Supplement
| HBS Case Collection
|
October 2016
24 Hour Fitness (B): Ownership Changes, 2005–2016
John R. Wells and Gabriel Ellsworth
In 2016, 24 Hour Fitness was the number-two fitness chain in the United States, generating revenues of $1.4 billion from 441 clubs serving 3.8 million members. Based in San Ramon, California, 24 Hour Fitness operated clubs in 13 states. Having grown rapidly to become the largest club operator by 2004, the company was sold to a private equity group in 2005 for $1.6 billion. The growth continued until the original founder, Mark Mastrov, left in 2008. Since then, growth had stagnated, and the company lost its leadership position to LA Fitness in 2012. Throughout, 24 Hour Fitness had retained its traditional positioning, offering several club types to satisfy a wide range of customers concentrated in a particular area at affordable prices averaging $39 per month. However, this positioning was increasingly coming under pressure. Small studios offering focused facilities at as little as $10 per month were growing, while LA Fitness provided full-line gyms for an average of $33 per month. Premium clubs also continued to flourish, while the competition from not-for-profits such as university and employee gyms continued unabated.
In 2016, the new CEO announced a new strategy to counter these challenges: rebranding 24 Hour as a lifestyle and media company. He declared, “We know we can do great things. We’re very excited about the platform that we have to build on.” Perhaps this strategy would help restore the company’s fortunes.
Keywords: Advertising;
Advertising Campaigns;
Buildings and Facilities;
Acquisition;
Business Growth and Maturation;
Business Model;
Business Organization;
For-Profit Firms;
Customers;
Customer Focus and Relationships;
Customer Satisfaction;
Age;
Training;
Private Equity;
Financing and Loans;
Price;
Profit;
Revenue;
Geographic Location;
Geographic Scope;
Health;
Nutrition;
Business History;
Human Resources;
Employees;
Employee Relationship Management;
Recruitment;
Selection and Staffing;
Journals and Magazines;
Human Capital;
Business or Company Management;
Goals and Objectives;
Growth and Development Strategy;
Management Teams;
Marketing;
Brands and Branding;
Marketing Channels;
Marketing Communications;
Marketing Strategy;
Social Marketing;
Demand and Consumers;
Market Entry and Exit;
Media;
Organizational Design;
Private Ownership;
Problems and Challenges;
Groups and Teams;
Sales;
Salesforce Management;
Situation or Environment;
Welfare or Wellbeing;
Sports;
Strategy;
Business Strategy;
Competition;
Competitive Strategy;
Competitive Advantage;
Corporate Strategy;
Expansion;
Segmentation;
Information Technology;
Internet;
Mobile Technology;
Online Technology;
Software;
Web Sites;
Value;
Valuation;
Health Industry;
Media and Broadcasting Industry;
United States;
California;
San Francisco;
