Smart Business Magazine, Sept 2012

12 Smart Business Florida September 2012 Weigh risks benefits Snow and his leadership team began looking at the idea of creating a new type of gym to compete directly with the discount microgyms that were cutting into Golds market share Once we decided to consider this opportunity we pulled my team together Snow says My stakeholders in this were the GGI team the senior executive team the management team the franchisees and the board of directors at our parent company TRT Holdings Adding a new product line to Golds traditional full service line of gyms would be a major shift for a company that hadnt changed its offerings much since its birth in Venice Beach Calif in 1965 Nothing had been added to our gym line in 45 years Snow says Wed been the same company offering the same product basically for a very long time So this would be a major change in direction We had to think it through Should we compete in this low cost high growth segment There were significant risks to take into account We had potential risks to GGI that we needed to work through and get everybody comfortable with and I needed buy in from the senior team here Snow says One of the major risks was possible damage to the brand Not all line extensions work The company also had to weigh whether it had the financial resources and manpower it would need to put a new brand into the marketplace You dont just go out and launch a brand Snow says It takes a tremendous amount of work from everybody and financial commitment There were many questions that needed answers Did we have the internal talent required to do it Could we build these gyms Could we put them up quickly There were a lot of pieces to the puzzle when you start looking at launching a new brand like this But a new line of low cost gyms would enable GGI to quickly increase its distribution of gyms across the country because the gyms could be built quickly The gyms would be relatively easy to run requiring only about half the management team that a full service gym needs In addition they were projected to become profitable quickly Lay out the plan The next steps involved conducting consumer research studies creating the new brands concept and image creating financial models with best and worst case scenarios for the new line of gyms getting the companys franchisees on board with the new concept and then ultimately presenting the idea to the companys board of directors It was a yearlong process in all We presented it to the board of directors in the late fall of 2010 Snow says We had a finance analyst who had completed a compelling set of financial models and we presented those to the board And the board after quite a bit of discussion agreed to fund the Golds Gym Express development on a beta test basis Over the next year GGI wound up building six Express gyms in a variety of markets around the country to test the concept The Express gyms offer Basic Memberships for 999 and Gold Memberships for 1999 a month as compared to the 30 to 50 monthly memberships at GGIs full sized gyms All the Express gyms have performed well in their test markets The beta test gyms are performing much better than our original models projected Snow says One of the things we look at Just going and cutting your rates and allowing your product to stand as is while this will probably drive some volume it will destroy your margins Jim Snow president Golds Gym International Feature Golds Gym International Protect the brand TAKEAWAYS Evaluate pros and cons Pretest the concept