at what you can and should be doing in 2015 to boost your profitability.  What you’re probably less proactive about is what you can and should be doing to protect the money you’ve already made.  I’m talking about risk management.  Nobody likes to “talk legal” because it’s viewed as a “cost center” and not a “profit center,” but mistakes in the legal arena can be very expensive to fix.  Your best prescription to avoid having to write those checks is to avoid making the mistakes.  As we move into the busy season, here are five legal pitfalls to avoid:

You don’t get your agreements in writing. 

It would seem like common sense to get your business agreements in writing, but there are many out there who still believe a handshake is enough.  While it’s certainly admirable of you to think that someone’s word might be “as good as gold,” reality would dictate that many-a-dispute could have been avoided (and a fortune saved) if the parties had simply reduced their understanding about a deal to writing.  A contract is, at its core, simply law created between two or more parties.  So long as certain basic parameters are met in the contract’s creation – for example, the parties aren’t drugged, under the influence or under-aged (capacity to contract); the parties have the proper authority to enter into the contract (authority); the parties aren’t being forced to sign against their will (duress); the parties aren’t lied to or tricked into making the deal (misrepresentation); and the substance of the agreement isn’t against the law (illegality) or against public policy (unconscionable) – courts will generally uphold the contract as written.  It’s critically important to be clear when drafting the language of an agreement.  Both sides should know exactly what they’re giving up and what they’re getting in return.  A well-written agreement should be understandable to anyone who reads it, not just your lawyer.  Use plain English, be direct and to the point, and don’t overcomplicate matters.  Say what’s supposed to happen.

You’re not paying overtime to employees who should otherwise be making overtime.

Wage and hour laws can be complicated.  Even if you think you’re complying with the Fair Labor Standards Act (FLSA) – the overarching federal law which governs pay practices in the workplace – the particular state where your business operates may have laws on its books which elevate the federal standard (California is a good example).  While entire books have been written on the subject of overtime, for purposes of this article, I have two take-aways: first, employers in the fitness industry can easily fall prey to misclassifying their staff as “exempt” to the FLSA’s overtime requirement when, in fact, certain employees should be classified as “non-exempt” and paid time-and-a-half for working over 40 hours a week.  And second, wage and hour lawsuits can be very expensive to defend, especially when brought on behalf of an entire group of similarly-situated employees (the dreaded “class action”).  In order to properly claim an exemption to the FLSA – there are several of them, the “big three” being exempt administrative, executive and professional employees – it’s not enough just to give someone a fancy title like “manager” and pay them a salary.  The salary must meet a minimum weekly threshold; but, equally important, the employee’s actual job duties must support the claimed exemption.  When it comes to wage and hour compliance at your health club, you’re well advised to take an hour or two to speak with an employment attorney with expertise in this particular area. 

You’re not keeping up with the changes in minimum wage law.

Beginning in 2015, more states than ever before will be raising their minimum wage.  As of January 1, 2015, 28 states and the District of Columbia will all have minimum wage rates higher than the federal baseline rate of $7.25 per hour.  These states include: Alaska ($7.75), Arizona ($8.05), Arkansas ($7.50), California ($9.00), Colorado ($8.23), Connecticut ($9.15), Delaware ($7.75), Florida ($8.05), Hawaii ($7.75), Illinois ($8.25), Maine ($7.50), Maryland ($8.00), Massachusetts ($9.00), Michigan ($8.15), Minnesota (depends on the size of the employer), Missouri ($7.65), Montana ($8.05), Nebraska ($8.00), Nevada ($8.25), New Jersey ($8.38), New Mexico ($7.50), New York ($8.75), Ohio ($8.10), Oregon ($9.25), Rhode Island ($9.00), Vermont ($9.15),  Washington ($9.47) and West Virginia ($8.00).  In the New Year, especially if your business is located in one of the states above, make sure that you’re not behind the times and that you’re in compliance with the state and federal minimum wage laws.   

Your health club agreements aren’t in compliance with your state’s regulatory requirements.

