Crittenden Retail SpaceTM Crittenden Research, Inc. P.O. Box 1150 Novato, CA 94948 (800) 421-3483 Vol. 26, No. 11 June 4, 2012 all (800) 421-3483. GYM GIANTS EYE AGGRESSIVE GROWTH The fitness industry enjoys a sturdy diet of expansion with growth across the board and many large chains vying for even more prominent positions as national gym giant Bally Total Fitness looks to be shrinking into the background. LA Fitness bought 17l locations from Bally in November and has been spending time, energy and money to upgrade the locations it wants to keep. It also wasted no time closing several of the acquired locations. A group of private equity firms own a majority of LA Fitness but, considering the size of the recent splash, the owners could be looking at an IPO in the next few years, which would infuse enough funds to allow LA Fitness to pull away from the pack in what is a tight horserace at the top. Rival Planet Fitness will finish this year with 130 new clubs, its second straight year of 100-plus new clubs. Snap Fitness pencils in another 100 to 125 new stores by year-end, which would give it 160 to 185 for the year. Gold’s Gym plans 80 more locations for 2012. And 24 Hour Fitness will open, replace and remodel a total of 15 to 20 locations in 2012 and 2013. Regional chains Retrofitness, Town Sports International, Life Time Fitness and Zoo Health will also add locations over the next few years. In addition to its large sale, Bally, once a national powerhouse, has closed 210 locations since November, reducing its club count to 60. That clearly leaves LA Fitness in a strong spot for the future. The company’s purchase of the Bally locations instantly upgraded its presence in several major markets, including 40 clubs in California, as well as 27 locations in the Chicago market, 13 in Philadelphia, and 12 each in Miami and Washington, D.C. All told, LA Fitness, which now counts more than 500 locations, also added tens of thousands of paying, instant members to its system. On the organic growth front, LA Fitness will open 50 clubs both this year and in 2013. The company will follow up earlier new clubs in Tucson, Ariz.; Hawthorne and Woodland Hills, Calif.; and Bellevue, Wash.; with additional units in all three states. All of Texas, the East Coast and Northern California are prime growth areas. Look for new clubs to also open in Arizona Arkansas, Connecticut, Florida, Georgia, Idaho, Illinois, Louisiana, Maryland Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Virginia and Wisconsin. LA Fitness can open in 35,000 to 60,000 s.f. on pads of 4 to 5.5 acres each and 25,000 s.f. in urban locations. To meet its aggressive growth goals, Planet Fitness will convert former Circuit City locations as well as take outparcels next to enclosed malls as an alternative property type. The 535-club chain will open in September on an outparcel next to Meadowbrook Mall in Clarksburg, Tenn. Planet Fitness is building out the 23,000 s.f. space itself. The space was formerly a High Point Furniture location. The health and fitness chain will break into Arkansas, Kentucky and Tennessee this year, in addition to adding on in California, Indiana, Iowa, Michigan and Ohio. The health clubs need 17,000 to 22,000 s.f. Gold’s Gym reduces its club size to 8,000 to 12,000 s.f. for future Express locations, its main growth concept. The Express footprint is half the size of the 15,000 to 30,000 s.f. needed for full-service clubs. Look for Gold’s Gym Express to enter California, Iowa, Kentucky, New York and Vermont this year, as well as returning to Texas for more deals. The Lone Sitar State accounts for four of the Express locations now open. Gold’s Gym rolled out the Express format last year. The company also acquired 11 former Spectrum Athletic Club locations in San Antonio, Texas in February. Gold’s Gym was considering acquiring Bally locations. However, the massive LA Fitness/Bally deal squelched that possibility. Gold’s Gym operates 600 clubs worldwide, including 400 in the U.S. Retrofitness includes its first locations in California among its 25 new locations for this year and 25 to 30 for 2013. Existing markets in its core states of New Jersey, New York and Pennsylvania are also on the books. The 80-unit chain has 45 locations under construction. Retrofitness prefers to open new clubs in 12,000 to 14,000 s.f. although it will drop to 10,000 s.f. or expand to 15,000 s.f. in some cases Continued on Next Page Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2012 