“If my father, Will, made buddies with athletes at the gym, he’d send them Powerhouse clothing, and they wore it at photo shoots,” says Henry Dabish, CEO of the business that his father and uncle, William and Norman Dabish, started in 1975.
At the time, bodybuilding was reserved for competitive athletes. Today, even harried professionals squeeze in a workout between hectic travel schedules and corporate commitments. Fitness is one of the hottest categories among franchise chains and was named one of the top growing industries in Entrepreneur magazine last year. Powerhouse Gym, a $244-million organization, is riding this trend with 320 facilities in 39 states and 15 countries.
With a branding effort that started out with free T-shirts, Powerhouse Gym has become one of the most recognized brands in the health and fitness industry seven out of 10 Americans know the name, according to a report by the International Health Racquetball Sports Association.
The branding efforts have expanded to include gym equipment, an annual magazine and commercials on its own MTV-like television station broadcast in the gyms, invaluable PR for a corporation that depends on selling its reputation and its label to gym owners for a flat monthly fee.
“The more people who see the Powerhouse brand, the more who will want to be involved with the company and either choose to work out here or open up a Powerhouse Gym,” Dabish says.
Dabish, along with his brothers J.R. and Victor, must uphold the company’s customer-focused culture and maintain equipment and service standards as they focus on conscientious, steady growth. This means toning up current facilities and tuning into a world market interested in wearing the Powerhouse logo.
Birth of a brand
Powerhouse Gym grew in tandem with the fitness boom, starting in the early 1980s when the Dabishes began licensing the name.
They were in the right place at the right time.
“When it became (popular) to get involved with fitness, we rode that wave we evolved with the market,” Dabish says. “Powerhouse was born at a time when market demand for fitness centers exceeded the number of facilities open to the exercising public beyond serious athletes.”
William and Norman Dabish set up a makeshift gym in the back of their father’s Highland Park, Mich., grocery store. The success of that initial effort led to a second location in the suburbs.
“As soon as the sign went up, there was a demand for it that no one was aware of at the time,” Dabish says.
Before long, customers were asking why there were no Powerhouse locations outside of Michigan and expressing interest in opening new locations, which sparked the Licensing Division in 1984. Powerhouse began tapping into an underserved, national market at a time when William Dabish’s American Cup Champion bodybuilder title and connections with Joe and Ben Weider, among other fitness gurus, had won recognition for the Powerhouse Gym name.
The Powerhouse brand was rapidly building its muscle power, introducing more and more people to the brand and to the fitness and strength it represents. But building that brand wasn’t easy. In fact, it meant losing money as the company focused on getting the Powerhouse name out and stamping its trademark on new locations across several markets.
“The license fee (to purchase the Powerhouse Gym name) was minimal, just enough to cover travel expenses, because Will went to each location to set up the equipment, pricing structure and systems,” Dabish says. “After hotel and airfare costs, we lost money on the first few locations. But we had to get that brand out there.”
Though Powerhouse took an initial loss, the gyms became profitable soon after opening, and today, Powerhouse Gym is the world’s fastest-growing gym licensing organization.
Muscling into the mainstream
With interest from workout enthusiasts and entrepreneurs who wanted a piece of the Powerhouse name, the Dabishes realized their business was much more than a gym. Theirs was a branding machine a stamp of approval for gym owners who wanted independent facilities. But how do you distribute the brand in a way that will help the company grow?
Licensing seemed a logical way to provide the Powerhouse name and networking opportunities to gym owners at a reasonable cost. Basically, licensing is much less restrictive, less expensive and less risky legally than franchising.
Franchise organizations provide exact formulas for facilities and set royalty fees on memberships, and Dabish says that approach wouldn’t work for Powerhouse.
“A gym membership is not a tangible item, so it is difficult to control memberships sold and royalty percentages would be too high,” Dabish says. “We saw that happen with the competition they tried to turn into franchise companies and lost their franchisees.”
A licensing model suited Powerhouse’s goal to expand the brand in the United States and internationally, and fewer restrictions on licensees appealed to entrepreneurs and athletes interested in owning their own businesses.
“Licensing is better for them because it gives them more freedom to add their own personalities to each location,” Dabish says.
