ARK – Andy Kay/Mhairi FitzPatrick – HCM – Ian Freeman

ARK Leisure Management’s Andy Kay and Mhairi FitzPatrick are a youthful, engaging pair on a two-person mission to set the industry alight and, so far, it’s a flaming success.

Not content with managing in-house fitness facilities for the likes of the BBC, British Airways, Rolls-Royce and McDonalds, they are also garnering laurels from peers and punters alike for their first solo commercial venture and eagerly anticipating the launch of their second.

So what drives people who have made a very good living from corporate clubs to dip a toe – or in Kay and FitzPatrick’s case, their entire bodies – into the minefield of high-end facilities ownership?

“The club an extension of what we are doing in the corporate sector” says Kay of their first private venture, the thirtysevendegrees club close to London’s Tower Bridge, on a development housing City mega-corporates such as Ernst & Young and Norton Rose and Mayor Ken’s City Hall. “We wanted to translate our hard work to a commercial environment.”

And with over 3,000 contented customers paying up to £83 a month, Kay and FitzPatrick may soon find themselves joining their financial sector members in the ranks of the seriously wealthy.

Kay and FitzPatrick met 17 years ago when they both worked for Fitness For Industry, the Trust House Forte subsidiary subsequently absorbed into Granada.

FitzPatrick says of their business partnership “we’re as good as married! It’s a lonely place running your own business and it’s good to have someone to talk to.” Kay stresses the importance of a 50/50 split, so neither has perceived pre-eminence over the other.

The corporate division of ARK – the name is Kay’s initials – was formed in 1999. Year one was, says Kay “a long, hard road.” The BBC was their first client and the pair swiftly went from turning over less than £20,000 a year to £300,000 and have never looked back. The company now manages some 25 corporate facilities, including six for the loyal Beeb.

A typical corporate set-up can cover from 1,200 square feet, up to enormous. FitzPatrick says “We can kit one out for around £35,000, or for £2 million.”

Some companies pay a fixed management fee but the business is moving away from that model towards performance-related profit-share deals.

“We operate the clubs as commercial businesses – if they make money we split it with the company, if not we don’t, and we share any losses” says Kay. Not surprisingly, they recommend a membership charge to employees. “Even if it’s just £10 or so a month it makes staff value it and creates a feeling of belonging” FitzPatrick says.

They cite Energy Fitpro, Bladerunner and Nuffield Proactive Health (formerly Sona) as competitors. “Kay says. “The chains may also be lured into the market. LA Fitness tried it, but it doesn’t suit everyone - it’s high maintenance and low margin.”

Benefits to companies include savings on employee health insurance - ARK’s research shows that corporate gym members take, on average, 2.2 fewer sick days per year than their non-member peers.

“Gyms are physical spaces” FitzPatrick says “and they bore some people, so you have to reach out and find different ways to engage them.” ARK developed programmes to take out into offices – one involves getting everyone to make one small change to their lifestyle for which they win points, another is ‘Eat Well’ week, a self-explanatory promotion managed with the help of the staff cafeteria.

The management/staff relationship when a facility is owned by a third-party can be tricky and it’s important, says Kay, to get it right. “Although they’re our staff they have to integrate into the ways of that company and that building. There can be a split loyalty which, managed correctly, can be quite a good thing.

“Five of our staff were at the BBC recently helping them to run a team-building exercise – that sort of involvement really helps a relationship, but the minute you stop working on the relationship the whole thing falls apart. And the further your tentacles reach, the more it helps you to become indispensible.”

And so to ARK’s commercial ventures. The Tower Bridge thirtysevendegrees has some 25 company staff, with personal training freelancers and those working for concessionaires pushing the total up to 40+. Concessions are operated on straight rent or profit-share and include a Rood Lane medical practice and a Beauty Essence salon. A swish indoor golf lounge features Full Swing simulators.

Residential membership is £83 a month, but those working for neighbouring firms get a deal at £61, part of which is often funded by their employer. There are no husband-and-wife or family memberships and no off-peak rates – “it’s a brave offer but it’s right for the area” says Kay.  “Why should anyone get it cheaper?” FitzPatrick adds. “That’s our pitch. We’re retention-led and trying to value each member the same.”

