Having prevailed where all others failed, the Queen of Turnarounds now reigns over a successful club of her very own
by Patricia Amend
CBI: You're the Queen of Turnarounds, it seems. When you were at Spa Lady, you saved a number of facilities, and you've also resurrected the Women's Club Fitness Center and Day Spa, which you now own. How did the latter situation arise?
Florence Auld: The Women's Club was founded in 1988 by a girlfriend of Dean Hamel, a defensive tackle with the Washington Redskins, who planned to market it in association with the team. She developed the concept, but couldn't obtain the necessary funding. The developer, who knew nothing about women-only clubs, brought in three different owners—all of whom failed. I was hired by the owner of the building, the Mass Mutual Insurance Company, and asked to see what I could do. When I arrived, in 1991, the club had 125 members and was losing $30,000 a month. Mass Mutual agreed to underwrite the turnaround, up to $50,000, for one year.
CBI: What were your first impressions of the club?
FA: The biggest problem was that there was no accountability and no fiscal controls, and the staff, though talented, had no focus, no direction.
CBI: Sounds like a rather frightening scenario. What did you do?
FA: I created a plan to win the support of the staff. I'm big on sharing information, so, with the exception of financials, I utilize an open-book approach in running a business. I told the staff that we had to show our numbers to Mass Mutual, and that any failure on our part to produce better figures, at any time during the coming year, would mean the end of my contract, the club, and their jobs.
CBI: You made them stakeholders simply by sharing information.
FA: Exactly. They went from doing very little work together to performing like a real team. We held after-hours staff meetings and member focus groups to analyze our product; we established budgets for every department; we created an advertising strategy that we monitored closely; we trained the sales staff on a daily basis and made them accountable by tracking everything they did. Together, we determined what it would take to make the club profitable . . . and we did it.
CBI: Details!
FA: Well, that we needed to reduce expenses and increase revenues came as no surprise—there were no measures of any kind in place to keep spending in check. Our bottled water bill, for example, was $800 a month! It's amazing how those little things add up. We worked hard to cut costs and, as I said, created a clearly defined advertising strategy. Since funds were so limited, initially, we weren't able to afford newspaper advertising or direct mail. Instead, we were forced to rely on gorilla marketing techniques; we canvassed local offices to invite people to ‘workout lunches,' spoke at chambers of commerce and every women's group around—very low-cost advertising. After the first six months, we began to run some newspaper ads.
CBI: What was going on with the members during all of this? How did you reassure and involve them?
FA: As I pointed out, we only had 125 members at the time, but, if anything, that merely emphasized how important each of them was to us. Many of them had already lived through a lot of changes under the previous owners—not all of them positive. So, at our first meeting, I introduced myself as the new manager, candidly acknowledged what had occurred in the past, promised them that I was going to make the club work, and—to convince them and generate a little excitement—announced a number of improvements: expanded hours, and new lectures, fitness classes, wellness programs, and activities for kids. We held a number of meetings, and about half of the members attended them; those that didn't, we contacted by phone and engaged one-on-one.
CBI: What sort of a response did that elicit?
FA: A very gratifying one—better than I'd hoped for. For instance: we'd informed the members that we were going to embark on a membership drive, and many of them jumped on the bandwagon and provided a lot of help. They got the word out in the neighborhood, and, inspired by their enthusiasm, the referrals began to roll in. The referral program was a key factor in our success. Then, one member contacted me and told me about an exercise studio nearby that was going out of business; I bought its member list, and, as a result, enrolled over 200 women!
CBI: You faced a lot of difficult choices and had to make some courageous decisions—it couldn't have been easy.
FA: It wasn't, but it was necessary and, ultimately, paid off as planned. We had to cut some staffers' pay—some stayed, and some left. We had to let some people go for other reasons. But, when the dust finally settled, we had a solid, eager, and pretty positive staff in place. In seven months, we grew the club's membership from 125 to 700, a 560% increase, with monthly revenues running $50,000, and profits of about $16,000, a 32% margin.
CBI: How did you come to buy the Women's Club?
FA: I didn't. Mass Mutual gave it to me at the successful conclusions of my one-year management contract. They invested in a dependable, proven, rent-paying tenant.
CBI: Over the years, you've launched and managed an impressive number of facilities, and have been involved in more than your share of turnarounds. What's the single biggest mistake you've noticed club owners tend to make?
FA: I see today, as I've seen in the past, a disturbing failure to reinvest adequately in the business and the staff—and reinvestment is critical. Even people in this industry that I respect are prone to let their clubs become worn-looking before they undertake major renovations. I've never understood that business model, because, when you resort to it, you tarnish your club's reputation and lose members. I've always regarded mine as a ‘five-star' club and treat it that way; I keep it looking just like it did at the grand opening every day.
