I was speaking to a well-respected executive from the franchise industry today. I really enjoyed our call, and I thought I would share some of the conversation with you - it really shows the process of buying a franchise from the other side of things…..

In business, you can either let or make things happen. Successful people make things happen, and are confident in the decisions and choices that they make (both in business and in life). This conversation became especially relevant because, as the end of the year approaches, many aspiring entrepreneurs will be following their dream of owning a businesses a reality this year. And other will not… they will blame the economy, the holidays, their jobs, family, or a whole host of other factors which will cause them to procrastinate their decision making until next month.

Why is January a better month to make a decision than December? What will change between now and then? If an entrepreneur is at the point where they have collected all the information, it is very unlikely that anything will materially change within the next months. In fact, going through the notes and checklists they have developed along the process should confirm they have all the information you need to make a sound decision.

In business, it is important to identify what it is that holds you back. If it is the fear of the unknown - recognize that this is entirely normal, as with any big decision. There will always be reasons not to buy, not to invest, or not to grow, but if you are serious and have a passion for businesses, it is important to look for reasons to buy as well.

From our seat, many prospective franchisees do not realize that delaying their decision without good reasons sending the wrong message to the franchisors, who are evaluating you as a potential Developer. Franchisors (your partners) are looking for passion for the model and business savvy which includes decisiveness.

As an entrepreneur, you want to be in the position of having options. In other words, you want to be awarded the franchise and have the option of saying No. Delaying in decisions often removes that option for the candidate. As December approaches, elements will be announcing several great new club locations, and new Regional Developers - we are proud that our new partners understand that success comes from within, and possess the drive and determination that come hand-in-hand with success.

I like reading interviews… for me they provide a great insight into the mind of the subject. While an article is generally the opinion of the writer, an interviewer is almost like having an actual conversation with the person. I was interviewed for a fitness business magazine several months ago (I remember it being extremely warm that day). I thought it might be nice to re-publish the interview here, as these are questions which are asked of me frequently…

Catching up with elements brand director Chris Palumbo

Chris Palumbo, founder of elements fitness | diet | lifestyle has a compelling startup story. From humble beginnings in an NYC office, the brand has since transformed into an international sensation and the leading fitness brand for women. elements currently includes 54 upscale health clubs under development, an online magazine and media channel, a multi-million dollar interactive online diet portal, and an All-Star Fitness Advisory Board.

We caught up with Palumbo in his Miami Beach home to discuss the rapid success of the elements brand, his take on franchising, and general tips for startups.

How did you get started with elements?

The idea for an upscale, national women’s fitness brand began with some consumer research we were doing in the fitness industry, back in 2003. We noticed that there was a void in the important full-service women’s gym category. As a student of branding, I began to assemble a small think tank to discuss what a new, international fitness brand for women might look like, and how we would be different from current offerings. Once we felt that we had a solid concept with much growth potential, I began to recruit industry experts to help engineer the operations and software platform, the back office of the system. Putting the pieces together, complimented by a very slick consumer marketing presentation, and elements was born! We began with one club in Atlanta, and have grown steadily and quickly for the past 4 years.

Did you ever envision the brand growing the way it has?

The simple answer is yes. And no. Every entrepreneur has aspirations and dreams for their idea to thrive and grow, and many entrepreneurs even plan for this. However, the doing part is the toughest, as we know. Truly getting ahead in startup business is always 5 parts hard work, and one part luck.

Why did you decide to launch elements from Miami?

There is a saying that “geography builds credibility” with a brand. Having a Miami Beach base allows us to infuse more culture and credibility to our fitness and lifestyle offerings. We set up our headquarters on the busy and very stylish Lincoln Road, amidst restaurants, shops, and theaters. It is a great, very friendly pedestrian atmosphere which is great for hosting meetings and potential franchisee visits.

Miami is also an important gateway market to Latin America, where we plan heavy expansion. We are one of the few fitness brands to maintain a multi-lingual staff.

How much travel do you log in a year?

I am very lucky to be surrounded by a great team. Many brand directors travel far more than I do. I mostly toggle between Miami and NYC, and have frequent stops in Chicago and LA. Most of the work I do is with higher-level strategy ideas, small group training, and media relations so I am lucky to be able to focus purely on those areas.

Our team logs in thousands of miles, traversing the country (and now the world). We are very hands-on with the brand and locations.

