Following the recent publication of my 2011 Global Low-cost Gym Sector Report, Hasse Hoftvedt, CEO of fitness.xpress gyms in Norway contacted me to update me on the expansion of his budget gym business. What follows is a short interview.
How did a guy with a degree in Petroleum Engineering from the University of Texas end up running a low-cost gym business in Norway?
“Even though I have a degree in Petroleum Engineering, I also have a BA in Finance and thus during my first years of vocational experience I spent less time in the Engineering field than in the business field. After ten years in the United States during the 1980s I came back to Norway in 1991. As everything else in life I stumbled by chance and through connections into the fitness business. Somebody asked me if I would be interested in buying shares in a successful fitness club.
I thought the business looked interesting, but realised that is was undervalued due to a lack of business strategy. Hence, I was the first one in Norway to introduce direct debits and contracts. Remember this business which infantile in the early ’90s. When you like engineering and finance, you love finding problems and solving them. With knowledge of business finance I understood the need for brand-building and marketing through word of mouth.
We created regular clubs (premium brands) with group exercise and other facilities. I was one of four initial players in the fitness business in Norway. We started a chain called SATS, which in 1996 was bought by 24 hour Fitness.
During those days, I became friends with the legendary Augie Nieto of Life Fitness and he asked me if I could try to grow his business in Norway. I did not like the manufacturing part of the business, so after 4 years I sold the Life Fitness distributorship together with two clubs in Sweden to Feelgood, which is a Swedish chain traded on the stock exchange. (ST:FEEL)”
What three words sum up fitness.xpress?
“Value for money”
Tell me more about your business proposition?
“The budget business in Norway is already being divided into two groups. “fitness.xpress” and “the rest”. I do not see us as a budget provider anymore, but instead as a highly efficient club with employees, the best equipment, the willingness to invest. In other words a business looking like a premium brand, but at half the price. I believe the market sees us that way as well. In two clubs, we get more than 250 new members every week. Basically we are a club chain not run by “bean-counters”, but by people wanting to run the best club in town. Due to this, the future of the business looks very exciting. Non of the low price providers in Norway has this far been able to create positive cash flow. In 2011 there were 27 fitness club bankruptcies in Norway, and the average bottom line from clubs started between 2005 and 2010 was negative. fitness.xpress has never lost a single “crown”. We only open new clubs if the other clubs are trading well, and if the new location and the building suits our needs. We are not a growth brand, but instead a small chain focused on Oslo where we feel there is strong demand. In 2011 our bottom line was 7%. However, our intermediate goal is 15,000 members in four location by 2015. All locations have been signed, and we are currently half way there, with more than 8,000 registered members. I believe we can earn €84 – €120 (Euros) per member, per year. The market likes “value for money”, which I believe few budget clubs or chains around Europe are presently delivering.”
Why does the price of your membership decrease after nine months and does it improve retention rates?
“It has always irritated me that health clubs give free stuff to every new customer and those who are your real business backbone and loyal customers get nothing. ‘Freebees’ crowd the gym, while loyal customers have to wait. Thus, we have given loyal customers an advantage with our loyalty pricing. If you stay a member, you receive by far the best price available.”
How will your legacy to the Norwegian fitness industry read?
“Even though Hasse might not have made the most money, he was truly the first one to turn the fitness business into a professional business. He is also the only one that came back and created a new and exciting business model with a new brand. He was a great “brand builder” and he truly believed there is enough for everyone if they work hard enough and are committed to employees and customers.”
“I sort of feel that I have left a legacy already. Even though fitness.xpress is a local brand in the Oslo area, we are spoken about everywhere in the fitness community, both in Norway and abroad. Many suppliers know our concept and wish to work with us.’
Every day I get up and I work with the 20% that provides me with 80% of my result. Thus, I´d like to apologise for not having been able to send you this document before today. Life is now, not later.”
Tags: Budget clubs