Licensees can choose the equipment and the color scheme and tailor amenities such as day care or physical therapy service to fit market demand. The licensing model works hand-in-hand with the branding strategy.
The more people that recognize the name, the more likely they are to ask, “Where can I find a Powerhouse near me?” The more they visit a Powerhouse, the more likely they are to support the brand by wearing its merchandise, further spreading the name when others ask about the logo.
And inquiries are coming from across the globe. International expansion is mostly responsible for Powerhouse’s 9.4-percent growth rate from 2003 to 2004. Master licensees in South America, Europe, Asia especially China and now India, are spreading the Powerhouse brand in markets where the American fitness brand is especially attractive.
“International growth has come quickly because we have other owners (in other countries) doing what we do here in the States,” Dabish says. “Locations crop up quickly because we have other partners, in essence. We can offer them prenegotiated pricing on equipment and other amenities they need, and they want to carry U.S.-branded materials.
“In their eyes, they want to be associated with ‘Powerhouse Gym U.S.A. since 1975,’ and they brand that way.”
Maintaining brand consistency
Elaborate facilities complete with day care and physical therapy services provide a much different fitness experience than the one that Powerhouse’s first hardcore customers sought. Today’s casual athletes work out with results in mind, but they also want the club feel, Dabish says.
Customer care is essential in order to compete in one of the fastest-growing franchise businesses. Older facilities with outdated equipment struggle to fight brand-new branches of the corporate chains that plant facilities in the same markets Powerhouse serves.
To maintain brand consistency, everyone has to live up to what the brand represents, even if it means sacrificing short-term growth.
“We’ve been steady,” Dabish says of the company’s 2005 growth in the U.S. division. “Growth hasn’t been as quick as it could be in the U.S. if we had maintained all current licenses.”
Instead, the Dabishes pulled the Powerhouse logo from 15 locations while opening 18 new gyms.
“If a Powerhouse isn’t reinvesting in its equipment and doesn’t have a good reputation, that facility will go under review,” Dabish says, describing one instance in which a gym lost its affiliation. “The facility was tired and run-down. Equipment was not maintained, and there was down equipment. There was negativity associated with the facility.”
The Dabishes look for clean locker rooms, upgraded equipment, helpful personnel and overall upkeep of facilities to determine whether a Powerhouse Gym is helping or hurting the brand.
“Corporate officers check up on facilities, and we have owners who travel and check up on other owners in different regions,” Dabish says. “We try to get to each gym once a year. We look at everything from signage to the quantity of group exercise classes offered. Probation periods for facilities that are not up to par can last from 60 to 90 days.”
If facilities don’t make the grade, Powerhouse strips its name from the gym. This doesn’t mean the gym owner won’t continue operations, but he or she will not reap the benefits of an international trademark. This type of monitoring is critical for upholding the long-standing brand.
“We will continue to grow in a controlled manner,” Dabish says, adding that by creating more corporate-owned facilities in the U.S., Powerhouse can more readily upgrade outdated gyms, especially those close to the corporate headquarters in Michigan.
“Many licensees travel to Michigan when they want to open a Powerhouse Gym,” he says. “Many of the facilities in this state have been here for 10 to 12 years or longer. I want to upgrade those, open more impressive facilities.”
Meanwhile, the type of person who chooses to open a Powerhouse location is also changing as the fitness industry evolves from heavyweight champions to well-versed entrepreneurs interested in a lucrative venture with a trusted brand.
“Initially, the people who opened Powerhouses liked to train, so they opened a gym,” Dabish says. “I always thought that was funny at the time. It’s like, ‘If I like to eat, I’ll open a restaurant.’ A gym is still a business to operate and maintain.
“The major change in the industry is that there is a lot of professionalism, and it is much more of a business now.”
Today’s Powerhouse Gym owners don’t necessarily need a fitness training background, Dabish says.
“More so, people are interested in investing in a successful company they have corporate interest in the Powerhouse brand.
“Even today when I go back and visit the original location, I’m amazed at how we started from that single location. While we grow the brand, we still want to maintain our roots.”
How to reach: Powerhouse Gym, www.powerhousegym.com