Private Fitness, Inc.

Background

Private Fitness, Inc. is a small health club founded and owned by Rosemary Worth in Rancho Palos Verdes, CA, and has been open for six months. The business model for Private Fitness is focused on personal training sessions and a variety of group fitness classes. Ms. Worth has been working as an aerobics instructor and fitness model. Winning local competitions and having notable success at the national level, she has built a reputation in the fitness industry she hopes to capitalize on. She saw opening Private Fitness as an opportunity to increase her standard of living and allow more time to spend with her family.

Ms. Worth teaches Spinning and Aerobics classes and currently contracts with five fitness instructors. The instructors are all qualified to run personal training sessions, as well as teach classes in their various specialties. The instructors are paid a commission of 20% to 50% of revenues, based on their experience and if they are responsible for bringing the client into Private Fitness.

With her goal of spending more time with her family, Ms. Worth did not want to be heavily involved in the day to day management of the gym. Kate Hoffman was hired as the manager, along with being one of the instructors she handled marketing and is a longtime friend of Ms. Worth. Recently there has been evidence of theft and fraud involving Ms. Hoffman. Ms. Worth noticed $40 missing from the cash drawer that Ms. Hoffman is responsible for. Ms. Worth also discovered that Ms. Hoffman has been conducting training sessions off the books for a discounted fee and keeping the entire amount. Ms. Worth personally witnessed this occur with one client.

Existing Control Issues

Rosemary Worth faces several problems at Private Fitness currently that must be addressed in order to have a successful future. The most obvious and urgent of these is Kate Hoffman, who is a valuable instructor, marketer, and friend. Theft by taking or unreported revenues can’t be tolerated in any business. The more long-term issue is what motivated Ms. Hoffman’s actions? How can the culture and environment at Private Fitness be improved to create a more unified team mindset for the entire staff?

Recommendations

One significant challenge that Rosemary Worth must face personally is the reality of starting her own business. Starting a business is a major endeavor that involves a significant amount of work to build a successful and profitable business. While increased time with family is extremely important, it may need to be a more long-term reward for the work and attention that the business needs to get going, beyond teaching fitness classes. Whether or not she is willing to invest this time and “sweat equity” is a decision she must make for herself. There are several things, however,