Life Time Fitness Eyes $1 Billion and East Coast

Life Time Fitness Eyes $1 Billion and East Coast

As Life Time Fitness announced 9.5 percent revenue growth in the first quarter, its CEO said the company may hit $1 billion in revenue this year as it ramps up plans for growth in number of clubs and related businesses and as it increases spending on marketing to improve retention.

“Our goal of $1 billion in 2011 is achievable,” Bahram Akradi, chairman, president and CEO of the Chanhassen, MN-based company, said in a conference call with analysts announcing first quarter 2011 financial results. “We will do all we can do to achieve this milestone.”

Life Time Fitness’ first quarter 2011 revenue grew 9.5 percent to $240.6 million compared to $219.8 million from the same period last year. Net income for the quarter was $20.8 million compared to $17.8 million in first quarter 2011. Net income for the quarter was $20.8 million compared to net income of $17.8 million for first quarter 2010.

The company has 90 locations spread across 20 states, but Akradi said his primary area of interest for expansion is on the East Coast, where the company already has clubs in New York, New Jersey and Maryland. “We have some incredible sites in the works,” he said, although he wouldn’t give exact timing. “We are excited about the places we are going and the opportunities we have.” Life Time opened a club in Syosset, NY, in the first quarter. In May, the company will open two clubs—one in Colorado Springs, CO, and the other in Summerlin, NV. Life Time will expand much faster starting in the second half of this year and into 2012, Akradi says. The growth will be balanced between adding more locations and adding other businesses that support the healthy way of life approach that the Life Time clubs are targeting. Those businesses could be events (such as marathons), wellness services or chiropractic services. Akradi, who said that the company reviews dues pricing at each club monthly, plans to increase dues and enrollment fees at some clubs. In particular, the company is increasing dues for members who were given discounts to attract them from lower-priced clubs that had gone out of business. “My vision is every member in every club will pay the same rate,” Akradi said. “And we wouldn’t have special prices for anyone.” The company would be able to justify those higher prices by differentiating on services and programming. “Our goal is to differentiate Life Time Fitness so we don’t have to play in the price segment,” he said, noting that Life Time’s average member price compared to all other national chains is two to three times more. “So, we have focused ourselves on delivering programs—not just equipment—high-quality people and well-run facilities. We want to get to the point where price is not a factor. I feel we are 80 percent there from two years ago. I’m comfortable with the way we have strengthened our brand.” For the year, Akradi expects revenue to increase 7 percent to 9 percent or $980 million to $995 million, primarily due to growth in in-center revenue and corporate businesses, as well as membership growth in new and ramping centers. Net income is expected to increase 14 percent to 18 percent or $92 million to $95 million. Memberships in the first quarter grew 6 percent to 650,784 from 613,882 at the end of first quarter 2010. Quarterly attrition in first quarter 2011 was 8.4 percent, down from 8.5 percent in the prior-year period. Attrition for the trailing 12-month period was 36.1 percent compared to trailing 12-month attrition of 39.3 percent at the end of first quarter 2010.

The state of North Carolina’s litigation against former Peak Fitness owner Jeff Stec is still ongoing.

The state of North Carolina’s litigation against former Peak Fitness owner Jeff Stec is still ongoing.

That information came in a press release from the office of North Carolina Attorney General Roy Cooper, who recently announced that his state has stepped up its efforts to ensure that health clubs are prepared to refund members whose clubs have closed.

Cooper’s office stated that multiple locations of ZX Fitness, which took the place of the former Peak Fitness clubs after Peak Fitness went into bankruptcy, are still under investigation, along with two Curves for Women clubs in North Carolina. Two other Curves for Women clubs have entered into settlements with the Attorney General’s office requiring their compliance with the law. Three more Curves for Women clubs have complied with the law after receiving a warning letter from the office’s consumer protection division.

In all, the division has recently contacted 28 North Carolina clubs and related businesses, such as dance and martial arts studios, about their compliance with state law. Over the past few years, the division has recovered more than $500,000 for members whose clubs have closed.