Most states have laws which regulate the contractual relationship between a health club and its members.  These laws – usually found under a state’s “Health Club Act” or “Health Spa Statute” – dictate everything from whether you must obtain a bond or get registered with the State’s regulatory body, to what sized type and font must be included for certain required provisions in your membership agreements.  It’s a tedious process to fly-speck your club contracts, to be sure, but it’s a necessary process since the penalties associated with non-compliance can be severe.  If you operate health clubs in several states, it’s important to remember that when it comes to regulatory compliance, it’s not one-size-fits all.  Each state may have its own provisions, including the specific verbiage it wants used, and your club contracts need to reflect this. 

Your response to complaints about sexual harassment is either non-existent or inadequate.

Health clubs make for fertile grounds for a sexual harassment complaint.  Whether allegations of sexual harassment involve a member of your staff, or it involves a client in your gym, how you respond to a complaint of sexual harassment is critical.  With some exception, liability can usually be avoided if you have a good sexual harassment policy at your club, and you enforce it.  A good sexual harassment policy will include a process whereby the gym/employer investigates what exactly happens, and remedies the alleged harassing behavior accordingly.  When the alleged harassor is a gym employee, as the employer, you have the right to temporarily suspend an employee pending the outcome of a thorough investigation.  And, if you determine wrong-doing or inappropriate conduct by an employee, you have the right to take disciplinary action up to and including termination.  But, if the alleged harassor is a gym client, your “control” over the situation necessarily involves the client’s membership, and your ability (hopefully per the terms of your membership agreement) to suspend the membership or revoke it altogether.  The worst thing you can do when faced with a complaint of sexual harassment is to do nothing.  Again, a policy against sexual harassment, uniform enforcement of that policy, a fair investigation process, and a decisive remedy to end alleged harassment are all key components in derailing a potential sexual harassment suit. 

Jonathan M. Hill is the Chief Legal Office for Gym HQ, LLC, a company providing back-office services to fitness industry clients, and he is the Managing Partner of the Hill Law Group, LLC, a firm specializing in the representation of health clubs, fitness studios and personal training companies.  Jonathan can be reached at jhill@hill-law-group.com.

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By: Michael Scott Scudder

The term rose-colored glasses first surfaced in common language in the 1850’s and is generally attributed to English author Charles Dickens.  It describes a person who has “…a cheerful, optimistic view of things, usually without a valid basis.” (Source: Random House Dictionary)

Said another way, the term denotes a refusal to acknowledge facts as contributors to an opinion on a subject.  One dictionary flatly states the term as “…used in reference to a naively optimistic or unrealistic viewpoint.”

I have more than once in my career been called “Dr. Doom” or a “negativist” in my presentations on certain aspects of the health club business.  Thankfully, in over 20 years of writing newsletters, far more people have acknowledged me for bringing objectivity to an industry that has often been subjectively over-hyped.

Maybe nearly three decades as a competitive individual-sport athlete (Nordic skiing, Alpine skiing, golf, tennis) tempered my outlook.  The truth is that you lose more than you win.  You work on your skills, only to find that in mastering many you still have others to approach from almost elementary positions.  You never have more than a few minutes in the limelight.

Early-on in the health club business, I came to understand that I was fighting an uphill battle by offering exercise to the masses…when only a small percentage of them actually wanted it. It was very sobering to learn that no matter what we do…of the15%-16% of the population who participate in facility memberships, 35%-40% (or more) of them will quit every year…and have to be replaced if we want to run even a marginally-successful club.

But, even in light of some obviously irrefutable facts (attrition, lowering prices and profits, increased competition), I haven’t changed my belief that ours is an industry that can immensely contribute to society.  With that in mind, today I’ll forge ahead with an editorial that some may think to be a “bummer”…and I fervently hope that more will view it as a breath of clean, fresh air.

OBSERVATION:  Independent fitness facilities are getting a smaller slice of the membership pie every year…and with less revenues.

