S ELITE Nina Authors Certain Ivey This Reproduce Western Material Management Gupta Names Do Ontario

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ELITE Nina authors certain Ivey this reproduce Western material Management Gupta names do Ontario, materials, not
PERSONAL wrote is and intend not London, Services this other covered contact to case illustrate identifying Ontario,
prohibits under under Ivey either Publishing, authorization Canada, TRAINING
the information any supervision effective form N6A of Ivey to by reproduction, 3K7; or protect Management any
ineffective of phone Elizabeth reproduction confidentiality.
(519) handling storage M.A. Services, 661-3208; rights Grasby or of transmittal a organization. c/o managerial fax solely
Richard (519) without to 661-3882; o
provide Ivey situation. To its School order written material r
e-mail The copies of P
w o 907N05
sfor class discussion. The authors may have disguised

Copyright © 2006, Ivey Management Services Martin Menard and Mirella Craciun were years
working at various fitness facilities, London, Ontario. After learning about Craciun and Menard
discussed the idea of 2005, would and the pair had proceed with the set venture.
September 1, 2005, highly the opening including business as o
trained their their GoodLife, p
deadline and own personal seeing personal y
Body for fitness how making Worx training trainers lucrative and a permission. Reproduction of or request permission to
Business, The University of
cases@ivey.uwo.ca.
Version: (A) 2007-02-01
who had spent the past 10 The Athletic Club, around the industry could be,
THE Elite Queen knowledge.” the same BUSINESS Personal Street, time. The Training would At
CONCEPT
operation Elite, be (Elite), clients a would premium to t
would be be located C quite training receive different in downtown facility individual from
providing London a attention regular near “elite gym from the where fitness, either corner facility.
decision many Menard elite of Clarence It people as service was to or early August whether they
would wherein The trained while Friday available training always 6 in the a.m. any client to
premises (see given work N
9 p.m. would Exhibit out hour. and would under o
be 1 The Saturday trained for be the facility the renovated guidance in proposed from the itself
areas 8 a.m. to of would layout include a of to personal muscle 6 be of p.m.; the two quite work,
trainer. facility). Elite individual small, cardiovascular would One-hour allowing The gyms be
gym’s open allowing both sessions strength for hours clients 50 Street and and elite work out at
Craciun and would be scheduled
and nutrition.
for two clients to be
D LONDON, London two committed by 1,100 metropolitan o was units, ONTARIO to the
revitalizing bringing 10th cities, largest Toronto, over its downtown Canadian 2,000 Ontario,
individuals, city, core. and population Detroit, To date, many Michigan, the 356,000 of number
them and U.S.A. young of growing, downtown professionals, In 1998, and residences the it was
would weeks City to to located the of see be had each London city’s Monday each increased
year.
between other
core. had to
This document is authorized for educator review use only by Carlos Cortes Tormo, ULACIT - Universidad
Latinoamericana de Ciencia y Tecnologia until April 2018. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
t
D Page Seventy-four 10,000-seat eat $27,100.2
THE Both order Emergency of facility.
The they variety their female.
Both term believed Menard He that trainers workout people’s Menard had Menard’s growing
Craciun complement house financial with 1 2 3 Joe City Canada’s personal believed and only the
two Belanger, the of PARTNERS enjoyed clients results o Menard Menard to 2 as London of shop
performed was would maintain two ability the many spending was timings. partners 27 collateral,
commitment only only industries First venue were and training per business. that Menard’s of a
“Downtown new a nationally and — and files. keen fun-loving, gyms them become N loyal concern
to cent lifestyle Aid, the had high this currently Craciun habits, Craciun for stores run many Menard
if to skill of took health working and client been BOSU certification, sports recognized school
needed, skill-set. from his gym start revitalization more o was changes much of had disciplines
advantage and believed high-energy were own completed.1 and worked base was the members
Menard events (Twist her funding. and together. opened knowledge, and for like t management
fitness fitness She fitness certified convinced of for post own has a Menard more in groceries as 40
and Conditioning) of had bank overall including because actually and a secondary C certification
‘turned His personal people’s industry trainer business. people, holistic facility. entertainment
$14,000 The popular through loan. two which contribution and that, health the duties and average
she who visited major law, o ranging Craciun would approach insecurities corner,’” trainers
program. students. Craciun to mortgage by would Since since the believed and as She had for invest
physiotherapy 2008, opposed the Canadian construction p annual KettleBells. continue groups, his
The a in individuals was would he annually at contribute gym. to knack was in current age
Approximately a payments. London the about had personal training; y the personal detail-oriented,
income to willing and from have As venture to Association for no business quick updated weight
Free employer, grow a projects the and to These savings motivating would result, 18 to trainers
consequently, for o fitness to the Press, and Covent entrepreneurship. be could to every and invest
and London’s certain credentials desired 75 65. often Menard in be — to of November Body
physical r per which facility, would was the be year. held Garden the contribute Fitness his Their in
short-lived cent qualifications, profitable also form elite the Worx, clients John expected they
accountable adult be P she Statistics ensured of clients appearance. Body 12, business willing
Market, Professionals.3 image of a their believed Labatt 2005. believed and employees and to
normal Only managing results. and Worx, o that worked the clients a believed to of 9B07N005 for
had a high without Centre, including a fulfilling for offer personal the venture, place in selling. part
few shown
would s
where
long- They level
were
their new in was
and
her he In
of
of to a
a
a
t
Page 3 The Partners’ Goals
The partners were excited by the challenge of working in an up-tempo, dynamic the opportunity to
earn financial rewards. They decided to incorporate monthly salaries of at least $2,500 each, but
they agreed to begin withdrawing of operations. If the business ever experienced a cash shortage, as
a last give up one or two months’ income.
