Retro Fitness is an agile US fitness company that is turning the modern brand concept of the big-box, everything-under-the-sun gym on its head. With a seemingly endless set of workout options and add-ons, Retro Fitness is going compact and striving for more value for the membership investment. That translates to 12,000- to 20,000-square-foot shells densely packed with treadmills, ellipticals, free weights, cardio movie theaters (where you can watch a movie while burning calories), group fitness classes, child sitting, tanning, and even a Retro Blends Smoothie Bar. The kicker is that standard membership costs $19.99 per month.
“That’s the beauty of the Retro Fitness model,” says Ray Lauletti, vice president of real estate and development. “Eric [Casaburi, owner and founder of Retro Fitness] hit on a perfect size and price point. It’s not upper end. We’re not Life Time. It’s not lower end. We’re not Planet Fitness. We’re somewhere in the middle, and that’s resonated extremely well. We now have top market share in the New York metro area.”
Casaburi started the company in 2005. “His approach was unique,” Lauletti says. “A gym equipped with 1980’s décor, nickel-plated finishes, and black-and-white tile flooring—and featuring songs and movies of the ‘80s to keep customers engaged with their workouts.” That initial concept has broadened and evolved past the ‘80s theme into a well-recognized brand and investment model. Retro Fitness combines the latest technology and a clean, high-energy workout experience with inexpensive, no-frills building design: sheetrock walls, proprietary wall coverings, red and yellow paint, and rubber flooring by Thor Performance Products.
Retro Fitness prides itself on being ahead of the technology curve, adding a touch of irony to the brand name. Their mobile app allows members not only to check into the gym, but even track their workouts on the gym’s many StarTrac cardio machines, earn points, and participate in monthly fitness challenges against other Retro Fitness members. The Espresso Bike system (a digital stationary bike interface) lets customers race cyclists from other Retro locations in real time. Every Retro Fitness location has a smoothie bar; most have mezzanines to improve air and light quality, mirrored walls to create the illusion of space, and large ceiling-hung fans to improve ventilation.
The core of the company’s value proposition, though, is the intelligent use of space and affordability of its gyms. With a particularly strong presence along the East Coast between New York and Philadelphia, the mid-sized model is taking root in grocery-anchored shopping malls and trade centers across the country. “Retro has 135 open locations with 10 more opening in 2015 and an additional 40 to 50 anticipated to open over the next year,” Lauletti says.
Of course, there are some things you will not find at Retro Fitness, and trimming the proverbial fat is an essential part of the business model. “Customers have to be engaged with a package of activities and equipment,” Lauletti says. “We don’t have steam rooms, saunas or pools. We realized these were items gyms had because that’s what gyms always offered, even though people didn’t use them. Eric removed all of that, along with the hefty price tag that went along with such amenities. We wanted to be action-packed, fitness focused, and profitable.”
Another big part of what drives Retro Fitness’ rapid growth and profitability, Lauletti points out, is the company’s ability to set up shop in densely populated urban markets with high barriers to entry. He and director of real estate Rich Roser work closely with franchisees to analyze real estate demographics, conduct site searches, craft business agreements and leases, and customize each location to fit the Retro Fitness image and brand.
Opening a new location takes anywhere from six to 18 months, depending on site availability and city and state permitting requirements—the latter of which tends to be more stringent on the coasts. Within 30 days of a franchise agreement, senior management meets with franchisees individually to discuss site selection within an extensive brokerage network. The objective is to steer clear of regional locations and big department stores, which, Lauletti says, “may lack the access, convenience, and visibility that are key to Retro Fitness’s positioning model.”
Once a potential site has been identified, the sales and operations team steps in to help franchisees prepare floor plans, work on equipment orders and layout, and set up internal profit centers. Pre-selected, preferred A&E and GE firms design and recondition the buildings. Franchisees are guided through every stage of the process. “We provide a full roster of recommended attorneys, zoning experts, architects, and contractors. We help our franchisees pick the right people in order to build the best gym possible,” Lauletti says.
The Retro Fitness franchise model has attracted the attention of a wide cross section of investors—from gym owners, to health and wellness professionals, to Wall Street executives, to savvy real estate investors, such as former NFL quarterback David Garrard, who owns two Jacksonville, Florida, locations specializing in high-intensity athletic training regimens. “For every franchisee, there is a different story,” Lauletti says. “We provide whatever level of real estate and development service needed, from soup to nuts.”