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IHRSA - June2007-CBI-Teen
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Totally Teens
Newest niche clubs tap underserved market twixt kids and adults

By Jennifer H. McInerney - Club Business International - June 2007
With teen spending power in the U.S. estimated at nearly $200 billion annually, and expected to more than double within the next five years, it may, at first, seem surprising that so few teen-centric health club concepts have found their way to market.

Maybe it has to do with adults' apprehensions about teenagers'their fickleness, insecurities, growing pains, and haywire hormones. Maybe it has to do with kids' increasingly "virtual" lifestyles. Maybe it has to do with the fact that many multipurpose family-oriented clubs already offer extensive youth programming.

Or maybe'just maybe'the industry has simply overlooked a tantalizing opportunity.

Remember when women, like teens, had to make do with a small piece of the general coed club package? And remember when Curves arrived on the scene? And remember, among others, Contours Express, elements for women, Healthy Inspirations, Lady of America, and Liberty Fitness?

Whether health clubs for teens ever rack up the numbers or achieve the success of single-sex express workout clubs remains to be seen. Among the IHRSA family of developers and operators, there are just'or should we say at least'three entrepreneurial spirits who are now testing the premise, and the promise, of teen-only fitness facilities.

These innovators and explorers are: Overtime Fitness, a 12,000-square-foot facility in Mountain View, California, that opened last September; O2 MAX, a 9,000-square-footer in central Los Angeles that's scheduled to open this summer; and XRKade, a division of iTECH Fitness, headquartered in Denver, Colorado, which unveiled its approach in 2005 and introduced a revised version last year.

All three groups agree that, while addressing the needs of this cohort isn't without its challenges, it becomes infinitely more manageable if you understand one key, incontrovertible fact: that teens want a place that is explicitly, undeniably their own'a space that they don't share with children or adults. Otherwise, they're not going to bother showing up.

Some clubs have addressed the desire by designating teen-only areas, and some sport-specific facilities, such as the Parisi Speed School, have done so by virtue of the large percentage of high-schoolers they attract. But, for teenagers'whose life stage is defined, in large part, by the need to separate and differentiate themselves from their families'that seems like a sort-of solution.

"If you think about it, there really aren't that many places'particularly, healthy places'where teens can hang out," points out Paul Rakitin, the general manager of Overtime Fitness.

In developing their business models, facilities, and programs, all three companies relied on the input of teens to create an environment and an experience that would acknowledge their specific preferences and meet their unique needs. As a result, the two with units up and running'Overtime Fitness and XRKade'report they've not only managed to attract athletic and fitness-conscious kids, but also their less active, less confident, and less healthy peers.

Overtime Fitness

People are constantly stopping in at Overtime Fitness for a tour of this state-of-the-art club. They ogle the assortment of Precor and Life Fitness cardiovascular and strength-training equipment; the personal viewing screens; the full complement of bars, plates, dumbbells, and benches; and the two large studios that serve as the setting for a wide range of classes, including step aerobics, group cycling, yoga, Pilates, and kickboxing.

But when, in the course of conversation, a staff person asks them whether they have a teenaged son or daughter'they immediately become confused.

"They're pretty much blown away when I tell them that this is a teen-only facility," explains Rakitin. "Judging by the upscale equipment and amenities we have here, you'd never guess that this wasn't an adult club."

Upon closer inspection, the revealing, tell-tale details start to emerge: the interactive-exercise, or exergaming, equipment; the 18' rock tower; the ping pong-tables, the Internet-equipped classroom for homework, tutoring, and nutrition education; the Wellness Wall filled with notices about clinics and seminars on time-management, stress-reduction, and SAT preparation. All of these components are the result of the feedback received from the many teen focus-group sessions the operators conducted during the conceptualizing process.

In fact, one of the keys to the club's success, says Rakitin, is that management never stops asking its more than 100 members, ages 13-18, for ideas and suggestions about what they'd like to see in their club. "It's pretty difficult to tap this market," he concedes. "For it to work, there needs to be a 100% focus on the teens."

Another distinguishing difference between Overtime Fitness and a traditional adult venue is that two or three trainers are constantly circulating on the club floor, guiding members through exercises, spotting them on the rock tower, taking them on in a game of ping-pong. "We offer them the structure and interaction that they need to make the most of the facility," says Rakitin.

