Case | HBS Case Collection | November 2005 (Revised January 2008)

Bally Total Fitness

by John R. Wells and Elizabeth Raabe

Abstract

A modest health and tennis club in 1962, Bally Total Fitness had grown to become one of the major firms in the $14 billion U.S. health club industry in 2004. Throughout its history, Bally had faced its share of challenges as it rose to become a leading health club operator. The last couple of years had proven particularly difficult, however: Bally's stock price had collapsed, it restated earnings in 2003 to the chagrin of stockholders, and the U.S. Securities and Exchange Commission began investigating the company's accounting procedures. Also, Bally faced significant competition from the likes of privately owned 24 Hour Fitness, which had $1 billion in sales in 2003. In 2004, under the direction of CEO Paul Toback, the company streamlined advertising efforts--targeting undertapped segments of the population--cut costs, and modified the firm's internal controls. Management's focus remained on increasing membership and maximizing revenue per member. Would Toback's efforts get the company's price back up, inspire stockholder confidence in Bally, and resist a rumored takeover, enabling Bally to remain a major player in the industry?

Keywords: Accounting; Advertising; Trends; Cost Management; Profit; Growth and Development; Leadership Style; Five Forces Framework; Private Ownership; Opportunities; Motivation and Incentives; Competitive Strategy; Health Industry; United States;

Citation:

Wells, John R., and Elizabeth Raabe. "Bally Total Fitness." Harvard Business School Case 706-450, November 2005. (Revised January 2008.)