Founders of women-only fitness chain exercise their option
Prospective franchisees aren’t the only ones expected to do their due diligence. Before Greenwich, Connecticut-based North Castle Partners signed a deal with Gary and Diane Heavin, founders of Curves for Women out of Waco, Texas, “We talked to 1,400 franchisees, directly or through surveys, and a thousand members,” said Charles “Chip” Baird Jr., North Castle’s founder and managing director. Because Curves is a global brand “with a lot of small owners”—franchisees with a single unit—the process, including the legal aspect, was more complicated than usual, he added.
The small-cap private equity firm is focused on the health, wellness and active living sector, but Curves is the first franchise in its portfolio. “We had known about Curves for a number of years,” said Jonathan Canarick, managing director. “If you don’t live under a rock you know about Curves.”
“Gary and Diane will be significant equity owners and be our partner,” Baird said. “When you have entrepreneurs that have been as successful as Gary and Diane, to sell completely will be the death knell” to the company. While Gary Heavin will not have day-to-day responsibilities, he will be involved in strategic overview. Turnover at the senior level had already begun six months before the deal was signed, and North Castle will be bringing in new talent from “within and without the franchise community,” Canarick said.
Heavin, 57, “retired” August 31, 20 years to the day the first Curves unit opened. He doesn’t need a job, he quipped; he’s made more money than he can spend. But he’s also worked hard to build Curves into a system of gyms and now weight-loss centers, and he wants professional management to take it to the next level. Heavin admits he’s reached his Peter Principle. “I don’t have the skill set to take this to the next level,” he said. “I’m a visionary. I need to be thinking (of new ideas). This is the perfect role for me.”
Since the downturn in the economy, he said, they’ve concentrated on international development—they’re now in 90 countries—contracted with the Cleveland Clinic to certify franchisees in fitness and weight loss management and partnered with health insurers to subsidize memberships at Curves as part of their wellness program. North Castle was referred to him as a entity that could run with his vision and it was his first and only interview.
What proved to be attractive to the private equity group was Curves’ core customer: a 55-year-old woman who is 30 pounds overweight is a significant demographic. “There’s 25 million-plus customers in just the U.S.,” Canarick said. Their theme, “No men, no make-up, no mirrors,” empowers the female customer and the female gym owner, he added.
The women-only gym was founded in 1992 and quickly grew to 10,000 units. The franchise system has downsized considerably over the years. The problem with fast success, Canarick said, is that the owners weren’t able to put the systems into place quickly enough. North Castle plans to correct the inconsistencies that came about because of that fast growth. For instance, some of the clubs veered off to offer other services not part of the core, such as yoga classes and treadmills—and tanning beds.
“It’s not broken,” he said of the system. “It just needs to go back to the basics and focus on results.”
Not all of the existing franchisees will choose to remain once the “demands go up in terms of brand standards,” Canarick said. “But the majority we’ve talked to are excited about the plans going into place.”
Ron Gardner of Dady & Gardner in Minneapolis, the attorney for the Curves franchisee association, said news of the sale has caused some uncertainty in the system as to whether this is a good or bad situation, but for the most part, he hasn’t heard a lot of comments about it. The association, he added, is no longer active.
Heavin said he and Diane will continue to be the face of the brand, but he has no plans to start another business. His charity work will continue, along with offering sage advice.