Membership dues are $59 per month, or $10-$15 per day, and there's a $109 initiation fee'$20 of which is donated to the school that the student attends.

O2 MAX

O2 MAX has been several years in the making. Karen Jashinsky, the founder and CEO of the company, began developing the idea while pursuing her MBA degree at the University of Southern California's Marshall School of Business in Los Angeles. To earn some money while still a student, Jashinsky worked as a personal trainer, serving adults initially and, then, their teenaged sons and daughters.

"During that period, I learned about the youth obesity epidemic, and realized that there was a population that hadn't been provided with a viable long-term solution," she says. "It seemed that there was a 'hole' in the fitness industry."

As part of her coursework, Jashinsky created a business plan for a niche club'a fitness "hangout" for 14-18-year-olds where they could work out, study, and relax. She researched the topic, conducted teen focus groups, and, since graduating last May, has continued to define and refine her concept in preparation for 02 MAX's imminent grand opening.

The club will feature a main exercise area with cardio and selectorized machines and free weights; an exercise studio for classes, such as dance-oriented aerobics, yoga, Pilates, kickboxing, and Budokon (a martial arts/yoga combo); a boot-camp training area, equipped with an array of specialized exercise tools; and a smaller studio for private personal training sessions.

"Many of the girls we talked to said that they felt self-conscious working with a personal trainer and wanted to be in a private environment," explains Jashinsky. "But, because the social component is what really drives teens, we'll be offering group training as well."

Tutoring, made possible via a partnership with The Princeton Review, will also be available.

If everything works out as planned, on weekends, O2 MAX will become a social magnet for teenagers who may enjoy working out to live musical performances. "On Friday nights, for instance, we might do a hip-hop class to a DJ spinning right here in the club."

Jashinsky expects to open with 200-300 members, each of whom will be entitled to a predetermined number of personal-training sessions as part of their membership package, which involves an initiation fee and monthly dues of $79. They'll also have the opportunity, each month, to have a "check-up" meeting with a trainer to ask questions and make adjustments to their workout regimens.

And because, like Rakitin, she understands the critical importance of member "ownership," Jashinsky intends to organize a teen advisory board to help chart the future course of her business.

XRKade

Over the past decade, teenagers have taken up video-gaming in droves, and high-tech entrepreneurs with an eye on fitness have responded by creating exergaming'games that incorporate various forms of exercise. Some of their inventions have already carved out an active niche in regular clubs, but iTECH Fitness, an interactive fitness products provider, has taken the concept to an entirely new level. It's developed a complete club model for 12-18-year-olds, called the XRKade, around the exergaming phenomenon.

"Our mission'our whole business model'is about making fitness fun," explains Mike Hansen, iTECH's president and CEO. "Having experience in the club industry, we recognized that most members don't consider working out the most entertaining thing they get to do. We also recognized that there was a huge gap between adults' and kids' clubs, and we wanted to offer teens an exciting, appealing solution."

Hansen, who had formerly been involved with Matrix Fitness, Capital Fitness, and 24 Hour Fitness Worldwide, Inc., was joined in his quest by Lenny Lowenstein, the former vice president of 24 Hour Fitness.

iTECH built its original 1,000-2,500-square-foot XRKade units as freestanding facilities; it opened four last year. Since then, however, it's revised and refined its business model, and introduced "business-within-a-business" in-club installations that require as little as 800 square feet of space. It's also transformed the XRKade environment, adding music and lighting effects to enhance the member experience. Among the exergaming options it offers are 3-Kick, iJoys, Trazer, X-board, Gamebikes, Treadwalls, Coretrainers, Hoggan Airbounders, and Dance Dance Revolution (DDR).

"We recently conducted a survey of 200 of our members, and the majority said that they'd had fun, and didn't even realize they were sweating!" reports Hansern. "The goal of the XRKade is to make fitness the byproduct of the activity."

XRKade licensees charge from $29 to $60 per month for memberships, depending on the size of the facility, and, based on square-footage, typically have between 100 and 250 teenaged customers.

While it's clearly too early for the three fledgling companies to share instructive metrics, all concur that the teen-only segment has real promise and holds the potential to eventually become an extremely profitable one. XRKade has already begun licensing in California, Texas, Canada, and Puerto Rico, and has 12 new locations in the pipeline. And, although they're still in their infancy, Overtime and O2 MAX make no secret of the fact that they have national aspirations.