Kay and FitzPatrick’s retention strategy runs like a critical artery through all they do. “There are potential members who have now been through the fitness-club cycle several times, a quite savvy group of people who have had enough” says Kay. “So many people are coming out of bad experiences at other clubs and never going back to a gym again.

“We’ll stay strong on our strategy and our service quality will never vary, right up until, if they cancel, we thank them for their business and they leave feeling good about thirtysevendegrees. In the 90s you could pre-sell to lots of people because the attitude to joining a club was upbeat, but now everyone’s a bit cynical. The whole industry is suffering because of the crap service that’s being offered.”

Attrition rates at Tower Bridge, says FitzPatrick, are “steadily improving, but it’s a fluid marketplace because of the nature of the area - if their firm sends them to work in New York, that’s it for us!

“After their first 14 weeks, we call members to ask how we’re doing and to give us marks out of ten. Eights and nines are not really helpful to me – I like to talk to the sixes and sevens. You have to ask customers what they want and how we can improve, but the industry in general doesn’t do that. As far as I can tell, most operators don’t even like their customers!”

The second thirtysevendegrees, in a 28,000 square feet, 1920s warehouse space in London’s Olympia exhibition complex, is soon to be launched. Where the Tower Bridge club is deep underground, a gorgeous, labyrinthine facility, all dark colours – the swimming-pool walls are black - and industrial-chic exposed metal pipework, Olympia will cover four upper storeys with a roof terrace for outdoor classes, daylight on three sides and an all-white colour scheme.

“It’s design-led” says Kay “but without compromising functionality. We set out to do something that was breaking the mould at Tower Bridge and we’ll continue to be true to our vision architecturally and from a service perspective.”

Olympia’s operation and facilities offered will closely match that of Tower Bridge, although where that club has a strict no-kids policy, the new venue will have a Tinies Childcare crèche. “Children will have their own training programmes, which will be meaningful and in line with the national curriculum” says Kay. “Kids can be annoying big-style in health clubs, but we will manage them carefully right from the start.”

Olympia is effectively a freehold, acquired from site owners EC&O Venues. Says Kay “We want to grow our estate, but we won’t compromise – we want them each to have something architecturally stunning. At Olympia, we fought hard with our board to feature a void with a shaft of light from the roof rather than filling that particular space with treadmills.”

Although cagy about actual figures, Kay concedes that ARK has invested around £15 million in the two businesses. A sleeping investor provided them with funds for their own interest in the clubs, while almost £3 million was made available by Close Brothers’ venture capital arm, which will again be partnering the pair in Olympia.

“We have a very good relationship with Close” Kay says. “They have confidence in us because we delivered Tower Bridge to target. They will support us in our third one too, which we’re currently on the lookout for. It needs to be same size as the first two, ideally freehold and a nice-looking space that we can work with. We’ve rejected 20 sites so far - we don’t want a cladded warehouse on the outskirts of Swindon!”

Part of Kay and FitzPatrick’s business ethos is to ensure they meet members’ aspirations. “People are getting more conscious of what they’re paying for” says FitzPatrick. “In this country we’re used to rubbish service” Kay adds. “We grizzle about it a bit, but take it on the chin when we really shouldn’t. The industry is starting to recognise that it needs to up its game, but that’s going to be hard with the resources that the chains are being given. Where staff are cut to the bare minimum it’s hard to provide the service.”

“There’s not enough service training” FitzPatrick says. “The industry needs to look at how the hotel and retail sectors train their staff. Our training reflects how we interfaced with the hospitality business through our times at THF and Granada.”

Of the future, Kay and FitzPatrick are optimistic and looking forward to more of the same. Says FitzPatrick “Both parts of the business are important. We are looking to grow the corporate side and hope to have five thirtysevendegrees clubs in two years.”

Kay agrees. “And if we can make a real difference to how commercial clubs operate, that would be fantastic.”

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