Approximately 9% of clubs in the U.S. control over 40% of national memberships.  (Source: analysis of Club Industry’s Top 100 and IHRSA‘s annual membership statistics.) 

Fifteen years ago, the average number of members per club was nearly 2,100…today it is barely over 1,600.  A decrease of more than 20%.

In 2004, average single-member annual membership dues exceeded $450.  Today, that average is less than $350.  A 20%+ decline in average prices.

OBSERVATION:  Large club companies (corporately-owned and franchisers) are getting big investment dollars to buy up profitable regional-chain facilities.

2014 witnessed over two dozen of these deals.

There are presently another dozen-plus deals in the making.

The appeal is cash flows.  The problem is over-leveraging. Many of the “bigs” have taken on huge debt to purchase or build clubs.  Eventual implosion is a strong possibility.

OBSERVATION:  The game has changed but most of the players haven’t shifted gears.

For independent facilities, profits can only be made from ancillary sales.

However, the average club is only garnering slightly more than 20% of its revenues from sales of training, programs and other ancillary sources.

The vast majority of facilities still insist on an antiquated “members-only” business model.

Potential-customer outreach is mired in outdated advertising and marketing vehicles.

OBSERVATION:  Profit margins continue to lower in the independent-club sector.

Just three years ago, average-independent-facility pre-tax margins approached 12%.  Presently, 8% is the norm.

Profits have dropped by one-third in less than 36 months.

Nearly 30% of reporting businesses are making no profits whatsoever…operating either at bare break-even or losses.

OBSERVATION:  Numbers reported by major industry publications present a distorted picture.

Articles continuously suggest that there is “…over 80% of the population” still available for health club membership.

Objective analysis of memberships purchased and memberships terminated suggests that well over 60% of available consumers have bought club memberships and decided it is not for them.

In the last 20 years, nearly 300 million new memberships were sold. At present, 53 million paying health club members. Approximately 18% retention of memberships sold since 1994.

OBSERVATION:  Technology adaptation and adoption are seriously lagging.

Less than 30% of facilities require a health/fitness assessment of new members.

Only 13% of clubs have a technology-based assessment system.

Only 6% of clubs employ wearable technologies to help customers “track” their exercise results.

In less than 20% of facilities can members buy, book or schedule training or classes online.

If truth be told, our industry is an entity that is now seriously behind the times in services delivery; tardy in adopting modern standards of business practices; and becoming increasingly more “Wal-Marted” each year.  Even the “bigs” that, due to scale, are capable of forging ahead in the race at an accelerated pace, are predictably taking the wrong approaches to long-term sustainability (assuming that most of them even want that).

Consumer-sensitivity has not been our industry’s forte. Unless we shift and shift quickly, digitalization will obviate that consumers bypass health clubs for everyday-life solutions offered on their smartphones, tablets, and laptops.  It doesn’t have to happen…but it well could.

MSS Note: In future issues, we’ll offer some solutions to the problems above.

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By the time you’re reading this, you should have had a great January sales season. Health clubs have solved this first challenge which is how to get people to join. The industry has also solved second challenge in creating beautiful, clean facilities chock-full of great exercise equipment, programming and training. Many clubs have solved the third challenge which is recruiting, training and supporting staff who are oriented towards serving the member. But all this is not enough to retain them. The Fourth Challenge is not a matter of further improving staff or facilities or programming or orientation. Efforts in in these areas by good clubs have not have reached the point of diminishing returns without dramatically improving the retention.

Solving the Fourth Challenge means understanding our members much better. It means having more empathy for ways their lives are and more data on what is happening. For example, this means understanding that no member has enough time in their life. Their schedule was full before they joined your club. As soon as they join, it creates a problem they did not have before. Exercising equals work out, a shower, bus driving, plus parking. And all of that 2 to 3 times a week. That’s an extra 5 to 10 hours a week to fit in their schedule that was already crammed full. Their body/mind rejects adding something more to their schedule. I suspect this is usually not a conscious rejection. They know that exercise is good and don’t want to reject that. But subconsciously they know there is too much in their life. So they create a rational reason not to exercise: ‘I’m too busy.’