“My office hears every week from people whose gym shut down, leaving them in the lurch,” Cooper said in a statement. “Fortunately, North Carolina law requires health clubs to set aside money for refunds, and we want to make sure that businesses are following the law so consumers are protected.”

Under North Carolina law, health clubs, dance studios, martial arts studios and dating services are required to have a bond or letter of credit to cover certain prepaid contracts in case they go out of business and need money to repay consumers. Businesses are required to file sworn statements with the Attorney General’s office about their bonds twice a year.

The state of North Carolina’s litigation against former Peak Fitness owner Jeff Stec is still ongoing.

The state of North Carolina’s litigation against former Peak Fitness owner Jeff Stec is still ongoing.

That information came in a press release from the office of North Carolina Attorney General Roy Cooper, who recently announced that his state has stepped up its efforts to ensure that health clubs are prepared to refund members whose clubs have closed.

Cooper’s office stated that multiple locations of ZX Fitness, which took the place of the former Peak Fitness clubs after Peak Fitness went into bankruptcy, are still under investigation, along with two Curves for Women clubs in North Carolina. Two other Curves for Women clubs have entered into settlements with the Attorney General’s office requiring their compliance with the law. Three more Curves for Women clubs have complied with the law after receiving a warning letter from the office’s consumer protection division.

In all, the division has recently contacted 28 North Carolina clubs and related businesses, such as dance and martial arts studios, about their compliance with state law. Over the past few years, the division has recovered more than $500,000 for members whose clubs have closed.

“My office hears every week from people whose gym shut down, leaving them in the lurch,” Cooper said in a statement. “Fortunately, North Carolina law requires health clubs to set aside money for refunds, and we want to make sure that businesses are following the law so consumers are protected.”

Under North Carolina law, health clubs, dance studios, martial arts studios and dating services are required to have a bond or letter of credit to cover certain prepaid contracts in case they go out of business and need money to repay consumers. Businesses are required to file sworn statements with the Attorney General’s office about their bonds twice a year.

Urban Active Faces Lawsuit, Responds to BBB Rating! Looking Really Bad For Urban Active

Urban Active says it cannot comment on a recent lawsuit, but it is attempting to resolve complaints filed with the Better Business Bureau (BBB) of Central Ohio, which last week issued the Lexington, KY-based company an “F” rating.

An amended version of the lawsuit was filed Tuesday in Franklin County (OH) Common Pleas Court. The complaint was originally filed last Wednesday on behalf of Ohio resident Amber Gascho. The amended version includes Ohio residents Ashley Buckenmeyer and Michael Hogan on behalf of themselves and all other similarly situated plaintiffs.
Gascho, Buckenmeyer and Hogan claim Global Fitness Holdings LLC, Lexington, KY, which does business as Urban Active, violated the Ohio Consumer Sales Practices Act and the Ohio deceptive trade practices act and breached a contract. The plaintiffs, represented by the law firm of Vorys, Sater, Seymour and Pease LLP, Columbus, OH, are seeking an award of damages of more than $25,000. The lawsuit is seeking class-action status for all Ohio Urban Active members who purchased membership contracts from Nov. 1, 2007, to the present.

Specifically, Gascho, Buckenmeyer and Hogan allege that Urban Active:

Misrepresented the terms and duration of its membership contracts, personal training contracts and other contracts for services. Misrepresented customers’ cancellation rights. Failed to notify customers of their cancellation rights as required by law. Failed to provide customers with copies of contracts at the time of signing as
required by law. Failed to honor notices of cancellation. Continued to charge customers after cancellation. Failed to inform customers of hidden $15 “maintenance fees,”which increase the cost of its membership contracts. Failed to provide customers with personal training sessions as contracted for in their agreements.

Gascho claims that Urban Active told her that she could cancel her personal training contract for a $10 fee, but when she tried to cancel the contract, she was told the
charge would be $250, according to the complaint. Buckenmeyer claims that an Urban Active personal trainer pressured her into signing a contract, but after she tried to cancel the contract four hours later, Urban Active refused to cancel the contract and continues to charge her bank card, according to the complaint.

