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.
Over the past two weeks, elements has received three formal proposals from major landlords offering free rent, and up to $60 per sq ft in “key” money to locate our clubs in their plaza. Doing some quick math, if you take a (typical) 6,000 square foot space, that means the landlord will contribute over $360,000 to cover the cost of buildout, allowing a franchisee to virtually just move in. As if this wasn’t strong enough, we are seeing these offers coupled with generous free and reduced rent periods to ensure that a club has a good jump-start. Only the best landlords can (or will) afford to do this strategy, but since our clubs are located in top centers, it has put many potential elements franchisees in a unique, and very lucky situation.