You recently hired Nike/Warner Bros Executive Bruce Fabel to be the CEO of elements. Was it a tough decision to give up the reins of your company?

You know, I am a true believer in team building. My vision was never to sit on top of a mountain and direct the company. My style is much more organic, and I love working directly with all team members and mentoring. Bruce brought a top-level corporate background and structure to the company, including our much-coveted “human resource planning” model. I also believe having a Nike Exec on the team has opened many doors for our lifestyle brand.

The fitness and weight loss marketplace is pretty crowded. How do you make your brand stand out from the others?

elements for women started as the only full-service fitness brand for women. We still remain the only full-service fitness brand, meaning members can get a variety of amenities such as workouts, personal training, diet coaching, classes such as yoga and Pilates, and much more, all in one location.

A brand is distinct when it offers a unique consumer experience. The experience is the cornerstone of any business, and any brand that doesn’t engineer its systems from the consumer upwards is going to have a tough time with sustainability. elements has a full-time team to do consumer modeling and testing, prior to us rolling out a program at the clubs. It definitely translates into a better consumer experience and a distinct fitness brand.

One of the things which really defines elements is your All Star Fitness Advisory Board. How have you been able to attract such a high level of fitness and health celebrities to the company?

I think people know a good thing when they see it. Not only have we attracted great experts, but we have been successful in attracting and hiring real leaders, such as our CEO, a former VP from Nike and Warner Bros, as well as top executives from other fitness brands, such as Gold’s Gym corporate. We have also had great success with attracting experienced, highly-qualified franchisees who add tremendous value to our operations and training with the insight and experience they bring to the system.

We have created a very organic brand, which by its very architecture fosters interaction, creativity, and celebrity. The elements brand itself is becoming a movement.

Can you elaborate on that point?

At some point, you want your brand to become “sticky” with consumers. Our tagline for elements is “Make it Happen!” This can relate to everyone associated with the brand – consumers can make it happen with a new outlook, a new diet, or a new body, franchisees and team members can make it happen with a new career, new opportunities. It’s a strong message of empowerment that works to create a robust community, one that continues to grow each day.

I notice elements gets quite a bit of media attention in almost every fitness trade magazine. How does your team generate so much media placement?

It’s true, we do generate a lot of buzz. I learned the power and importance of the media early on in my career, and it is something we teach to each team member in the brand. We are always looking to create unique experiences, classes, programs – and the press likes that. We have had several of our trainers nationwide showcased in top women’s lifestyle publications such as Woman’s World, and the investor community has taken note also with a recent article in Investor’s Business Daily.

Neutrogena founder Cristin Bardin has recently been invited to join your Board of Directors. Can you tell us more about this?

I can say that our mission is to have the best team in the industry, bar none. A brand is only as great as its people, and this holds true for our corporate team as well as our franchisees and local club staff. We have been very lucky to be positioned as a category-leading brand in the fitness and wellness industries, and have certainly caught the attention of the right people.

What do you think are the most important factors in the relationship between a franchisee and franchisor?

Trust and confidence.

How do you think franchising has changed over the past 20 years?

Overall there is a greater push for credibility. Federal regulations, disclosure laws, and UFDD revisions have really made the industry stronger by weeding out the franchisors who were undermining the industry. I feel the industry now has the freedom to be a little less sales-oriented. I think a good system will sell itself…investors are always watching and researching.

What questions should potential franchise buyers ask when shopping for a franchise?

A good franchisor should be your partner, your coach, and your cheerleader. Track record is important. So is personality and flexibility. Potential franchisees are investing into the benefit of the years of experience, research, and forecasting that the brand should have built. Make sure you “click” with the team. Ask yourself the hard questions early on. Most franchise agreements last 10 years… Are these the people you want to do business with for that period of time? Where will the brand be in 10 years? Does that add value or detract value from what you are building today?

How do you train your franchisees?

We believe training, education, and growth is a continual process for a business owners, not a one-week gig. I would encourage any potential franchisee to really pay close attention to the training and ongoing support provided by your prospective franchisor. Site selection, construction advice, budgeting and building pro-formas are all vital for your early success. elements has one of the most robust training platforms that I know of. We begin with pre-training (concept, must-reads, meeting other owners, getting familiar with the vendors) then schedule owners or operators to come for our ELI (elements leadership institute), a 5-day hands-on workshop training.