Like Gascho and Buckenmeyer, Hogan claims he was not advised of his cancellation rights, nor was he provided with duplicate copies of a notice of cancellation form.
Hogan claims that he tried to cancel his Urban Active contract in October 2010, yet his bank card was still being charged through last February, according to the
complaint. Hogan was charged more than $100 in additional fees after he resent a notice of cancellation, fees that Hogan claims Urban Active has refused to refund.

John Gragg, general counsel for Urban Active, says the company does not comment on litigation, but he did tell Club Industry that the company “will vigorously defend
our good name.”

The lawsuit comes on the heels of a release from the BBB of Central Ohio, which says it has received more than 200 complaints from Ohio Urban Active members within the last year. Of those complaints, 78 of them were either unanswered or unresolved, as Urban Active did not respond to written requests for explanation, the BBB said.

“We’re aware of the complaints that have been filed, and we’re aware that people are frustrated and that it’s taken a while to respond to concerns,” Gragg tells Club
Industry. “Our goal is to provide the best fitness experience, and we take any complaints very seriously.”

Most of the complaints deal with billing issues. Specifically, members have complained that Urban Active continued to charge their bank accounts or credit cards after
the members believed that their contracts had expired or had been canceled.

“The trends we’re seeing in complaints against Urban Active tell us consumers need to read the fine print on the contract before they sign and keep a close eye on their
bank statements to insure they’re not getting billed more than they should,” Kip Morse, president and CEO of the BBB Central Ohio, said in a statement.

The Lexington Herald-Leader reported last week that the BBB of Central and Eastern Kentucky also has given Urban Active an “F” rating. That chapter has processed 93
complaints against Urban Active over the past three years, with 62 of them resolved, the newspaper reported.

Gragg told media outlets last week that the complaints represent less than half of 1 percent of the company’s overall membership base.

“We apologize to our customers who have experienced problems,” Gragg says. “We’re working diligently to resolve these issues by promoting more personnel to provide
better customer service. We’re also working with all of the Better Business Bureaus to resolve these issues as well.”

Gragg adds that Urban Active had taken steps to resolve these issues before the BBB Central Ohio released its report.

“Every one of those cities that we have BBB issues, year in and year out, we’re unanimously voted the top health chain of that market,” Royce Pulliam, CEO of Urban
Active, tells Club Industry. “We know we’ve got a few customer service issues that we’ve got to get under control, and we’re going to put forth all our best efforts to
make sure that we do so. We do have a few things to be better at, and we’re going to be better at it.”

Urban Active has 34 clubs in operation, primarily in Ohio, Kentucky and Tennessee. The company also has expanded into Pittsburgh, Omaha, NE, and Charlotte, NC. Last
year, Urban Active closed two of its clubs in Cincinnati and a club in Brentwood, TN.

Gragg confirmed that Urban Active will open two new clubs in July, one in the Buckhead section of Atlanta and the other in Dublin, OH. He adds that Urban Active also is considering seven to 10 other locations for development.

Urban Active Faces Lawsuit, Responds to BBB Rating! Looking Really Bad For Urban Active

Urban Active says it cannot comment on a recent lawsuit, but it is attempting to resolve complaints filed with the Better Business Bureau (BBB) of Central Ohio, which last week issued the Lexington, KY-based company an “F” rating.

An amended version of the lawsuit was filed Tuesday in Franklin County (OH) Common Pleas Court. The complaint was originally filed last Wednesday on behalf of Ohio resident Amber Gascho. The amended version includes Ohio residents Ashley Buckenmeyer and Michael Hogan on behalf of themselves and all other similarly situated plaintiffs.
Gascho, Buckenmeyer and Hogan claim Global Fitness Holdings LLC, Lexington, KY, which does business as Urban Active, violated the Ohio Consumer Sales Practices Act and the Ohio deceptive trade practices act and breached a contract. The plaintiffs, represented by the law firm of Vorys, Sater, Seymour and Pease LLP, Columbus, OH, are seeking an award of damages of more than $25,000. The lawsuit is seeking class-action status for all Ohio Urban Active members who purchased membership contracts from Nov. 1, 2007, to the present.

