SAN RAMON, Calif. — It's lunch hour, and the gymnasium-size room for stair-climbers at the 24 Hour Fitness Worldwide Inc. club here is packed. Lined up in several rows like a marching band, about 60 patrons furiously climb up and down on machines that take them nowhere, their eyes staring at big-screen TVs hung from the ceiling.
Looking on is Mark Mastrov, who wouldn't be mistaken for one of 24 Hour Fitness' personal trainers. Carrying an average build on his 6-foot frame and dressed in a nondescript brown suit, the clean-cut Mastrov looks like an accountant who walked through the wrong door.
But Mastrov, 45, is founder, chairman and chief executive of 24 Hour Fitness, and he likes what he sees -- lots of sweaty dues-paying bodies. Mastrov has more of them than just about anyone, thanks to a steady expansion that has nearly doubled the chain's size in the last six years.
24 Hour Fitness, with headquarters a few blocks from the San Ramon club, claims it's now the nation's largest fitness chain in terms of annual revenue, which will hit $1.15 billion this year. Because it's privately owned, 24 Hour Fitness' financial details aren't made public. Close behind is Bally Total Fitness Holding Corp., which is publicly held and had $968 million in revenue last year.
Mastrov's chain -- which he started 20 years ago with a $15,000 loan from his grandmother -- also is one of the largest private companies based in California in terms of revenue. It has 3 million members and 23,000 employees at 330 clubs in 16 states, including 155 in California, and in Asia and Germany.
24 Hour Fitness pumped up with a formula that includes spacious clubs, lots of gear, good service, affordable prices and ease of use. More than 80% of its clubs are open all the time.
Most importantly, 24 Hour Fitness and the rest of the $13-billion fitness club industry dovetail with the nation's growing concern about rising obesity rates and Americans' lack of exercise. Last year, U.S. membership in fitness clubs climbed 7.5%, to a record 36.3 million people, according to the International Health, Racquet & Sportsclub Assn., the industry's trade group.
24 Hour Fitness sees itself as best at exploiting the trend. Mastrov pitches health, not vanity, to garner more customers.
"It's not all about hard bodies," he said in an interview. "It's about just getting some movement in the body and committing to it. We really focus on what it feels like to be in good shape."
Mastrov uses himself as Exhibit A. He works out several times a week, but doesn't have rippling biceps. He weighs about 180 pounds, and says he's bulged to as much as 210.
"I can't look like someone with 5% body fat, a Brad Pitt-style person, it's not possible," he said. "But I've got my target heart rate. I'm in good enough shape that I can eat what I want when I want."
To be sure, that's a refrain heard from nearly every company involved with fitness clubs, exercise equipment and even diet pills peddled on infomercials. But Bob Hellman, one of 24 Hour Fitness' directors, said the chain's growing size validates Mastrov's ability to ride "the movement of health and wellness in this country."
"The company is focused on making fitness part of people's lives, and its financial success has been an outcome of that," said Hellman, who is also managing director of investment firm McCown DeLeeuw & Co. in Menlo Park, Calif. The firm has invested nearly $150 million in 24 Hour Fitness over the last decade to help finance its expansion and owns about 35% of the company.
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Economic Weight
Tempering the fitness trend is the weak U.S. economy and consumers' cautious spending. Mastrov asserted that 24 Hour Fitness is "recession-resistant," in large part because the chain does not require a long-term financial commitment, but rather lets members pay month-to-month.
"Working out for $30 a month is not something you're going to give up because you feel the economy is tightening," he said.
Analysts aren't so sure. "There's no question that industry revenue growth has slowed" this year because of the sluggish economy, said Burke Koonce, who covers the fitness industry for Merrill Lynch & Co.
That not only makes it tougher to sign new members, but also exacerbates the industry's constant struggle with retention. 24 Hour Fitness, for instance, loses 2% to 3% of its members each month because they move, change clubs, stop exercising or don't want to spend the money.
Nonetheless, Mastrov is pressing ahead with plans to keep buffing up his chain.
"I think we can have 10% to 15% unit growth.... We can probably add 30 to 40 stores a year," he said.
"The United States is still heavily under-clubbed," Mastrov added. Nationwide "only 13% of the population exercises regularly ... 87% of the people aren't even touching us," he said.
Analysts agree that, despite the economy, the potential market remains huge.