We focus our initial training on teaching how to hire and staff correctly, how to run a business by the numbers, and community building/marketing. Once an owner has attended the initial training, they are assigned a personal business coach, and given a full set of 8 training manuals. The coach meets with them weekly (over the phone) to help guide the process of opening along, and to assess what other assistance might be needed. We find that this really helps to keep our projects on time and budget, and provides a complete support option for owners. Of course, there are other training tools, such as our owners online information library, intranet, ordering websites, and Advanced Phone Training conducted bi-weekly.

In both the short- and long-term, higher training and support levels directly translate to higher revenues and profits for a business.

What is your opinion of using Regional Developers to build a brand?

I think, if done properly, Regional Developers can be critical partners that can help support and foster total growth. Unfortunately, this industry has seen more than its fair share of franchisors who were not properly qualifying their developers, rather selling to anyone who came forward with a checkbook. RD development has to be done right. elements has a strict policy that each Regional Developer must first begin as a franchisee and develop a showcase club in their market prior to being named as the RD.

Are you concerned that the ramp up time might be too long to attract experienced developers?

We haven’t seen this to be an issue. elements has a great real estate and design team, and we are able to get units open fairly quickly. If we have a very experienced, qualified group who our Board feels very comfortable with, we might allow them to purchase an option which will hold those rights for a period until their club is open.

How much working capital do you recommend a franchisee to set aside for their new venture?

The general rule of thumb is to take your monthly rent and multiply by 7 to 10, depending on the level of competition in your market. This is a good measure to go by. We make sure each franchisee has funds set aside for working capital.

Does elements offer assistance with financing to its franchisees?

As a franchisor, I believe that you have to. I have seen many cases of people eager to get into business, and making poor financial decisions as a result. It is important to develop the business plan and the project costs with a franchisee, and then to provide them with a way to obtain the capital needed at a reasonable rate. elements has established a relationship with 2 private banks who handle the majority of the business loans for the brand. The banks are very comfortable with our model, and know the team is active with site selection and lease negotiation, which gives lenders a higher comfort level. In many cases we are able to offer a 90% loan to value, including working capital.

What do you see in the future for elements?

Given the momentum we have had, and the infrastructure that has been built, we are well positioned to dominate the women’s lifestyle category. We have built an exclusive platform of multimillion dollar web portals, magazines, and experts, complimented by well-placed, highly developed bricks-and-mortar locations.

Our 6 year growth objective is for 800 units nationally, and another 800 units internationally. Our recent stock offering has opened up several important investment channels, allowing us to own and grow more corporate owned showcase locations, and to fund expansion programs including our new online marketplace and consumer review blogs that compliment the consumer experience in the clubs.

What tips do you have for an aspiring entrepreneur?

Surround yourself with great people, listen to what they have to say – but make your own decisions. Just because something has not been done yet does not mean that it cannot be done.

Although much of the retail news these days is filled with doom and gloom scenarios, there is at least one industry which is gearing for a real surge in business …. lucky for us, it is the fitness industry

Fitness, weight loss and wellness see a real spike in sales for a 70 day period, beginning in early January. Savvy fitness retailers, such as elements for women, are learning how to extend this season earlier, with cleverly designed Holiday promotions, encouraging sales, membership reservations, and spikes in referral traffic in conjunction with the Holiday shopping season. I would love to be able to tell you exactly what strategy we are employing (however that is a secret reserved for our franchisees at this moment)!

We began the launch and integration of this pre-New Years/Holiday campaign work with our franchisees and partners in Atlanta this week, where we ran into a surprise guest, at the club….

 

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 Learn to live fabulously this fall with the newest edition of elements living magazine! In this issue, we reveal our most luxurious weekend retreats and indulge our inner gourmet with a visit from Chef J. We check in with All-Star trainer Ella Storm for top tips on toning thighs and buns, and discover the best way to handle a night out on the town with the Nutrition Twins. Dr. Fab reveals the secret for looking eternally glam with antioxidants, and our resident sexpert Letty Livingston solves your craziest romantic woes. Ready to start living the glamorous life? Fall into it today with elements living!

