Derek Gallup's Fitness Marketing Magic

Derek Gallup, the chair of IHRSA's board of directors, began his career in 1992 as a designer handbag buyer for Macy's in Hawaii, and has been immersed in retail ever since—for Gold's Gym Hawaii, 24 Hour Fitness, and, since 2009, with New Evolution Ventures, the multi-brand private-equity firm.

What he doesn't know about club retailing isn't worth knowing.

Gallup spoke to Club Business International about hurricanes, multi-brand management, and saving the world through fitness.

CBI: You assumed the office of chairperson of IHRSA’s board of directors in July. What have been some of the highlights of your tenure thus far?

DEREK GALLUP: While serving as chair, I’ve met so many dedicated, passionate, and innovative industry leaders. For example, I recently had the privilege of presenting on leadership during the 18th Annual IHRSA/Fitness Brasil Latin American Conference & Trade Show in San Paulo, and was able to interact with so many great people there.

The board also has formed a new international committee that’s made up of four members whose businesses are located, primarily, outside of the U.S. The goal is to better address the biggest issues and opportunities that the global industry faces today.

CBI: New Evolution Ventures (NeV), the private-equity firm that you work with, owns, operates, and invests in club companies. Does it have any facilities in the areas affected by hurricanes Harvey and Irma?

DG: We have two corporate Crunch locations and one UFC Gym in Miami, which we closed several days before Irma’s arrival. We wanted to ensure that our team members could evacuate as soon as possible, to encourage our members to get to safety, and to do everything we could to secure the facilities. We also have 16 Crunch and five UFC Gym franchised locations in Florida, and provided them with plans to help them evacuate their facilities in a timely and safe manner.

At this very moment, Irma continues to slam the west coast of Florida, and my thoughts and prayers are with our team members, our club members, and all of the people of Florida.

CBI: What sort of action will NeV be taking in response to any of its damaged properties there?

DG: Our Crunch leadership team in Miami ensured that the gyms were protected as much as possible so that our members had a great place to come back to, and release some stress post-hurricane. We created a special 1-800 hotline for team members to call in order to keep them posted on updates about the clubs and the timing of the reopenings. September 8 was payday, and the Miami Crunch gyms were closed. We have several team members who don’t have direct deposit, but we were able to direct deposit their paychecks into their accounts, so they were paid just prior to Irma’s arrival.

We’re paying team members for all hours they were scheduled to work while the gyms were closed, including session pay for trainers. We’ll also pay our team members in Miami for all hours they were scheduled to work, and do everything we can to help our members in need.

In Puerto Rico, our Crunch franchisee’s gym was destroyed, and through our “Crunch Cares” initiative, headed up by Amber Hazor, we’re preparing to launch a fundraising campaign.

CBI: Does NeV’s eclectic portfolio of brands represent an articulated strategy, or does the firm simply seize opportunities as they emerge? Does the mix facilitate synergies or cross-pollination?

DG: Mark Mastrov is the chairman of NeV and the most visionary person I’ve ever met—in any industry. He seems to operate years out in front of everyone else. Mark will meet people, and quickly have ideas that may precipitate a new brand. For example, when he and Jim Rowley, the CEO of NeV, met with the former owners of UFC (Ultimate Fighting Championship)—Dana White, and Frank and Lorenzo Fertitta—it led to the UFC Gym concept.

Amazingly, Mike Feeney, our executive vice president, lays out every location and decides which equipment will go into every club, which creates the synergy of our various brands.

We bring some brands together because they work synergistically, or because we have successful operators who can manage several platforms.

CBI: A few examples, if you would…

DG: For instance, Crunch, led by CEO Keith Worts, has a mix of 32 Signature Gyms and 15 high-volume/low-priced (HV/LP) Base locations, which operate under the same brand, but offer different experiences for members. In addition, some Crunch franchisees, such as Curtis Harman and Mark Polli, in California, have UFC and Crunch gyms with one membership that provides access to both. Our Canadian partner, Steve Nash Sports Clubs, led by Chris Smith, has two locations like this in Vancouver, British Columbia. Kirk and John Galiani operate 29 One-Life Fitness facilities in Virginia, Atlanta, Missouri, and Washington, D.C.; they also operate two Crunch Gyms in the District.

CBI: Many of NeV’s brands make use of celebrity partners or franchisees. What are the benefits, and/or the challenges, of doing so?

DG: Actually, nearly every NeV Brand has celebrities involved with either the corporate or franchised clubs. Crunch has partnered with soccer star Cristiano Ronaldo to create CR7Crunch, which has opened its first location in Madrid, Spain. Joakim Noah, of the Chicago Bulls, plans to open five Crunch facilities in Chicago.

UFC Gym has joint venture partner sites with UFC stars B.J. Penn, Frankie Edgar, Urijah Faber, Michael Bisping, and Cub Swanson. A-Rod Energy Fitness, of course, involves a partnership with Yankee legend Alex Rodriguez. A-Rod also partners with us on UFC Gyms in Miami, where he and girlfriend Jennifer Lopez often get trained together by our very own coaches.

These high-profile people are all huge personal-fitness enthusiasts themselves, and can help get the active and healthy lifestyle message out to the masses.

CBI: Does NeV possibly have another new brand up its sleeve?

DG: NeV always has something up its sleeves. However, if we told you what it was, then it would no longer be up our sleeves…

CBI: Your title is executive vice president of fitness and retail. What, exactly, does that entail?

DG: We combined these two aspects of the business because I’ve had professional experience with both. I started my career with Macy’s, and then went to Liberty House, a specialty store chain in Hawaii. When I was at 24 Hour Fitness, I led the growth of its retail business to $70 million a year. Today, with NeV, our nutrition, accessories, and apparel arms constitute 6% to 15% of total revenue per location, depending on the brand.

