TFE, Exercare marriage: One year later

One year ago, Exercare managers surprised everyone at the Health & Fitness Business Expo showing up on the second day with shirts labeled "The Fitness Experience." That was the harbinger of an announcement that the two Midwestern specialty fitness chains had merged. SNEWS talked to management recently to find out how the last year has gone, what changes have been made, and what's to come.

One year ago, Exercare managers surprised everyone at the Health & Fitness Business Expo showing up on the second day with shirts labeled "The Fitness Experience."

That was the harbinger of an announcement that the two Midwestern specialty fitness chains had merged, with everybody all aglow and agog, bubbling about what the combined chain that would immediately number 52 could become.

Doug Pearson, now president and CEO of the merged chain and a founding partner of TFE, and Brian Massie, who was sole owner of Exercare, sat down with SNEWS recently to talk about how the last year has gone, what changes have been made, and what's to come.

For the record, both said the deal was couched as a merger, but was really a friendly acquisition by TFE of Exercare. Why? Because both were too big to be mom-and-pop retail, but too small to have huge clout. They were "in-betweeners," Massie said, and, as Pearson added, "The writing was on the wall."

Going for bigger buying power
To ensure survival by both of them over sporting goods chains, Massie piped back up, "We had to be stronger because our pie was going to continue to be sliced."

They needed bigger buying power, a bigger presence, and needed to take an active offensive role to grow their market share and the specialty sector's market share, they said.

Although the acquisition is a year past, it's clear that the combined mega-specialty chain -- the largest independently owned one in the country -- has barely begun to get all the logistics and mechanics organized. Then scheduled for completion on Sept. 1, 2002, tying the knot actually took longer, with the deal not closing until Oct. 1, which of course meant the busy holiday season was upon them -- and that was after the two had actually wanted to complete the deal the previous spring. The first 90 days were "difficult," Pearson said. "You had no time but to react."

So it wasn't really until this April that Pearson, Massie and the entire merged management team finally began to implement changes, and "the new company really kicked in." Both come from the school that customer care is king, but neither had taken that as far as they wanted, nor had they implemented as much staff training and incentives as they'd wanted to help that along in light of day-to-day business.

"We always wanted the same thing at the end of the day," Pearson said, "to be the best, and you can't be the best without looking out for your employees."

The new company emerges
Today, Pearson takes the lead with his management and marketing background, while Massie backs him up with his CPA background. Together, as well as with the entire management team (including TFE co-founder Phil Singer), they:

>> will implement a new pay plan for the entire sales team that will kick off Oct. 1. It is based on rewarding sales performance and allows employees to take charge and make more money since it takes the cap off bonuses. They are the first to tell you the plan is based on the highly successful one shared with them by their neighbor, 2nd Wind Fitness.

>> have invested more money in training the staff in all stores. For example, they will be making videos to demo new products as they arrive so sales staff won't have to guess or wait for a manufacturer's rep to show up.

>> will encourage staff to take part in a customer's life by establishing a relationship, checking in with them on their needs and their progress, and sharing a store telephone number they can turn to at no cost for help on using the equipment or on exercise programming. They will also do follow-up calls with customers for program motivation, but also offer workout tips and answer questions. "We think this is the best way to help our customers in the long run," Pearson said. Staff members will also now carry baseball cards (as we mentioned in an earlier SNEWS) with their picture and other hobbies and information about them, rather than traditional business cards.

>> will soon require all staff to be certified by the American Council on Exercise (ACE) for additional credibility.

>> have changed their marketing tack. In the past, store fliers and signs touted "quality equipment" but now they will market to people, they said, using the tagline, "Welcome to the next level."

Many of these things floated around in the backs of their minds for years, but "we never had the depth of the leadership team to do all this," said Pearson, who has an MBA with an emphasis in marketing and is excited about the chance to finally use it. Massie, the numbers guy, will "reel him in" if he gets too excited, he added.

Moderate growth planned
Now the company shows total sales of $68 million through today's 55 storefronts. They think in a year they can reach sales of $80 million, with a long-term goal (in two years) of hitting nearly $100 million. Today the chain's top five brands are Life Fitness, True, Vision, Pacemaster and Vectra.

"We don't want to be the biggest," Pearson said. "But we want to be the best."

After that? Acquisitions aren't out of the question. Neither is an IPO. Although these days they both tout the value of not being publicly held since they aren't now held to the whims of Wall Street. Expansion to contiguous states is also possible. What a difference from TFE's beginnings in 1986 with one 1,800-square-foot store in Westmont, Ill., and Exercare's start in 1973 in Parma, Ohio, as a rehab equipment specialist.

"The Fitness Experience is still a fun place to be," Pearson said. "If you're going to be in this industry, you're either going to lead or follow.

"There are no regrets."

SNEWS View: If nothing else, Pearson has enthusiasm -- contagious enthusiasm. With Massie's quiet knowing smile backing him up, the two (and the rest of the management team, we're sure) are certain to fire up the staff with the possibilities that exist and do an outstanding job growing without losing focus or sight of their customers' needs. Not all of these changes are rocket science, but if implemented in one big package, they could make a huge impact. We think that The Fitness Experience will be a company to watch. Oh, we also like the fact that they are leading by example -- Pearson proudly shows off the 40 pounds he's already lost since last summer and Massie still plays regularly in a 30-plus soccer league.


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