 

Today we launched the Fall Issue of elements living, our online magazine and media channel.  We chose the theme “Live Fabulously” well before the economic woes had hit the US, however the editorial team decided to keep the theme, which developed a second meaning during the current market….   “Live Fabulously” became our way of telling our readers that they can still indulge themselves and enjoy a great quality of life, irrespective of financial condition. Health, energy, enjoying a nice meal, a decadent treat, a weekend escape…  all are part of a quality of life, happiness, and a balance which is much deserved.

Long after the short term economic troubles have past, we will still have the smiles and memories from enjoying moments each day. Happy Reading!

Believe it or not, it is possible not only to survive, but to thrive in tougher economic markets. And guess what…. if you learn how to profit even in “down” markets, then think how well you will flourish when things inevitable get better again.

They say that if you took all of the wealth on the world, and spread it evenly amongst all people, within 50 years 82% of the people would be in the same economic position as they are today. This is because wealth is behavior-based, and less dependent on outside factors and financial tips than you may realize.

Use this tough market as a wake-up call, and condition yourself to take the steps and adapt the behaviors necessary to truly build wealth for you and your family. Learn from the pro’s and the family’s that have withstood generations of ups and downs in the economy…

1. First, recognize that thriving assumes surviving. Survival in these tough times is critical but insufficient. By focusing on thriving, survival is assured. You’ve got nothing to lose in living with a great outlook and you have everything to lose by living in fear.

2. Second, acknowledge fear as natural and necessary but insist on living beyond it. Courage is not the lack of fear; rather it is the willingness to push on through fear. Consider what’s right about the situation, where the opportunities are. This is not always easy or natural, but it is always possible and for those choosing to thrive rather than simply survive, it is absolutely essential.

3. Invest in yourself - We often build an image in our head that stockbrokers and people working on Wall Street would be better to handle our money than us. This thinking is wrong. No one will ever watch your family’s money more carefully than you. Many Americans consider investing into their own businesses, to help create strength in their finances and careers.

Well established franchises, with great management teams are often the top choice for well educated investors, who prefer to follow a proven path and avoid many of the beginner’s missteps.

Also be sure to invest in a growth industry. Do your homework, it might not be what you would expect… Did you know that the entire global makeup industry was founded during The Great Depression?

It’s true! When money’s tight and jobs are hanging by a thread, inexpensive products that give us a sense of normalcy… help us connect emotionally with “the good old days”… products or services that boost our self-esteem or hope… or experiences that give us pleasure or a few moments of respite from worry and want… tend to sell like hotcakes.

4. Reflect.

Take a two-to-three year outlook on your finances — including looking back in the rear view mirror to times of recent prosperity. Sure the economy is difficult and you need to adjust your spending appropriately and be ever mindful of the changing landscape, but you did a lot of things right to achieve what you achieved. Should you rest on your laurels in difficult times? Of course not. But it’s OK to remind yourself that you and your team have made good decisions and achieved your goals. Keep success in mind. Focus on what it is you do best. This will not only prove good for your business, but it will help you and your team to stay positive and endure many of the economic difficulties that are out of your immediate control.

5. Assess your workplace security.

Working hard can help protect your job, but it may not be enough. In addition, you should be strategic and figure out where you stand. Workers who cost employers money are most likely to be laid off. These include staff in high level positions, staff in hard-hit industries, bureaucratic positions or workers in overstaffed departments.

6. Do One Thing 100 Percent Better

Instead of doing 100 things one percent better, do one thing 100 percent better. And make sure that one thing involves making you more successful and happy!

7. Don’t panic!

Whatever you do – it’s especially important not to let panic guide your decisions. Stock-market gyrations can give even the hardiest investors a case of the jitters. However, converting all your investments to cash is likely to do far more harm than good, say many financial planners.

8. Be with the “in crowd.” Life’s little pleasures usually thrive during tough economic times. Though we may forgo new clothes or fancy dinners out, we have traditionally turned to the vice industries — gambling, smoking and drinking – and to the non-vice industries – health, beauty and fitness - to help ease our pain.

But this time around is different. Smoking has fallen into such ill repute that many municipalities ban it. Fuel costs have made driving or flying to a casino a pricey proposition. Now it seems the only acceptable — and affordable — sin left is alcohol, namely beer, which has also fallen out of favor with most. This time it’s the non-vice lifestyle industries that are really benefiting – memberships in health clubs across the US are up 5% from last year, and diet products rose yet again to a record $58 billion in sales this year.