Crittenden Research Inc. For use by original recipient only. It is illegal to forward or otherwise distribute without permission. To report violations c Page 2 Crittenden’s Retail Space™ RETAILER UPDATE Company: Dave & Buster’s Entertainment,. Inc. Expansion Goal: 4 Merchandise: Restaurant/Casual Dining Sites Needed: 3 (Maximum) Brand(s): Dave & Busters Number of Locations: 58 Notes: The entertainment-driven restaurant concept will exceed last year’s net gain of one location with four in 2012. Dave & Buster’s likes the response to its latest design, a 25,000 s.f. footprint, which opened in the first quarter in Oklahoma City, Okla. all (800) 421-3483. The other 2012 openings will be in Dallas; Orland Park, Ill.; and Boise Idaho. The future Dallas location will be 40,000 s.f. while the rest will be 25,000 s.f. Dave & Buster’s also has an S-1 filing completed, a first step towards an Initial Public Offering (IPO). Formerly a public company, Dave & Buster’s has been privately held since March, 2008. The chain finished last year with positive restaurant comps of 2.2 percent. Total revenue for 2011 improved by 3.8 percent to $541.5 million, compared to the previous year’s $521.5 million. Dave & Buster’s needs a daytime population of 100,000 within three miles of a potential site. The company also recently hired former BJ’s Wholesale Club executive John B. Mulleady, as its Senior VP of Development. Contact(s): Dave & Buster’s, (Dave & Buster’s Entertainment, Inc.), 2481 Manana Drive, Dallas, TX 75225, David Pettengill, Real Estate, (214) 904-2579, [email protected] GYM GIANTS EYE AGGRESSIVE GROWTH… Continued from Previous Page Meanwhile, 24 Hour Fitness will convert former Borders and Mervyns locations in addition to former Circuit City stores, supermarkets and theaters. The Pleasanton, Calif.-based chain will open locations in Los Angeles, San Diego, Denver, Portland and Seattle as well as adding on in Maryland, New Jersey, New York, Virginia and the Washington, D.C., area. The chain operates 421 locations. Snap Fitness has opened 60 stores so far this year and looks to almost double that total by the end of the year. The vendor financing program will provide financing for exercise and operating equipment for a total of 20 locations, totaling $2.6 million in funding. The financing program can cover $135,000 $200,000 per location. Snap Fitness, a 2,500 to 4,500 s.f. space user, has provided financing for a total of 29 locations since the program started in January 2010. The clubs will take over former Movie Gallery spaces. Snap Fitness focuses on rural markets of 68,000 population. The franchisor has more than 1,200 locations. Town Sports International concentrates on Boston and New York for its 10 to 20 new clubs over the next three years. The company has 50 locations pinpointed in these markets for future Boston Sports Clubs and New York Sports Clubs. The emphasis will be on the New York area. Towns Sports International will follow this year’s single new club with three to six in 2013 and another six to 12 more in 2014. New York Sports Clubs and Boston Sports Clubs both take 20,000 s.f. for most new locations, although there is a 40,000 s.f. design available. The 20,000 s.f., fitness-only format accounts for 106 of the 160 locations among the four concepts owned by Town Sports International, which include Washington Sports Clubs and Philadelphia Sports Clubs in addition to the New York and Boston locations. The smaller clubs can open in markets with 30,000 to 50,000 people; the larger locations need 50,000 to 100,000. The company will finish the second quarter with positive comps of 3 to 4 percent, following its 4.5 percent increase for the first quarter. New York Sports Club is the largest with 108 locations. Life Time Fitness opened its 100th location last month in Sandy Springs, Ga., its third and final new unit for this year. The club’s 100,000 to 110,000 s.f. size has kept the number of new locations to three per year for the last four years, including 2012. The other 2012 openings were in Mississauga, Ontario in the Toronto area, the first in Canada, and Tulsa, Okla., the first in the Sooner State. Life Time Fitness is also converting nine former Lifestyle Family Fitness locations it acquired in December. The acquired centers are in Indiana, Ohio and North Carolina. Life Time Fitness had same-center sales of a positive 5 percent in the first quarter, its highest since 2004.