In addition to monthly salaries, the partners established the following goals:
• Earn a profit of $10,000 in the • Register four to eight new clients • Establish Elite Personal
Training • Provide high-quality customer THE MARKET
Aside from those clients from Body to target business professionals, (Western) and Fanshawe
College group and whether they should be Business Professionals There were a number of
corporate students. considering sports first service Worx as every offices year the professionals, and
who premium month They to within any long-lasting be followed o reinvested did additional
(beginning training not walking p women the know results. into partners groups. y facility in
distance whether Year and the business. in The to 2). o London. Elite, they of resort, the r funds
business and they fun P
in would the environment and second o
be to 9B07N005 willing withdraw month s with
to
Menard and Craciun wanted University of Western Ontario should be selecting a specific
Employees London employees average. a working monthly One in fee of these of the $10.
larger buildings institutions, C
totalled London 9,700, the proposed fitness location.
Sports Sports professionals Professionals
were required t
to be in peak physical condition and Life, their had at salaries its all own times. fitness tended
Approximately facility to be higher and charged 50 than the its
of were professionals Knights accordance sports qualified hockey professionals with to N
fill to their team Elite’s train game worked and o
these capacity. schedule. the out London individuals, with There a Silverbacks personal were but
also they trainer football two questioned three semi-pro team. to six sports whether times Each
teams a team week. there in trained London: were Menard enough as and the a per cent Craciun
sports London group in D
Women Many women working many o
women fitness were out with clubs results-oriented responded other catered women. that solely they
and When to felt often women intimidated had asked or weight-loss whether offered and
uncomfortable a they “women’s goals. enjoyed Women only” while working also section working
enjoyed out within in out a the co-ed with the social facility. men.
environment, aspects Many of
t
Page 4 9B07N005
Western and Fanshawe Students
Each year, London’s population increased by approximately 38,000 between September students
attended Fanshawe College and Western. One Western student, Katie Hellyer, I am looking for a
place where I can feel comfortable and achieve my weight-loss Gyms intimidate me because more
experienced than I. work out. I want a small washrooms are a nice bonus. cannot afford to train
more the summer and December Toronto gym. UWO has included in the student fees. would have
to book cardio personal training services now, so I am looking for a for place place than holidays, I
a machines also I campus I $50 they don’t will that. where where have an are probably at enjoy My
hour. one recreation which I filled an I can parents can week extremely going walk I with work
point feel am in live centre there to in comfortable people advance. out I my would my in difficult
one because Toronto, where sessions. third who or work Campus two o year, time and basic are it
so out is None times so welcome, I motivating extremely and without r will fitness recreation much
of a I week more P and commented: myself because and private fit goals. o April, and to
I go home during a trainer at a facilities are busy and I provides live downtown my friends has
s when
Both consisted THE There and women, Health GoodLife GoodLife an average health,
COMPETITION partners was for a including of personal had Women, an only of including
wondered abundance 11 2,000 a London trainer. few Spanx.4 Herbal members weight-loss students.
whether of locations, Magic, I fitness think The t at Elite it fitness-related Curves facilities pills,
each is one because would C of easy-to-use GoodLife and which in be independent of London o
good businesses the was location. large home for p five and this expense. personal numerous
minutes fitness included y group, Five knowing that their current client base alternative remedies
for weight loss equipment and slimming apparel for GoodLife, Athletic Club, TrueStar trainers.
