Mark Mastrov, 50, founded what would eventually become 24 Hour Fitness Worldwide, Inc., in 1983, borrowing $15,000 from his grandmother to acquire a 10% stake in a 5,000-square-foot club in San Leandro, California. By 2005, when he sold the company to Forstmann Little & Co., a private-equity firm, for $1.68 billion, he’d grown 24 Hour into an international chain with more than 400 clubs, serving some 3 million members.
Highlights
Parting with 24 Hour
Partnering with UFC
Upbeat idea for downturn
Future prospects of NEFC
Jim Rowley, 40, joined 24 Hour in 1992, starting as a sales counselor and eventually becoming co-president of its northern division. Early last year, Mastrov and Rowley left 24 Hour and, subsequently, formed New Evolution Fitness Company (NEFC), a private-equity firm focusing on the health and fitness sector. The company’s newest venture is both unusual and ambitious. Working with mixed-martial-arts events and Ultimate Fighting Championship (UFC), NEFC is developing a new club brand: UFC Gym.
CBI: The big question—and one that really hasn’t been answered before—is why did the two of you leave 24 Hour Fitness Worldwide, Inc.? You’d founded and built the company, Mark, and you, Jim, had served as the co-president of its northern division.
Mark Mastrov: Carl C. Liebert, the CEO of the company, and Ted Forstmann, a senior partner at Forstmann Little & Co., the private-equity firm that now owns 24 Hour, really wanted to take the business in a different direction—one that, in the end, it was hard for me to support. So I felt it was best that I just move on.
After only two hours, we decided that UFC Gym was an idea that was worth pursuing. The rest, as they say, is history.
Jim Rowley: It was the same for me. Things changed at 24 Hour—it wasn’t the place that I’d grown up in. It was simply time for me to go in a different direction.
CBI: People who don’t know you well might have assumed that you’d open a little club in Northern California and relax a bit, but, instead, you’ve moved into the private-equity arena, establishing the New Evolution Fitness Company (NEFC). Why?
MM: For more than a decade, I’ve had the good fortune to meet and speak with a lot of people who came from the world of finance. I always made sure to ask as many questions and learn as much as I possibly could from them. That informal education, combined with the industry experience and knowledge I’ve accumulated over the years, suggested that it made perfect sense for me to set up my own fund. That would allow me to invest in a number of business opportunities worldwide. And my 24 Hour experiences taught me a ton of dos and don’ts.
JR: Investing isn’t new to Mark. He’s had businesses other than 24 Hour for years, including Planet Fitness in Russia and Energy Fitness in South America. I was a partner in the latter and really enjoyed the chance to work abroad.
CBI: Can you tell us a bit more about your investment activities?
MM: I’ve been investing in the health and wellness space, worldwide, for many years now. Some of the better-known platforms, internationally, are, as Jim just said, Planet Fitness, Energy Fitness in Chile, Mrs. Sporty in Germany, California WOW in Thailand, and the Steve Nash Sports Clubs in Canada . . . and, in the U.S., YogaWorks, BioDensity, and iTech Fitness.
CBI: In January, you surprised quite a few people when you announced that NEFC was getting involved with Ultimate Fighting Championship (UFC) to create a new club brand, UFC Gym. How did that come about?
MM: I was on a spring-break vacation with my family when I received a call asking if I’d be interested in meeting with Lorenzo Fertitta, who, along with Dana White, had founded the UFC. Several weeks later, we met in Lorenzo’s office in Las Vegas. After only two hours, we decided that UFC Gym was an idea that was worth pursuing. The rest, as they say, is history.
JR: Mark had been watching the mixed martial arts (MMA) space since the early 1990s and was sponsoring quite a few fighters, so he’s been involved in the sport for a long time. When he phoned me in late August to see if this idea was of interest to me, I jumped at the chance to meet the UFC team. Have you ever had one of those meetings where everything seems absolutely right? The energy and enthusiasm driving the idea were constantly being fueled by Mark, Lorenzo, Dana, and myself, and, before you knew it, we had a unique and very cool concept.
CBI: What are your goals for the growth of the UFC Gym brand?
JR: The first hurdle is to open 5-10 clubs by the end of this year, either in presale or full workout.
CBI: At 24 Hour, you developed some interesting programs and strategic partnerships, with, for instance, sports celebrities such as Magic Johnson and Derek Jeter, to create signature clubs. Do you intend to do something similar with UFC Gym?
MM: Yes. In fact, we’ve already signed two of the UFC’s top fighters, Georges St. Pierre, out of Montreal, and BJ Penn, from Hawaii, to do signature gyms. Those are two of the clubs that Jim referred to, and they’ll open later this year in the fighters’ respective home markets.
Dana is amazing and really has his finger on the pulse of the MMA world. He’ll play a key role as we develop our concept over time.
CBI: According to recently released IHRSA numbers, club revenues increased an average of 1% year over year for the third quarter of 2008, primarily because of a 3.8% increase in membership dues. Do you think the UFC Gyms will be able to outperform the current economy?
JR: For us, it’s sort of a “right-time, right-place” scenario. We’re well capitalized, and we’ve been able to take advantage of a soft real estate market and lower construction costs. Now, we’re even able to gain entry into markets that weren’t open to us in the past. We also believe that, while people have cut back on spending, there’s still money for fitness. Every study that we’ve read over the past few months tells us that people who are spending money on fitness aren’t stopping.
MM: I’m also convinced that the industry will continue to perform well this year and in the years to come. As my good friend and industry pioneer Ray Wilson always said, “It’s never the club or the market. It’s always the team.” And we have a great team and a very powerful partner and brand.
CBI: How closely will you be working with Dana White, the president of UFC?
MM: Very closely. Dana is amazing and really has his finger on the pulse of the MMA world. He’ll play a key role as we develop our concept over time.
CBI: Fertitta has been quoted as saying that UFC Gym “is going to become its own separate, profitable business and company on the side, and we’re talking about rolling out hundreds of gyms all over the place.” How closely will UFC be working with you on the operational side?
MM: Lorenzo is a visionary and a tremendous businessman. He’s already built several billion-dollar businesses from the ground up, and he’s barely 40 years old. Lorenzo, Dana, and the UFC team are all experienced gym people, so they’ll be very helpful, but, as far as the day-to-day goes, they’ll leave that up to us.
JR: As the CEO of UFC Gym, the entire operation, ultimately, will be my responsibility.
CBI: Last month, in CBI, Mark observed that “The fitness industry needs innovation. It needs something to get excited about, and we all agree that UFC Gyms will deliver on that in every way.” How are you going to make good on that promise?
MM: I’ve always felt that what truly differentiates your club from the competitions’ is the experience that your brand delivers to your members. At UFC Gym, we’ll offer an experience that’s unlike anything else in the market. From innovative training methods and classes, to the interior design and layout—everything about it is going to be quite unique. As Jim has said, “It’s not going to be like your dad’s gym.”
CBI: Does NEFC have any specific revenue or growth goals for this venture? Is there a sunset on your agreement with UFC?
MM: We’ve committed to this concept and this relationship for the long term. We’re not in a hurry, and, over time, we’ll build a global platform that supports the UFC footprint.
CBI: As for NEFC—how do you see it growing? Where do you see the company five or 10 years from now? What types of investments are you seeking?
MM: NEFC is focused solely on the health and wellness space. We’re currently operating in more than 15 countries around the world, and I’d expect that number to double over the next 5-10 years. Our driving, defining, goal is to invest and partner with great people, brands, and management teams, while adding value where it’s needed.
- Jon Feld, jfeld@trendline-co.com
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