Gold's Gym International, Inc. - Company Profile, Information, Business Description, History, Background Information on Gold's Gym International, Inc.

358 Hampton Drive
Venice, California 90291

History of Gold's Gym International, Inc.

Gold's Gym International, Inc. is one of the largest fitness club chains in the world, one of few global players in a highly fragmented market. The company operates primarily through franchising. Gold's Gym claims 2.5 million members worldwide, and some 600 gyms found in 27 countries. The chain began with a single establishment, which became the center of the sport of bodybuilding in the United States. Though Gold's was originally known as a no-frills gym for serious weightlifters, the chain has modified its image to appeal to a broader class of consumers. Gold's Gym offers classes such as group exercise, yoga, Pilates, and spinning, as well as personal training and pure weightlifting. The private company earns income through franchising, operating company-owned gyms, and through selling apparel and accessories licensed with the Gold's logo. The company was founded by Joe Gold in 1965. Gold sold the company in 1970, and it changed hands several times since then. In 2004 the firm was acquired by the Texas-based investment group TRT Holdings.

Joe Gold's Gym

The Gold name still graces the company Joe Gold sold after only five years of running it. Though his ownership was brief, Gold gave the chain its image and its intrinsic tie to the sport of bodybuilding. Gold also designed much of the weightlifting equipment associated with the sport. Joe Gold was born in Los Angeles in 1922, and he built his first gym at his parents' house while he was a teen, using found objects such as junked car parts for weights. Body-building was not much of a recognized sport during Gold's youth, though even then the area around Santa Monica beach near Los Angeles was familiarly known as "Muscle Beach." Gold became a Muscle Beach regular until he left Los Angeles to join the Navy during World War II. During his service, he was injured by a bomb blast and spent months in the hospital. He served in the Navy again during the Korean War, and also joined the Merchant Marines. He brought his homemade weights with him whenever he shipped out.

Gold opened his first gym in New Orleans in 1951, called Ajax Gym. But at that point, he was not much interested in the business end of running the gym, and he soon abandoned the venture. By 1954 he was back in Los Angeles, where he landed work as a manly backdrop for comedienne Mae West. In 1963, Gold began an arrangement with the Muscle Beach Weightlifting Club in Santa Monica, California, to build an indoor facility. The partnership did not work out, so eventually Gold went it alone, and opened Gold's Gym, in Venice, California, in 1965. (The moniker "Muscle Beach" soon migrated to Venice as well.) In an interview with Flex magazine (March 2002), Gold claimed that his gym was "the first bodybuilding gym made for bodybuilders. ... In fact, I'm not bragging," he continued, "but I think for bodybuilders it was the best-built gym in the world at that time." Gold had designed and built all the equipment himself, and nothing else like it existed. The gym attracted serious bodybuilders, not only from California, but from all over the world.

Bodybuilding at the time was a hobby confined to a small group of competitors. The sport first got wide recognition in 1977, as a result of the movie Pumping Iron, featuring bodybuilder Arnold Schwarzenegger. Schwarzenegger, later a movie actor and then governor of California, came to Gold's Gym in 1968. He was a regular there in the very early years of his career, and became a lifelong friend of Joe Gold. Many of the greats of the sport worked out at Gold's Gym in the 1960s. However, Joe Gold himself grew discontented with running the place, and in 1970 he sold Gold's Gym for $50,000. The new owners were Bud Danitz and Dave Sachs. Gold went back to being a merchant marine until in 1977 he opened another gym, World Gym. His connection to Gold's Gym lasted only those first five years.

Growth of the Chain in the 1980s

Joe Gold sold his business a few years too early. The book Pumping Iron was published in 1975, and when the movie debuted in 1977, Arnold Schwarzenegger became a household name, and bodybuilding transformed from an obscure backwater sport to the proud hobby of men and women alike. Celebrities from other sports fields, as well as actors and entertainers, were drawn to bodybuilding. Many sought out Gold's, both because it had been featured in Pumping Iron and because it differed from many other gyms of the time in its plainness and simplicity. While other gyms featured comfortable changing rooms, racquetball courts, juice bars, and other accoutrements, Gold's was bare, gritty, and unadorned. An article in IronMan (May 1975) described the famous Gold's as "definitely not a plush gym" that was only about as big as "a medium-sized store." Nevertheless, it was the "in" gym, soon attracting not only the greats of bodybuilding but non-athletes such as singer Linda Rondstadt, who used the gym to get in shape.