Monthly rates certain one-hour an Fitness Saturdays individual and locations, Professionals. fees
session, registration and ranged or 12 N
to p.m. access depending a group. from fees. GoodLife to o
to 6 $45 to $60, depending Fees provided access pools and saunas. on the number of Not all
GoodLife gyms were open p.m. on Sundays.
on to Personal sessions trainers from from the proposed Elite facility, with of these were women’s-
only gyms. the length of agreement, promotional offers, corporate the gym, aerobic and weight-
training classes and, in training services ranged from $43 to $60 for each purchased and whether the
sessions were given to D 4 having Spanx’s o
to spend tagline hours was “Our at the products gym.”
were certified through the Canadian Association of 6 a.m. to 10 p.m. on weekdays, 6 a.m. to 8 p.m.
on
are as close as you are going to get to a washboard stomach and toned bottom without
t
Page 5 The Athletic Club
The Athletic Club had two locations in London. fees ranged from $35 to $40 depending on the
registration fees. The facilities had numerous studios and squash courts. Personal training
depending on the number of sessions purchased upwards of 8,000 members, and approximately
training service. The Athletic Club was open p.m. Sunday hours were 8 a.m. to 8 p.m.
Young Men’s Christian Association (YMCA)
There were five YMCA facilities in and around growth in spirit, mind and body for people of fees
were $42 for adults and discounts were available that it offered programs for individuals to pay
Personal training services were available at a $350 for 10 sessions. Very few sports professionals
TrueStar Health for Women
TrueStar Health for Women attitude and sleep. A team of diet, nutrition and fitness program in
London, $38 to $67 London.
each depending with fitness on the equipment, (TrueStar) coaches selected to achieve and C
program. promoted a specialists total services all length 24 price o 150 what London. machines, and
backgrounds, Both hours health programs worked of members worked of whether for they p ranged
facilities $40 a agreement, for seniors day, The could for aerobic out that designed with y the from
at from YMCA beliefs one at offered client. each and afford, trainer each the promotional $43
session, classes, Monday students. facility. around gym and o provided client a There to was
allowing women’s-only abilities. $60 took $187.50 a at one-on-one nutrition, certified. r were
boxing The for 5 offers, advantage opportunities a.m. access each two YMCA Monthly for P ring,
corporate until exercise, TrueStar Each section. one-hour five to to of tailor a was Saturday more o
sessions location membership the for pool, 9B07N005
unique vitamins,
locations rates a Monthly personal
personal session,
people.
perfect s
dance at and
and had
in 8
D Herbal Herbal clients and purchased. Curves There Curves in felt Monthly community Cancer a
circle comfortable energy, o were in Magic research. Magic
promoted fees achieving with There charities six specific ranged utilized a N Curves Curves in a
were 30-minute their the from including therapy a approximately locations o motivator combination
weight Curves $39 and circuit-training to donations t loss environment $47. in vitamins in goals.
London the of 800 There sensible centre for fitness Herbal Herbal and were the workout with with
supporting minerals. studio food eating Magic There no Magic approximately its personal for bank,
and variety habits customers were offered women and Fees conference the approximately training
socializing and of Heart were products only. 500 in natural activities London.
programs. and based members rooms. Women with for herbal Stroke 1,000 and on weight the
Monthly would belonging the Curves supplements its women. Foundation TrueStar number
management, casual work fees supported Many to ranged atmosphere. members out of and each to
products together support
women
Breast health
many club. from in
t
Page 6 Independent Personal Trainers
Within the London area, there were three personal training facilities, including Body five minutes
from the proposed Elite facility), and 20 to 25 individuals who provided of their home. Independent
personal trainers provided similar services to Elite. Prices $85 for each session, depending on the
level of expertise of the trainer and the sophistication equipment state-of-the-art training
FINANCIAL Menard join unsure brief Elite. conversation whether and and Menard available body
Craciun PROJECTIONS
fitness soliciting assessments. with and for hoped centre Craciun a the lawyer, their that client.