CBI: How much of a contribution do those three categories make?

DG: Nutritional products are the largest part of our retail business, because the key to a successful training program is producing results for members. That requires a nutrition component that includes menu-planning and nutritional supplementation. Our partner, dotFIT, led by Neal Spruce, has created a program that delivers the right nutrition at the right time; we use it with all of our North American brands.

Second, in terms of retail, is accessories. Our trainers recommend workout accessories, such as foam rollers and home exercise equipment, and, at UFC Gym, we also offer MMA (mixed martial art) accessories. We produce some pieces for branding and a lot of the “I forgot” business—locks, ear buds, gloves, and socks. Apparel is critical for branding, but not a huge part of our revenue. The retail business—nutrition, accessories, and apparel—is our third-largest revenue stream behind dues and personal training.

CBI: Obviously, many club companies are now getting involved in online selling. What’s NeV doing in terms of online stores?

DG: For UFC Gym, we’ve partnered with UFC to sell our products online. They provide a very strong online shopping experience, so it makes more sense for us to work with them, rather than to start up on our own. We’ve also developed a robust program with dotFIT that allows trainers to have their clients receive auto-shipments of nutritional products, for which the trainer and the club both get credit.

CBI: Moving on to fitness…is it possible for you to quantify this aspect of NeV’s activities?

DG: Personal and group training is the key differentiator for the NeV brands. It’s where we create the deepest relationships, and produce the best results for our members. Training is responsible for 25% to 35% of total revenue, per location. In fact, training revenue is actually larger than dues in some locations.

With respect to fitness, we always strive to be at the “tip of the spear,” especially with respect to people—that is, who we choose to join our team and how we onboard them; education—in-house training, certifications, specialties certifications, and modality specific training; modalities—new types of personal training, every year, with best-in-class educational support; and technology—innovations to enhance the member and team member experience both in and out of the gym.

We have amazing fitness leaders, such as Steve Stonehouse, Nastasia Genova, Mike Spiegel, and William Coker, who help us stay sharp and on point at the tip of the spear.

CBI: With UFC Gym, NeV has basically ushered MMA into the mainstream. To what do you attribute its success?

DG: I still remember my first meeting at UFC headquarters. UFC Gym President Adam Sedlack and I, along with Dana White and Lorenzo Fertitta, who were still owners at the time, conducted a whiteboard exercise on what UFC Gym should be.

Two key words stuck out: “authentic” and “family.”

We’re authentic to MMA and the UFC, utilizing top-notch instructors in conditioning, striking, grappling, and Brazilian jiu-jitsu. We employ many current and former UFC fighters, and, as I mentioned earlier, have partnered with some of the greats.

Finally, we have a tight-knit family community, consisting of both our team and club members. Children as young as age three can have their own membership, and learn, play, and train in our gyms. We host Family DUT (Daily Ultimate Training) workouts on weekends, so families can train together. We also host viewing parties for all of the UFC fights, which include special events for kids.

CBI: You do a great deal of traveling, last year racking up 150,000 miles, visiting 100 clubs in four countries. What are some of the most innovative fitness programs you’ve encountered?

DG: With respect to Crunch, there are two new concepts that I love. We partnered with 4dPro Reaction Trainer to create Bungee Flight/Adrenaline Rush. Making use of bungee suspension, members perform bodyweight, strength, and flexibility movements, and literally fly through the air. There’s also Sweatshed, the product of a collaboration with our favorite small apparatus equipment manufacturers. It’s a high-intensity interval training (HIIT) program with great instructors, pumping music, and a really cool environment.

CBI: On a personal note, we understand that it was your wife, Carla, who inspired you to get involved in the fitness industry.

DG: I met Carla in a statistics class at Oregon State University. Who would have calculated the odds of meeting my wife, being married for 25 years, having a beautiful son and daughter, and following her into the fitness industry? They were slim to none. But it happened.

My wife and I moved back to my hometown of Honolulu soon after we graduated from OSU, and she became the manager of Gold’s Gym Waikiki. I was a designer handbag buyer, with a degree in marketing and kinesiology, and found myself wanting to be part of what she was doing. I met with Odd Haugen, then the owner of the Gold’s Gyms in Hawaii, and embarked on my fitness career.

CBI: Speaking of family, we just have to ask—are you a member of the Gallup Poll family…or not?

DG: My dad says that we’re distant relatives of George Gallup, but I’ve never seen a family tree to prove it. However, I’m pretty inquisitive, and I love statistics. My first job was delivering newspapers, and Gallup’s first job was delivering milk, and, with the money he earned, he started his school newspaper. Coincidence? Maybe. Maybe not.

CBI: You’re also a member of the extended IHRSA family and, beyond that, the global fitness industry. How do you see your professional family changing and growing in the years to come?

DG: IHRSA’s mission is to reverse the global physical inactivity epidemic. When you study charts or maps depicting the percentage of people who don’t meet even the minimum requirements for physical activity, you realize that we have a real fight on our hands. The IHRSA community and the international fitness industry have embraced this issue wholeheartedly, and we are all looking for ways to get more people moving.

CBI: Finally, at the end of your tenure as IHRSA board chairperson, what do you hope to have accomplished? DG: Two things: I’d like to have had a role in providing IHRSA members with information and services that made it possible for them to offer improved programming and to increase their membership bases in order to have a greater impact on their local communities. I’d also like to see the IHRSA board recognized for having created a highly visible footprint, so it can grow, promote, and protect the industry, and, in the process—as I said—reverse the physical inactivity epidemic. It may sound ambitious, but, basically, I’d like to save the world through fitness!