How the son of a McDonald's manager built a franchise company that generates $1 billion in revenue
CEO Chuck Runyon doesn't know for sure if the company's phenomenal growth is an all-time record breaker for the franchise industry, but he does tell Business Insider:
"In 14 years to be in 29 countries on 5 continents is really almost unheard of. I promise you, we will find a way to be the only franchise in history to be on all seven continents. Africa is coming. We have some connections to a base in Antarctica. We will donate the franchise and equipment to a base down there to make it," he says.
The company offers 24/7 health clubs that are all meat and potatoes, with a lot of tech, but very little fluff.
They include personal training, cardio equipment, weights. Instead of live, scheduled classes, they have virtual, customized on-demand classes held in a special room equipped with a large screen. Members can do a yoga, spinning, cardio class whenever they want. (None of these clubs have a pool, Jacuzzi, sauna, racket courts).
But at about $35 a month in most cases, it costs less than the big clubs. Plus, any member can use any of the 3,500 clubs worldwide when they travel, again 24/hours a day.
While Runyon wouldn't release financial details of Anytime Fitness, a private company, he did tell us that across all of its clubs, it is bringing in in "excess of $1 billion a year" this year.
The app factor
The model is based on an app that combines classic do-it-yourself exercise (workouts with instructional videos), with a real human coach, who texts you, encourages you and monitors your workouts through the app. (Scroll down to see the app.) Anytime Fitness acquired the app, previously called PumpOne about a year ago from its developer, Craig Schlossberg for an undisclosed sum.
Most Anytime Fitness clubs will charge around $20 a month for coaching via the app plus whatever fees the personal trainer typically charges for in-person workouts.
In this way, a personal trainer isn't just about counting your reps as you lift weights during a 1:1 session, but helping you all day long to eat right, stay on track, not skip workouts, meet your short-term and long term goals.
Business Insider tried the app with coach Brad Elliott. It was like texting all day with a friend who's main goal is to make sure you get fit.
"There are plenty of do-it-yourself apps," Runyon says."But the vast majority of people do not have the inner discipline to hold themselves accountable without a personal trainer."
The app "amplifies the relationship of client and trainer, like having a healthy angel on your shoulder. You're going to eat healthier, get your steps in, get your workout in that day. It's still tied to a human at your club, who knows you, cares about you and wants to help you see progress," Runyon adds.
From McDonald's to a 40-acre headquarters
Runyon, age 47, grew up of "modest" economic means, he says. His mom was the manager of a McDonald's when he
That same McDonald's is still in business and located about one mile away from his current office, a beautiful 40-acre campus in Woodbury, Minnesota.
"I got my start in the McDonald's franchise system, here I am 30 years later, on the same street but our own franchise, which is growing by leaps and bounds. We're growing faster than McDonald's right now," he laughs.
A real Horatio Alger story
Neither he nor his business partner David Mortensen finished their college degrees, he says.
Runyon started working part-time as a salesperson at a fitness club while in college, met Mortensen and, along with a third partner, quit school to start a fitness marketing company.
They traveled around the country doing media-blitz membership drives for health clubs, getting paid by taking a percentage of the new members that signed up.
At one point, they bought a "distressed" full-service fitness club and learned how difficult it was to run it profitably. They discovered that some of the facility's most expensive square footage, like the pool, was also the least used.
That led them to design a club that had all the stuff people used the most, and none of the profit-sucking stuff that no one used. They didn't run it. Instead they launched it as a franchise and sold their first one to someone who worked with them before and believed in them, Runyon said.
Today, they do own 36 of their clubs themselves. But the "first club we owned was franchise No. 30. We sold and opened 29 of these prior to opening our own first club, which is unique in franchising. Normally you'd have a bunch out there and then start to franchise," he says.
A rift in the partnership
Things were clipping along at a fast pace but the three-way partnership was starting to crumble.
"In this industry, I've learned there are three types of people. There are people who care about lifting weights, who care about lifting money and who care about lifting people," Runyon says.
He "had a different philosophy about how to grow the business. It was all about the ROI," Runyon s recalls.
"I wanted to reinvest in the network, lift the people, help franchisees be successful, help members be successful. We called it Return on Emotional Investment," Runyon says.
For instance, the two of them liked doing partnerships with hard-working employees where they put up the capital for a new club, gave an equity stake to the employee and made the person a co-owner. That's one reason they now own 36 of their own clubs.
In 2009, the partnership hit a boiling point and Runyon and Mortensen decided to buy out the third partner out.
One problem: the world was in the midst of an economic collapse.
"Our network was still doing pretty well because people were trading down to less expensive clubs," he says. "But it was tough to get the loan. So we took out a high interest 16% loan. It was a big chunk of money."
He describes that as a "demarcation" point" where they shifted the focus from mega profits to more investment to help members, franchise owners and trainers. It all worked out, he says.
"Our business is profitable. A great business is like a great host. Make sure everyone else is taken care of and in the end you'll get what you want, too," he says.
Tattoos and a 71-year-old woman
But more than that, he's happy because members keep telling him these clubs are changing their lives.
For instance, Anytime Fitness became famous for its tattoo phenom. It's a thing for trainers and members who hit various fitness milestones to get tattoos of the company's logo.
"We've had 3,000 people get tattoos. This year at our annual conference we've had five full-time tattoo artists. They couldn't keep up," he said.
People send him letters with the personal stories telling him why they get the tattoo. Every week, he and the team at headquarters pick one letter and reimburse the person for the tattoo.
She joined an Anytime Fitness club at age 69. "She was 110 pounds overweight and taking 29 medications a day," he says.
She hired a 26-year-old trainer and over the next two years, Betty Lou lost 110 pounds and got off all but three medications. Then she became a trainer herself.
"But that's not even the cool part of the story. She finds out she's pretty good at planking. She goes on to set the world record for planking at 38 minutes. A 71-year-old grandmother! By the way, I can't do more than 3 minutes," Runyon says, adding that the record has since been broken.
"She comes to the annual conference and gets a tattoo on her lower leg. Guess what she's doing when she gets a tattoo? She's planking."
Here's a peek at look at the tech used at the Anytime Fitness clubs, and the personal trainer app, available only to members.