focused current anywhere had they The not on Body learned signed most from training Worx
sophisticated that a 20 non-compete to athletes clients they 26 of could could their and type
agreement5 not sports current lead of solicit equipment to o teams. clients other on-site with r legal
was would Body Sessions (at offered P training Worx ranged usually by of o
(also services from the Velocity, 9B07N005 included training located $50 s out to
a
D new Key Craciun and assuming would Although body Revenues: Menard Beyond and Those per
four Revenues: In beginning contracts average sessions, flexible fitness 5 business Such addition
cent enhancements 70 gym; weeks to o size, agreements who goals. then per the for with and this,
wanted of three and would clients no however, Menard in a cent each of purchased assess partners’
to period Craciun October October growth packages they the they sessions. to Elite’s N of to 48-
session restrict expire achieved second five of assumed clients to and estimated these be it time in
were the 2005 2006 success would competitive a new Craciun initial if an the and third o within
price gym. year needed who employee their confident first package to to 90 clients would be that
package clients, a of September September would purchased points per They hoped goals t year,
particular possible and operations. each from and cent not monthly. to that had to at would be
relative to the would C be client joining hoped a be cover of territory for sell the Elite’s to a
different paid partners 2006 2007 these second renewed, calculate them tailor initial packages
forces would become to On all to They upfront, (geographical o charge the earn clients their to a a
pace, package clients with hoped monthly solicit program work competition so believed what
lifetime a costs of p a after healthy would with for depending competitor 48 would out to off-site.
they would or and sessions each which y basis, to projected sign otherwise). three members. most
purchase would profit, help to each and personal or purchase achieve four on clients one times
setting clients to accommodate determine purchase their have which all turnover, to to a Payment a
clients. would up second three their training eight discipline a to week. would his third could charge
a or profit a of minimum new pay the package her fixed package terms the The purchase Elite’s
ramifications. session. be Body partners Elite’s Worx, monthly level, own leave goals. clients used
client’s partners price would competing Worx) current of of of diet Body for but initial an The
Menard 48 each 48 48 per expected for budget require expansion and they initial would sessions.
sessions, sessions. Worx for partners the session.
clients’ After clients,
month initial were
their
next and
and 25
48 be to
to a
t
Page 7 Financing
In order to begin operations, financing would be required in addition to the $14,000 loan, secured
against Craciun’s home, had been approved for $24,000; however, the provide any more financing.
Principal payments of $500 would be paid each month, cent annually would be paid on the
outstanding balance at the end of each month. were company financing, Marketing Menard creative,
The flyers, London unsure referral and low- could it would whether Craciun Free to programs
generate no-cost Press have the wondered to ways with and loan its be own press repaid a to and
daily how bring cash the releases. within circulation to in $14,000 from promote new the Cost
operations. clients. first investment of the and nine 115,000 facility The response months largest If
would papers.6 the with rates of partners newspaper be operations. minimal enough (see o Other
Exhibit were funds. in promotion to r Southwestern cover able 2 in and Menard P bank to their
equity. interest secure was costs o
and A 9B07N005 hesitant additional of business until Craciun 4.3 s per
the to
would Start-up There improvements, were be Costs
critical a number equipment, when of making initial flooring, promotion costs signage associated
decisions.
and mirrors with p
building (see y
the gym, Exhibit 3 for The partners wanted Ontario was vehicles included for advertising costs)
and They debit/credit Craciun had also card had decided machine selected to security effective pay
everything deposit but lower would upon o
cost/quality be delivery. required, equipment On which including renovations/leasehold
Monthly Costs
In addition to the on the last day of of $120 would be workouts. It was D price $50 fiscal parking
shampoo, of and Additional The or 6 http://en.wikipedia.org/wiki/London_Free_Press, these more
taxes monthly, partners o of year. $2 supplies hours fees. would soap, an Trainers The were and
18.5-litre of Since N cream, be each personal partners loan important each an paid willing paid
annual the session. repayment, month. every toilet bottle in o to gym agreed training April to
insurance hire paper, two with remain As t First would of an that weeks. there sessions a each the
etc. additional small and C Elite hydrated cost following be bottle would were last Client an June
business, of a would months’ week. a elite $1,619 projected trainer be 1, number while program
year. 2006. provided. pay facility, Elite’s Menard would only rent training, for of to cards would
when last monthly clients’ income all have and Each 20 so the cost the Craciun be to workouts. a
top client would parking would necessary costs. water be gym due $0.30 of paid due upon was had
would the dispenser be be a Rent each at breakdown to in Security returned taxed expected enough
equipment toiletries a occupancy. full their for and cost then at at $3,353 would could financial per
clients reduce the a alarm in to rate of including October beginning session use costs, costs). be be
Cleaning would of fees to their $0.85 used rented limitations. 20 support would a 2006. of per
Menard
training be towels, $5,000
for of worth $2 costs for paid
cent the six
80 be
in a
t
D Page hours remaining Craciun duties. would EXPANSION The conference allowing Elite’s
pursue one investments.
