MONTREAL – A man walked into the Nautilus gym in Hayward, Calif., to talk with owner Leonard Schlemm and the business partner, Mark Mastrov, about purchasing the club. To show he was serious, the man exposed a briefcase packed with diamonds.
How Freshii is riding the health food boom and finding inspiration from fast fashion to fuel its rapid expansion
Toronto-based Freshii Inc., which marked its 11th anniversary in January, has reaped advantages of being in front of the healthy fast-food trend, doubling its global restaurant count last year to more than 200 franchised units, with plans to almost double in size again in 2016.
Continue reading.
Although they’d no plans to sell the business, having only invested in it a couple of years earlier, it had been tempting enough that Schlemm told the potential buyer to come back as they evaluated the offer. “(Schlemm) went out, bought plenty of books and spent 2-3 weeks asking them questions and became fairly knowledgeable on how to value diamonds,” Mastrov recalls.
The potential buyer ended up being invited back together with his diamonds.
“Leonard took one look and said, ‘These diamonds aren’t worth anything,’” Mastrov said. “The enjoyment thing about Leonard is that he likes a challenge.”
It’s this willingness to consider new offers and ideas that has made Schlemm the powerful, yet often behind-the-scenes force who created after which sold the world’s largest chain of health clubs and somebody that continues to shape the global fitness industry by investing in the most recent health insurance and technology trends, often along with partners who have long overlapped business, fitness, friendship and romance.
“His business savvy and innovation to expand his knowledge in the accounting world to the fitness world has been enlightening,” said David Hardy, president of Franvest Capital Partners, a private-investment firm that are experts in the and fitness industry.
Before heading south to first make his fortune, Schlemm was created and raised in Montreal to a family that helped literally shape the city.
His grandfather was the urban planner who designed Atwater Avenue for the Society from the Priests of Saint-Sulpice, while his father was the previous president from the Atwater Racquet Club, where Leonard played badminton 5 days a week like a teenager.
Related
- How a kickboxing star used a love for sport to fuel his company’s rapid growthThe long, strange good reputation for Lululemon Athletica Inc, North America’s weirdest clothing brandWhy companies should get serious about working out at workHow Mark Cuban, Richard Branson, Bill gates along with other leaders stay in shape
-
-
-
In 1983, having a Harvard MBA along with a job as a strategy consultant at McKinsey & Co., Schlemm decided the time had come to apply what he had learned. It wasn’t long in coming. Just 3 decades old, he was presented with a chance to make a US$45,000 purchase of the San Francisco Bay Area Nautilus club – an average 5,000-square-foot-gym with five employees.
“To be honest, it was somewhat of a random investment and while I’d been involved in sports activities when I was younger, it was more of a lucky coincidence,” said Schlemm, 63, in his office overlooking the expansive weight-room floor of downtown Montreal’s Mansfield Athletic Club, that was once the 3,000-seat Loews Theatre.
Part of this lucky coincidence was that certain from the five employees Schlemm inherited was Mastrov, who also committed to the club and it has become an important figure in the fitness world in the own right.
“Whenever we started working together, he was very useful on strategic issues, legalities, finance issues – areas which i probably did not have lots of strength in,” Mastrov said.
“I was excellent on the operations and people skills and getting out front using the members, that they didn’t enjoy just as much. Therefore we didn’t overlap too much.”
Schlemm and Mastrov made two simple changes towards the club that will wind up changing the face of the entire fitness industry.
At the time, members paid up front for a three-year contract – a big limitation for individuals on a budget.
Instead, the partners decided to make Nautilus the first club to chop its memberships into monthly dues, something that has since become standard practice in the market.
They also realized that the cost of paying a worker to operate the front desk overnight, while cleaning staff were there, was relatively small, meaning the gym didn’t have to close. The 24-hour gym was created.
The club was rebranded as Round-the-clock Fitness and started opening other locations in the area.
“In the fitness industry, you will find very major economies of scale on the regional basis,” Schlemm said. “Inside a given market, the important thing to financial success was being the dominant player.”
First, Round-the-clock Fitness took over the San fran, then Southern California, Texas and so forth until it end up being the world’s largest health-club chain, with increased than 420 clubs, 20,000 employees and revenues estimated at more than US$1 billion.
Over the years, Schlemm did with celebrity athletes including Andre Agassi, Magic Johnson, Shaquille O’Neal, Lance Armstrong and Steffi Graf as investors.
“Some are extremely down to earth, some you cope with a group of business reps, lawyers and accountants, plus some are directly involved,” he said.