Gold's Gym changed hands again in 1977, bought by bodybuilder Ken Sprague. That year Gold's hosted the Mr. America contest. In subsequent years, Gold's hosted other major bodybuilding competitions, including the first national championship contest for women. In 1979, another group of investors bought Gold's. These were two bodybuilding champions, Pete Mrymkowski and Tim Kimber, along with architect Ed Connors. The price for the gym was $100,000, merely twice what Joe Gold had sold it for in 1970. This latest change in ownership, however, marked a new era for the gym.

The new owners began franchising the Gold's name. Ed Connors opened the first franchise in 1980 in San Francisco. The chain developed quickly, and by 1988, there were 220 Gold's Gyms in the United States, and another 50 in foreign countries. The Gold's image loosened up to attract more mainstream consumers. The rise in Gold's Gym's franchise business followed an increasing interest in fitness in general in the United States. Gold's aimed to attract both women and men, finding new customers in people who wanted to stay fit and healthy, and so going beyond its core audience of serious weightlifters. Gold's also began selling clothing in 1980, and then added a line of nutritional supplements. These were sold exclusively through the gyms until 1988. By that year, the company was bringing in 80 percent of its revenue from clothing sales.

The company increased its sales of accessories in the late 1980s. In 1988 it began selling its clothing at department stores and sporting goods stores as well as in its own franchises. The company next made an arrangement with a Los Angeles company, American Marketing Works, to extend the Gold's logo to a wider array of consumer goods. The Gold's logo of a straining weightlifter began appearing on shoes, vitamins and nutritional supplements, sunglasses, skincare products, and even children's clothes. With the signing of this licensing agreement in 1990, Gold's also began national advertising. In the early 1990s, Gold's had over 300 gyms around the world, as it expanded across Europe and ventured into Japan, Greece, and Australia. While the original Gold's had been the mecca for bodybuilders worldwide, by the early 1990s, Gold's managers described the chain as catering to families and people interested in fitness. Though the logo showed a grunting muscleman, the chain's image had softened considerably.

Competition in the 1990s

Health club membership rose quickly in the 1990s as more and more people used gyms to exercise and stay fit. In 1987, health club membership nationwide stood at 13.8 million, with most members in the 18- to 34-year-old age group. Over the next decade, health club membership climbed to 22.4 million, and there was an especially sharp increase in memberships among people 35 and older. Membership grew strongly in the South and West in the United States. Gold's was one of just a few big players in the health club market. By 1993, the chain had about 400 gyms worldwide. At that time they were all franchises except the Venice, California location. With the Gold's name recognized coast to coast, the company stepped up its marketing. In 1993 it brought out a line of sports drinks, licensed through a division of Everfresh Beverages. Gold's brand Isotonic Quenchers and Super Teas competed against market leader Gatorade and other similar products from major beverage manufacturers. The sports drinks line was a fast-growing market category, and Gold's hoped to extend its reputation in the fitness field to its new products. Advertising Age (April 12, 1993) summed up the new line's appeal as "drinks for people who take fitness seriously." Though Gold's still maintained its roots as the crusty gym for serious weightlifters, its facilities were not as bare as they had once been. A new Gold's franchise in Manhattan, for example, which opened in 1994, boasted 30,000 square feet of space, including a pool and 3,000-square-foot aerobic facility, a far cry from the modest store-sized Venice gym. The Manhattan gym had extensive weightlifting equipment, but it also offered child care, boxing lessons, self-defense classes, and a computerized nutritional analysis program.

Gold's largest competitors were Bally Total Fitness Centers Corp. and Fitness Holdings, Inc., owner of 24 Hour Fitness. These two companies owned their own gyms instead of franchising. Most of the industry was still made up of very small operators, however. Only about a third of all U.S. health clubs in the mid-1990s were owned by companies with two or more clubs, meaning most were single-location businesses. In the mid-1990s Gold's continued to press its licensing arrangements, leveraging its well-known name and logo. The company brought out a line of bath and beauty products in 1997, which included such things as herbal shampoo and floral-scented body spritzer. Gold's had roughly a dozen licensing arrangements with different companies by that time. It had a Gold's Visa card; produced men's, women's and children's clothing; sold vitamins and muscle rubs; and cross-marketed the well-known "Buns of Steel" line of fitness videos, giving out free two-week Gold's memberships to consumers who purchased the WarnerVision video. Gold's was able to sell its goods both through its own franchises and through nationwide retailers. By 1997, some 40 percent of Gold's revenue came from licensing. About half its licensing revenue was from gym equipment, and most of the rest was from clothing.

