America's #1 Fitness Club Entrepreneur
Jill Stevens Kinney has always been very healthy. She grew up in a family agribusiness in Fresno, California, eating lots of fresh fruits and vegetables. She started jogging regularly with her father at age 6. And she had a successful career as an athlete (as a downhill ski racer) before graduating from the University of California at Berkeley in 1979.
After graduation, Kinney met Dr. Jack Bagshaw, a successful cardiologist in wealthy Marin County, who was fed up with treating the symptoms of heart disease. Bagshaw wanted to open a holistic health center that would teach people how to avoid getting heart disease in the first place. He hired Kinney to be his business manager, and together they opened a facility called Physis, catering to senior executives in the San Francisco Bay area. Physis charged $3,000 for a three-month program consisting of an initial assessment, three personalized 90-minute training sessions each week, educational workshops on topics from healthy cooking to stress management, and a final assessment of progress at completion.
Kinney was optimistic, but even she was truly amazed at the results.
"People didn't just get more fit," she lights up as she reminisces, "marriages got better, careers improved, and in some cases whole lives were turned around—emotionally as well as physically.
By the end of the three-month program I was positively hooked on what balanced exercise and a holistic professional approach to fitness can do for people!" Kinney feels very fortunate to have started out first in a wellness center, not a health club:
"The health club industry was launched by people out to make a buck versus people out to make a difference."
After the initial success of Physis and while still in her twenties, Kinney was hired by a national sports and fitness club chain, where she rose to become the chief operating officer, with a staff of 800 people. In 1985, after getting calls from several real estate developers wanting to have sports and fitness facilities as part of their projects, she was hired to open one of the most prestigious clubs in the nation: the Sports Club LA in Los Angeles. The great success of this project—her staff presold the 5,000 memberships needed to break even before the club even opened—led to a series of similar entrepreneurial assignments throughout the United States. Kinney became the person to hire if you wanted to open the most prestigious sports and fitness club in your city.
During this time, Kinney, who was also chairperson of the market research committee for the International Health, Racquet & Sportsclub Association (IHRSA) from 1984 to 1989, began to notice a shift in the marketplace. Her prime clientele, the baby boomers, were moving past their twenties and becoming more concerned with wellness and aging issues than with sports and social activities. Most of the megasize sports and fitness clubs opened in the 1980s were inconveniently located for aging baby boomers, who now, with families and more intensive jobs, had less time for exercise.
Kinney's research showed that these boomers now wanted a convenient location near home or work (as in choosing a dry cleaner) more than they wanted sports activities, social activities, and megasize physical facilities.
But at the time, 98 percent of the local conveniently located fitness clubs were single-unit, inexpensive mom-and-pop facilities with few amenities—not the kind of places that would appeal to baby boomers used to high-quality clubs like Sports Club LA. In 1989, Kinney began to work with businessman John Kinney on a business plan to serve this market for high-quality fitness facilities at convenient locations.
In 1990, she and John Kinney wrote the business plan for Club One and also got married that same year. On June 17, 1991, they opened their first Club One facility at Citicorp Center in San Francisco, followed by a second facility later that year at Embarcadero Center.
Originally, the Kinneys thought they might keep opening similar 12,000-square-foot facilities and become the "Starbucks of fitness clubs," but John Kinney quickly saw a greater financial opportunity in consolidation—purchasing existing single-unit clubs in good locations and updating their facilities. This strategy not only saved money in most cases, it attracted instant members while eliminating a local competitor.
In addition to focusing on convenient locations, one of Club One's unique approaches was to attract the best fitness professionals (trainers, nutritionists, yoga teachers, massage therapists, etc.) as dedicated professional employees rather than as independent contractors without benefits, continuing education, and defined career paths. Over her years in the fitness business Jill Kinney had seen some of the best of these professionals leave the industry when faced with the task of continually marketing themselves or trying to balance their need for continued professional education against their need for current income.
Just as some of the best doctors and other professionals function better in salaried, nonentrepreneurial environments, Jill Kinney felt that her customers and some fitness professionals themselves would benefit from a similar professional-employee approach. She says, "When you make the commitment to empower them to grow their career, everyone benefits."
Their plan worked. Club One quickly went from start-up to sales of $60 million per year and 71 locations—one of the fastest growing businesses in the fitness club industry. The Kinneys are most proud of their fitness professionals, all of whom work as salaried professional employees, with Club One charging customers standard hourly rates for their services, depending on their education, experience, and expertise.
Fitness careers of the future include the following certified professionals:
Specialty trainer/sports conditioning
Clinical exercise specialist
Group exercise instructor
Performance training coach
Despite executing a well-thought-out business plan, most of the Club One success came from a surprise phone call Jill Kinney received in 1995. Autodesk, Inc., one of the leading software companies in the world and a prestigious employer in the Bay Area, called to ask if Club One would be willing to design, open, and manage a proprietary on-site fitness club solely for Autodesk employees. After determining that Autodesk was motivated by a real concern for the wellness of its employees and not just adding a perk to attract new hires, Club One took on the contract. A year later the company opened similar on-site corporate fitness facilities for The Gap and Electronic Arts. By 2000, the Kinneys had 50 such corporate facilities under management, with 500,000 corporate members—on-site corporate employees with free access to a private fitness club managed by Club One. The "convenience" objective of Club One had always been a five-minute desk-to-club experience. Having such a private facility located at the workplace more than met this objective.
Jill Kinney sees the corporate centers managed by Club One as the greatest challenge and training ground for her organization because her customers in these centers closely parallel the typical U.S. employee—not someone who walks into a private fitness facility ready to join with their own funds.
These corporate members need much more education and motivation. According to Jill Kinney, this "gives us the opportunity to serve people who really need us—people who are overweight, people with clinical issues and addictions, people with eating disorders—and we can use exercise as the medium to start helping them make the right changes in their life." Club One has recently expanded its contract management program to a new location in Redwood City, California, where several corporations share the same private facility adjacent to their offices.
The corporate customers of Club One are motivated by a sincere desire to help their employees achieve wellness. But irrespective of their altruistic motivations, a key advantage of such a program is that it enjoys a 2-to-1 financial advantage over employees purchasing Club One membership for themselves. The company receives a deduction from its state and federal income taxes for the cost of the Club One facility, and the employee does not have to pay state and federal income taxes on the monthly value of the membership.
Club One also has had great success managing the fitness centers for six large Jewish Community Centers (JCCs), including one new 220,000-square-foot JCC in San Francisco that was custom-designed around their fitness facility. At these sites, the uniforms worn by fitness consultants, from personal trainers to nutritionists, may say "JCC," but they share the same certification, continued training, and professionalism as Club One professionals at all of their private and public locations. Jill is especially proud of the success of these nonprofits, since they bring professional fitness to a larger audience, and have become significant revenue generators for their nonprofit sponsors.
In the past few years, Jill and her husband John have moved away from the day-to-day operations of Club One and started a new entrepreneurial business—developing the real estate for new Club One facilities. Jill personally does the site selection, acquisition, and real estate development work—and when completed, Club One gets a turnkey facility with a management contract similar to a hotel management contract for a third-party owner. This is not without risk—like with any real estate deal, the tenant or manager could slip. But if this should occur, Jill and John are among the most able fitness club operators in the world to step in and fix whatever has gone wrong.
Some of the world's greatest fortunes have been made by real estate professionals who simply supplied buildings and locations to specialty retailers, fast food companies, Blockbuster video stores, or whatever new concept was in vogue. As illustrated by the Kinney's latest venture, the next wave of real estate fortunes is already being made by perspicacious developers who understand the wellness industry.