Specifically, Gascho, Buckenmeyer and Hogan allege that Urban Active:

Misrepresented the terms and duration of its membership contracts, personal training contracts and other contracts for services. Misrepresented customers’ cancellation rights. Failed to notify customers of their cancellation rights as required by law. Failed to provide customers with copies of contracts at the time of signing as
required by law. Failed to honor notices of cancellation. Continued to charge customers after cancellation. Failed to inform customers of hidden $15 “maintenance fees,”which increase the cost of its membership contracts. Failed to provide customers with personal training sessions as contracted for in their agreements.

Gascho claims that Urban Active told her that she could cancel her personal training contract for a $10 fee, but when she tried to cancel the contract, she was told the
charge would be $250, according to the complaint. Buckenmeyer claims that an Urban Active personal trainer pressured her into signing a contract, but after she tried to cancel the contract four hours later, Urban Active refused to cancel the contract and continues to charge her bank card, according to the complaint.

Like Gascho and Buckenmeyer, Hogan claims he was not advised of his cancellation rights, nor was he provided with duplicate copies of a notice of cancellation form.
Hogan claims that he tried to cancel his Urban Active contract in October 2010, yet his bank card was still being charged through last February, according to the
complaint. Hogan was charged more than $100 in additional fees after he resent a notice of cancellation, fees that Hogan claims Urban Active has refused to refund.

John Gragg, general counsel for Urban Active, says the company does not comment on litigation, but he did tell Club Industry that the company “will vigorously defend
our good name.”

The lawsuit comes on the heels of a release from the BBB of Central Ohio, which says it has received more than 200 complaints from Ohio Urban Active members within the last year. Of those complaints, 78 of them were either unanswered or unresolved, as Urban Active did not respond to written requests for explanation, the BBB said.

“We’re aware of the complaints that have been filed, and we’re aware that people are frustrated and that it’s taken a while to respond to concerns,” Gragg tells Club
Industry. “Our goal is to provide the best fitness experience, and we take any complaints very seriously.”

Most of the complaints deal with billing issues. Specifically, members have complained that Urban Active continued to charge their bank accounts or credit cards after
the members believed that their contracts had expired or had been canceled.

“The trends we’re seeing in complaints against Urban Active tell us consumers need to read the fine print on the contract before they sign and keep a close eye on their
bank statements to insure they’re not getting billed more than they should,” Kip Morse, president and CEO of the BBB Central Ohio, said in a statement.

The Lexington Herald-Leader reported last week that the BBB of Central and Eastern Kentucky also has given Urban Active an “F” rating. That chapter has processed 93
complaints against Urban Active over the past three years, with 62 of them resolved, the newspaper reported.

Gragg told media outlets last week that the complaints represent less than half of 1 percent of the company’s overall membership base.

“We apologize to our customers who have experienced problems,” Gragg says. “We’re working diligently to resolve these issues by promoting more personnel to provide
better customer service. We’re also working with all of the Better Business Bureaus to resolve these issues as well.”

Gragg adds that Urban Active had taken steps to resolve these issues before the BBB Central Ohio released its report.

“Every one of those cities that we have BBB issues, year in and year out, we’re unanimously voted the top health chain of that market,” Royce Pulliam, CEO of Urban
Active, tells Club Industry. “We know we’ve got a few customer service issues that we’ve got to get under control, and we’re going to put forth all our best efforts to
make sure that we do so. We do have a few things to be better at, and we’re going to be better at it.”

Urban Active has 34 clubs in operation, primarily in Ohio, Kentucky and Tennessee. The company also has expanded into Pittsburgh, Omaha, NE, and Charlotte, NC. Last
year, Urban Active closed two of its clubs in Cincinnati and a club in Brentwood, TN.

Gragg confirmed that Urban Active will open two new clubs in July, one in the Buckhead section of Atlanta and the other in Dublin, OH. He adds that Urban Active also is considering seven to 10 other locations for development.

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