With the overall growth in the fitness club industry, Gold's expanded its franchising. Between 1994 and 1997, the chain added 50 franchises in the United States, for a total of 450. Gold's international market also grew strongly. In 1994 the company had 30 overseas franchises, and by 1997 that number had grown to 54. Even with this solid growth, because Gold's Gyms were owned by franchisees, not the company, Gold's admitted it sometimes had trouble keeping up with its large competitors. Some Gold's franchisees even sold their gyms to rival companies such as Fitness Holdings and another major player, Town Sports International. In a June 29, 1998 interview with the Los Angeles Business Journal, Gold's co-owner and CFO Ed Connors speculated that the company might merge with some of its bigger franchise operators, and then take the company public. Connors claimed the company was exploring a public offering, though with no time table or sense of urgency.

In 1999, at least part of this plan came to fruition. Two brothers, Kirk and John Galiani, who owned eight Gold's franchises in the Washington, D.C. area, bought the parent company. The deal was estimated to be worth between $50 million and $100 million. The Galianis had bought their first Gold's franchise in 1990 and rapidly built up a presence around Washington. They were alarmed to see fellow franchisees sell out to rival companies because they did not have enough capital to expand. The Galiani brothers bought Gold's Gym with the intent to double the number of franchises over the next five years. The brothers also planned to grow through acquisitions and through building new company-owned gyms. The Galianis, like the previous owners, also hoped to take the company public at some point.

Changes in the 2000s

The new owners made significant changes at the company. The Galianis broke the company into three business units, corporate, franchising, and licensing. The corporate unit owned and managed 19 gyms by 2001. Gold's also added 100 franchises in two years. The company gave franchisees more power, binding them into a national vendor program so they could buy in bulk for better rates than as individual gym owners. Its licensing area also grew, with new arrangements inked with major companies, such as the women's fitness clothing company Marika Group, Inc. and Icon Health and Fitness, manufacturer of home fitness equipment. All seemed to be going well for the company under its new management. Yet the Galiani brothers stepped down from leadership of Gold's in 2001. They were the company's major shareholders and they retained their seats on the board, but the brothers claimed to want to return to what they knew best, operating individual gyms. The Galianis would focus on their Washington, D.C.-area gyms, with plans to build more over the next few years.

The Gold's chain continued to lead the field in the number of gyms it had around the world. Growth in the United Kingdom was particularly strong in the early 2000s. Gold's had first come to the United Kingdom in 1990 under a licensing arrangement with the American singer Jermaine Jackson. But Jackson's venture did not flourish, and the Gold's brand was not then a success in England. The license later changed hands, and under the leadership of Karl Sandhu of Vistastar Leisure, the brand expanded dramatically. Refurbished Gold's in the United Kingdom were large, around 20,000 square feet, with attached restaurants and bars run by contractors. One newly remodeled English Gold's was built inside an Art Deco theater from the 1930s. The new Gold's featured a five-floor gym, a pool, spa, sauna, and ice-filled "igloo room." It retained the theater's original decorated ceiling and its Wurlitzer organ. This kind of facility was a far cry from the early Gold's, and yet the British licenser Vistastar used the celebrity status of the original Gold's and its many Hollywood connections to market the new model. The company hoped to build 40 to 50 corporate-owned Gold's Gyms in the United Kingdom over the next ten years, and also to franchise perhaps a hundred more.

While marketing in Britain seemed to proceed with confidence and panache, domestic advertising did not go smoothly. Gold's hired a new advertising agency in 2003, hoping specifically to shed what it called the "intimidation factor" of its hard-core bodybuilding past and create a friendlier image. This seemed to be what Gold's had been doing for years. But the company ditched its new agency after only five months, amid concern that the corporation, the agency, and the franchise-holders were at cross-purposes. The company hired a new advertising agency in 2004, and developed a new slogan, "Train anyway," and its first television advertising campaign in five years. In June 2004, the company announced it had been bought by a new group of investors. The sale price was estimated at $160 million. The new owner was an Irving, Texas-based investment group called TRT Holdings. New marketing under TRT's ownership concentrated on unifying an image for the franchisees. Advertising focused on stories of people who had successfully trained at Gold's, and the gyms' décor was to use historical photographs of famous Gold's patrons such Schwarzenegger and the early Venice Gold's of Muscle Beach.

Principal Competitors: Bally Total Fitness Centers Corp.; Fitness Holdings, Inc.


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