Wanting to expand beyond the U.S. in early 1990s, Schlemm and Mastrov looked to Russia. Since 1997, he has been chief executive of Sila Holdings, which runs the largest chain of fitness centres in that country.
“He used to have to travel out there each month and in those days it had been sort of the Wild West in which you couldn’t find a taxi and merely needed to pay regular citizens,” Mastrov said. “Leonard would navigate that with ease where most people could be very scared. He was extremely humble and no-one would even bother him.”
In a given market, the key to financial success was being the dominant player.
He and Schlemm say they are close friends who continue to interact on various initiatives even today.
“We believe a lot alike. He is able to finish my sentences, I can finish his,” said Mastrov.
After 20 years in the U.S., where three of his four children still live, Schlemm gradually left Mastrov to run Round-the-clock Fitness and moved his home base to Montreal.
There, he started the Mansfield Athletic Club chain, and acquired the 89-year-old Atwater Racquet Club, where his father have been president.
In 2008, he met Annick-Isabelle Marcoux, who was working as vice-president of BMO Harris’ Private Wealth Group in Quebec as well as leading a weekly spinning class at one of the Mansfield clubs.
“I’d asked to satisfy the who owns the business simply to sadly realize that he’d been sitting ahead of me for three years straight within my spinning class and never noticed,” Marcoux said.
Schlemm hired Marcoux, 46, as his investment adviser and also the relationship grew as the two realized they had many common interests.
A former national champion mountain and road biker and Ironman competitor, Marcoux joined Schlemm in raising money for charities through events for example the Enbridge Ride to Conquer Cancer.
“We started rapport according to using fitness and business to do some good,” she said. “It’s quite amazing how he is able to make use of the same stamina he does in marathon running … in businesses.”
A partnership developed plus they were married in 2013.
Schlemm said he and Marcoux were so compatible in business that he asked if she would leave her career in finance to operate the Mansfield Athletic Clubs.
“I wanted to produce a legacy,” Marcoux said. “I took part in creating and building something and I wanted to leave something behind and that i knew it had not been going to be within the financial industry or in a large corporation.”
Before these were married, Schlemm said he spent annually and a half attempting to convince Marcoux to become listed on his enterprises. She finally decided to take the opportunity as he was looking for any fitness brand to keep company with a 42,000-square-foot space he had leased in Toronto.
In that space, Marcoux decided to open Canada’s first Hard Candy Fitness, a joint venture with Madonna that opened its doors in 2014.
“Having developed (hearing) Madonna, (I said), ‘When you get a Hard Candy, I believe I would consider joining in,’” Marcoux said. “She’s vibrant, she’s an energy that actually I don’t even get in Twenty-five year olds. She’s quite a role model.”
Today, Marcoux is president from the three Mansfield clubs, the Atwater Racquet Club and Hard Candy Fitness Toronto, while Schlemm is really a partner within the 21 Steve Nash Fitness Clubs in B.C. alongside Mastrov.
Schlemm sold his curiosity about Round-the-clock Fitness this past year to investors in a US$1.85-billion deal that included the Ontario Teachers’ Pension Fund and also the New York-based private-equity group AEA Investors LP.
Marcoux said that while her husband excels at strategic planning, her strengths, like Mastrov before her, lie more within the day-to-day operations.
“It’s absolutely a 10-on-10 partnership, and also the great thing about it’s that we have the same interests and also the same passions, but we’re fundamentally completely different individuals,” she said. “We absolutely complete each other.”
Marcoux and Schlemm also provide investments within 600 clubs in Europe, as well as interests in many non-fitness-related ventures such as medical and software companies.
We have a similar interests and also the same passions, but we’re fundamentally totally different individuals.
Together, they’re managing partners of the LangLeven Group, Canada’s first and only private-equity firm exclusively centered on growth opportunities in the North American wellness sector.
Through this, they’re purchasing evolving fitness technology, such as LIFT Sessions, an online platform that gives access to customized fitness training on demand from any location.
They will also be looking to investments in wearable technology – including companies in Quebec – though they decline to name any sort of brands, citing the fierce competition.
“Likely to amazing movement and at this time, something in Quebec is actually going to blossom in 2016,” Marcoux said. “One of them will get ahead from the pack and also the real question is who’s going to buy them.”
It’s through this mixture of fitness and finance that they aspire to continue making an impact.
“Our legacy together is the fact that you want to really help people take care of themselves,” Marcoux said. “It’s not about living long; it’s about how you are likely to live long.”