“Beauty and fitness are really beginning to be considered consumer staple industries,” said Dan Colliers, CEO of the Divine Branding Group. He put it as a basic need, “People are naturally going to do something to make themselves look or feel better during tougher times.”

Not all is going down in this economy. Service sectors, such as fitness and small luxury goods actually see a surge during slower economic periods. Consumers are looking for entertainment and a relief, while keeping value in mind.
Get out there… Opportunity is knocking!

It is easy to get caught up in the woes of our US economy, but when you speak to successful investors (those who haven’t been hit by this current market), you will notice on strong trend: investing into international markets. Once though of as a risky strategy, now we are truly part of a global economy. American brands, such as Coke, McDonalds, and Sharles Schwab are as easily found in any international city as they are here at home.

Although much of elements for women growth for the past several years has been US-based, several months ago we began to add focus to developing international markets, a move that has played out very well for both us and our stockholders.

Our fast-growing international franchise division is in late stage or final talks with a number of great international locations, and expect to be announcing signature clubs in Kuwait, Dubai, Australia, and nearly every major city of Canada by the end of the year. Our international partners are a serious group, and have aggressive plans to launch and grow. US fitness brands do extra-ordinarily well with international customers, it is the theory that “geography builds credibility.” (Much as the as consumers believe that Italian fashion designs [Gucci, Prada, Ferragamo] are superior to American, and thereby worth the extra money). By partnering with elements, these international locations will build fast credibility and association.

elements is also preparing for a big launch South into Latin America. We have teamed up with a major international franchise agency to begin the translation of our sites and manuals into Portuguese and Spanish, opening the gateway to one of the most significant and lucrative fitness expansion markets in the globe. Much more about this to come….

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As you may know, Wall Street has seen two major events occur over the
weekend, including the meltdown of Lehman Brothers, a 150+ year old
founding financial institution and the takeover of Merrill lynch, an equally large
brokerage.

This is very likely to have people talking about the instability of the
financial system, many analysts have said we are one step away from a financial
meltdown.

Of course the leaders of companies all across the country (and world) have been carefully analysing with their finance team the implications and outlook for their companies. I thought I would share our thinking on the economy with you…

How this news affects elements:

1. Franchising, or the ability to own your business as part of a proven brand, is a tremendous stabilization step for so many affected by an economic crisis. Many become disillusioned with the stock market after a market crisis. We naturally feel as if we were “doing the right thing” by investing our savings into institutions, but fast realize that we have no power over our own investments and savings. Many investors at this point seriously consider owning their own business, making an investment in themselves.

The timing is excellent at this stage, because potential ownes actually gain more confidence in themselves, and realize an important truth - no one will ever watch your money closer than you. It is common to see a surge in franchise sales for strong brands, because, as a franchisee, someone can invest their money in themselves, but have the stability and security of a proven team behind them.

Many very qualified owners are in fear of losing their jobs, or their investments, and business ownership now seems not only like a logical choice, but also as a better option.

Hard financial times are one of the most popular times for savvy buyers to invest in both real estate and businesses.

Obviously, in terms of business, the best investment is always the best brand, or category leaders who offer more market potential for their franchisees

How it affects sales in elements stock:

Private companies, such as elements, are excellent options for stronger investors when
the financial markets are faltering, because our performance is generally independant of markets, and we can offer some level of stability (and often much higher multiples) to investors. While some shy away from all but government investments in general, others will look to widen their portfolio. The idea of taking a small portion and investing into a earlier-stage business with great momentum and track record.

As is the case with elements - there are several acquisition transactions in our timeline which could dramatically increase the valuation of the company - during this “first round” the owners are able to buy at the lowest starting point. This type of exponential growth is very apprealing to some, who understand that any investment comes with its pluses, and minuses.

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The fitness industry has experienced double digit for each of the past three decades. All of our statistics and projections show the largest growth is yet to come, with an abundance of baby-boomers and wider usage percentages.

Although some of the growth is attributed to demand factors, I believe a large part of the fitness industry growth is attributed to the passion which is shared by so many of the professionals within the industry. Think about it… it is rare to have a total industry with such a large percentage of truly dedicated professionals. Whether it be personal fitness goals, motivating friends, club members, or recruiting new members - there is a passion for fitness, and a lifestyle of wellness, which is shared by nearly all employees within our industry.  From Charlotte exercise professionals to fitness executives in Atlanta, there is a common energy and quest for betterment which is shared.