Upon would during DECISION
The would 2005. year chosen partners o 8 from opening, start involve be the second this Each
would following for a renovation 20 at venture room. feasible 40 location additional were new
OPPORTUNITY $15 or year renovation to have N the more 30 a employee An anxious the since of
conference session venture. to allowed hours period; operations, expansion expansion. find hours
clients o financing and a and to personal could week that for They would equipment analyse to
room t would two said, opportunity and be work and They needed was time be trained. gyms, would
they C increase all renovations would not a given wondered costs the maximum to to would an a be
tackle decide information small included each Menard (see option. to by o used the have 10 could
Exhibit how spend the office, quickly of for per new p and They four converting to 40 many be cent
storage. 10 rely and hours 4 employee. two Craciun completed to y since also for hours after clients
determine solely seven change costs) each wanted Converting they one the a planned hours on week
would week. o within conference year. and rooms, Until hoped the whether to a each on pay
internal be certain to r Wages two this to the administrative one needed do back of open days. Elite
happened, room space washroom this weekly degree generation for P all Elite to Personal no into
part-time into investment cover earlier administrative of on o a Menard a duties. disturbance and
9B07N005 October third third of the Training trainers than cash a s
initial gym, large
costs
gym The and
in to
1,
t
Page 9 PROPOSED Change Room (including shower)
Training Gym (#2)
ot
Exhibit 1
LAYOUT OF ELITE Change Room
(including shower)
Hallway
C
o
p FITNESS y (Proposed FACILITY Storage o
r
Gym Room
1
Washroom
#3) P
o 9B07N005 s
Training Gym (#1)
D 1 Source: Diagram o
Martin not to Menard scale.
N Sitting and Mirella Area
Craciun
Office Clarence Street
Cardiovascular Training Room
t
Page 10 Exhibit 2
ADVERTISING AND PROMOTIONAL COSTS
9B07N005 s
Promotional Item Cost Website development $ 10,000 Highway
signage $ 5,000 Billboards (cost of one billboard for one month) $ 2,200 Radio spots (cost
per day for 11 30-second commercials) $ 200 Color brochures (cost to produce 15,000) $
10,000 Newspaper advertisement (one full-page, weekend, color ad) $ 5,000
Source: Casewriter
Exhibit 3
INITIAL EQUIPMENT COSTS
Cost
r
P
o
o
p
y Useful Life
o Salvage Value
Amortization Method Cardio Equipment
Treadmill $ 2,000 5 years $200 Double declining Recumbent Bike $ 700 5 years $200
Double declining Elliptical Trainer $ 900 5 years $200 Double declining Weight Training
Equipment $ 21,600 20 years 0 Straight line Office Equipment/Computer $ 600 4 years 0
Double declining Renovations/Leasehold Improvements $ 18,000 20 years 0 Straight line
Flooring $ 2,809 3 years 0 Straight line Signage $ 1,070 4 years 0 Straight line Mirrors $
598 10 years 0 Straight line Training Tools (weight balls, jump ropes, etc.) $ 500 5 years 0
Straight line
Source: Martin Menard and Mirella Craciun D
o
N
ot
C
Page 11 Exhibit 4
t
COSTS ASSOCIATED WITH GYM #3

9B07N005 s
Useful
Salvage Cost
Life
Value
Flooring $ 1,200 3 years 0 Spinning Bike $ 800 5 years $200 This document is authorized for educator review
use only by Carlos Cortes Tormo, ULACIT - Universidad Latinoamericana de Ciencia y Tecnologia until April
2018. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860
Straight Double P
Amortization Method o
declining
line
Weight Training Equipment:
Smith Cable Machine $ 2,000 20 years 0 Straight line Bench $ 400 20 years 0 Straight line
Weights $ 700 20 years 0 Straight line Weight Rack $ 300 20 years 0 Straight line
Renovations/Leasehold Improvements $ 1,000 20 years 0 Straight line
Source: Casewriter
N
ot
1
All costs would be paid upon delivery / finished work.
1
C
o
p
y
o
r
D
o

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