CBI: What sort of a reinvestment strategy would you recommend for other small independent clubs?
FA: On an annual basis, including repairs and maintenance, about 3% of gross revenues; at the five-year mark, we did more, about 4.5%; and at the 10-year mark, we doubled it, to 9%. At that point, we were renegotiating our lease, and our landlord paid for many of the lease improvements. We fund most of our upgrades and renovations out of profits. We now lease nearly all of our equipment, with a $1 buyout at the end of the lease.
CBI: For most of your 30 years in the business, you've been involved with women-only facilities. What's the single biggest mistake that owners make with respect to that market?
FA: So much is written about the ways in which women are different, but very little is done to position clubs accordingly—to capitalize, effectively, on our understanding. We know what we should do . . . but, in all too many cases—we don't. Women make connections, cultivate relationships: what's important to them are partnerships. Women are much more discriminating, on a sensory level, than men; they're incredibly observant, and, when they come into a club, form an impression within seconds.
These are all things that we know, but, if they're to be of any value, we have to respond to them—in terms of design, programs, staffing, service, etc.
CBI: For example?
FA: When a prospective member calls our club, looking for information, the receptionist asks her name; then, when the membership consultant takes the call, they're able to answer using the person's name. It seems so basic, but what you're really doing is initiating a relationship from that very first moment. You're participating, in a sincere and interested way, in a mutually rewarding conversation—not reciting from a memorized script.
CBI: Your club has earned a reputation for being very profitable. What do you consider the principal reasons for its success?
FA: First: I took the all-women segment and narrowed the focus—to the high end—to make it a stronger niche. Our customer is willing to spend more for what she regards as true quality. To maintain and reinforce the value of our product, I don't discount initiation fees or dues, except in the case of corporate memberships. In fact, in January, we raised our prices—our fitness-only membership, by 5%, and our fitness/spa membership, by 10%. Second: because I stress revenue per member, I can produce the same revenue base with 1,300 members that many clubs would require 5,000 to achieve. Our revenue/member has increased by 25% over the past four years, and now averages $1,015 a year. We've grown it primarily through nondues sources, such as personal training, which generates $165,000 a year, and spa services, which contributes $300,000. Third: I keep on top of what our members think of as quality. I do focus groups, remain personally involved with members, ask questions, talk to people in the community—all to obtain feedback whenever, wherever, and however I can. Fourth: I hire people who care about the business as much as I do. I love the Ritz Carlton's motto: ‘Ladies and gentlemen serving ladies and gentlemen.' My staff understands the importance of first impressions.
CBI: What do you regard as the principal obstacles, the difficulties, that are faced today by the owners of independent clubs?
FA: The main challenge, I think, is the one posed by the rapidly expanding and evolving nature of this business. As the industry has matured, so many clubs—and so many different types of clubs—have appeared, many of them targeted at specific segments of the market. This makes it very difficult for the independent operator to compete. You either differentiate—find your niche and do it better than anybody else—or you die.
In the case of the Women's Club, we emphasize, advertise, and otherwise showcase our differences: our total health and wellness philosophy; our certified, caring, all-women staff; our ability to work, one on one, with individuals with medical conditions; our spa and yoga programs, for stress reduction; our Kid's Club.
CBI: What's been the biggest challenge that your club, specifically, has faced?
FA: Increased competition. We now have 12 clubs within an eight-minute drive of our facility . . . We keep narrowing our niche in order to defend it better.
CBI: Transforming a club that was about to fold into one that's vital, profitable, and growing has to be very gratifying. Is that the principal payoff? What do you find most rewarding about owning and operating your club?
FA: Well, given the fact that I'm a woman, you won't be surprised when I say: the relationships. One: the relationship that we have with our members. And two: the relationship that I enjoy with my staff. Many of them have been with me for more than 10 years and seem like family. And members—it's wonderful when one of them compliments my staff or the club.
A few years ago, we sponsored a walk/run to raise funds for breast cancer research, and asked members to participate in the promotion. At one of the meetings, a member—who had cancer and was undergoing chemotherapy, but had been too depressed and frightened to reach out for help—met a breast-cancer survivor, and the two became very good friends. The survivor supported the other member during her treatment. Unfortunately, she didn't survive, but, before she died, she wrote a letter thanking me for what the club had done.
The fact that we had facilitated that friendship was most rewarding to us. When you talk about the Women's Club—that's really what we're all about.
Patricia Amend is a contributing editor to CBI and can be reached at pamend@aol.com.