Overcoming the Fourth Challenge means getting over a huge barrier for health clubs. Clubs are experts in physiology of exercise, not the psychology of habit forming. This means figuring out how to add exercise into their schedule which often means that they have to drop something out of their schedule. Most members will need help in making this tough decision. Personal coaching and life planning is a new discipline. Those skilled in this area generally have very high empathy and willingness to apply tough love to their clients.

We know that what gets measured gets done. Solving the Fourth Challenge will be tremendously helped by having much better data about what happens to those members who leave. REX has worked with ABC Financial in pioneering a new metric for measuring what happens in the early days of new members. Many REX members are using this 30-60-90 day report and the results are stunning. It reveals the number of check-ins of new members in the first 30, 60 and 90 days of their new membership. For well performing REX member clubs we see numbers like this: 30% with no check-ins in the first month; 40% in the second month; 50% in the third month. Essentially, the third month percentage appears to predict the annual retention rate. This seems to point out that that Fourth Challenge occurs in the first month or two if not on the first day. Attempts to address this challenge must happen immediately or we lose them.

You can do a lot and probably are for every new member. You’re courteous. The club is clean. Your staff is engaging, pleasant experts who provide a great deal of encouragement. You’re club facility is beautiful and clean. You have an extraordinary variety of equipment and possibly even as large a variety in programming to engage the new member in exercise. But unless the client does a number of things on their own in the first moments or certainly days after becoming a member, they will not build an exercise habit. They will simply have been encouraged by you. In fact, the majority of new members are ready to take responsibility for building an exercise habit and finding the time to exercise but they have no experience in doing this. Most have never consciously built a habit in their life. So they don’t know how to do it and clubs are not helping or coaching them do it. So the Forth Challenge in health clubs becomes how to change the members’ behavior from non-exerciser to exerciser which includes fitting exercise into their schedule. Not which program to take, not which equipment to use, not how many reps to do. We’ve solved those questions.

You can coach new members into building a habit when the following three conditions are met. (1) You have the right person doing the coaching; (2) you have the right coaching process; (3) you have the right program or model for habit building. So when the right person, process and program are in place, all focused on building an exercise habit, we may as an industry solve the Fourth Challenge.

Part Two (next month) will propose solutions and resources to solve the Fourth Challenge.

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If so, it may be time to update the tools and software you trust to help you manage your club’s reporting and day to day operations. To be sure, ask yourself these 4 key questions.

1. Is Your Health Club Management Software Being Used For More Than Billing?

Any software trusted by your health club must provide you with the ability to harness all your resources at the highest efficiency levels.

Most gyms have integrated club management software for billing but the opportunities to streamline your operations far exceed collecting dues. Your software should give you control over multiple other actions such as check-ins, class scheduling, member retention and marketing.

2. Do You Know How Clean Your Locker Rooms Are?

More to the point, do you know how clean your locker rooms are – without looking inside them? You’ve got staff, you’ve got schedules, and the rest should take care of itself. However, you can know the state of your locker rooms more precisely through the reporting capabilities of the right health club management software.

3. Are Your Employees Coming In On Time?

Keeping tabs on the number of employees that help you keep your club operating efficiently is no easy task, especially when you manage multiple locations.

Yet detailed reports generated by the right health club management software can keep you updated on employee attendance and performance.

4. Do You Have Enough Bosus On The Floor?

Not just bosus but bands, bars and balls – and yes, towels – all of your inventory can be tracked and kept at full force through club management reporting.

One of the essentials to fitness club enhancement is the ability to stay on top of all the tiny details in real time fashion. Customized reporting lets you choose those specifics you need to follow most closely.

Did you pass the test?

As the health club industry continues to boom, it’s essential that you understand how efficiently your club is operating on every floor, in every corner, and with every member and employee.

In order to do that, you’ve got to combine the best health club management software with the knowledge of how to use it to its fullest capacity.

To learn more about the capabilities of health club management software we offer, request a demo from ABC Financial.

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