JGR 300- Assignment 3 case study

Case Study – BJ’s House of Fitness: A Business on the Ropes

Read the following case study and complete the assignment.

BJ’s House of Fitness is a gym owned and operated since 1991 by Barry J. Jerrod in a working-class area of Pittsburgh, PA. Barry grew up in Pittsburgh and worked in the steel industry. As a hobby, he participated in amateur bodybuilding competitions, gaining a small but devoted local following. In 1990, he set up weights and a stationary bike in his garage so neighborhood friends could work out. He charged 25¢ per day to work out and sold neon pink sleeveless T-shirts that read, “I Get Big at the Garage.” Word of Barry’s gym spread, and it quickly outgrew his garage. Barry opened BJ’s House of Fitness in a storefront on Cherry Street, his neighborhood’s retail district.

The gym is well-equipped with treadmills, ellipticals, weight machines, heavy bags, and free weights but lacks premium amenities like a sauna, juice bar, and towel service. There are no personal trainers. In 2002, Barry expanded to the adjacent retail space, knocking down a wall to double the gym’s size and add a studio space for exercise classes. His last price update was in 2011; it costs $35 per month to be a member. There is no joining fee and no annual contract. Barry’s members are mostly longtime residents of the neighborhood, and many are retirees.

Barry’s business is modestly successful, providing him a comfortable lifestyle without requiring significant marketing, strategic planning, or capital investment. He feels the success of his business relies on his strong values, mission, and vision.

BJ’s House of Fitness was founded on his values of fairness, hard work, and helping others, and those values are the reason Barry has always run slim margins to provide his clients with a low monthly membership cost without fees or penalties.

His mission is to share his lifelong love of fitness with members while maintaining a high level of personal customer service. He is at the gym seven days a week and employs a small staff— many of whom have worked there for more than 10 years.

Barry’s vision is to a provide members with a simple, no frills gym experience (what Barry calls, “the old school”) that maintains some of the neighborhood feel of the garage gym that started it all. BJ’s House of Fitness does not have a website. Instead, Barry shares his passion for fitness by working out at the gym daily and writing motivational quotes on the walls in chalk. Barry’s passion is infectious and is frequently cited by members as their favorite part of belonging to BJ’s.

The past year, however, has brought a series of disruptive challenges that threaten the survival of BJ’s House of Fitness.

Barry’s landlord doubled the rent on the gym’s location, citing higher city property taxes, national brands moving into the Cherry Street business district, and gentrification in the neighborhood.

A national chain of fitness centers, Pump It! Gyms®, have opened a location three blocks from BJ’s House of Fitness. Their equipment and facilities are brand new and state-of-the-art. Pump It! has blanketed the neighborhood in marketing and promotional offers. Pump It! memberships cost $55 with a $34.99 joining fee and an annual “service” fee of $18.99. Late payment or denied credit cards incur a $120 billing fee.

Barry’s new sign-ups have been flat. He notices most of the new members are drawn from the affluent young professionals moving to the neighborhood. Comments from the newer members have been mostly negative: he has received complaints about cleanliness, broken equipment, and a lack of exercise class options. Barry has lost approximately 50 percent of new members since the start of the year and his online rating has fallen from 4.5 to 2.5 stars.

Barry has verbally encouraged his staff to clean better and engage in proactive customer service. Requests to his staff have not been followed up with training, written performance goals, or performance-based bonuses. Staff have responded with increased absenteeism and low morale. One longtime employee recently quit, citing the lack of pay raise and a higher cost of living in the neighborhood.

It has not been all bad news for Barry. The biggest local paper featured a glowing profile of BJ’s House of Fitness, including a professionally shot photo spread. The photographer, a neighborhood resident, has approached Barry about using the photographs for promotional materials. The newspaper profile also attracted the attention of a local documentary filmmaker, who wants to make a short film about Barry’s life as a bodybuilder and the quirky regulars at the gym.

Recently, Barry was approached by another national gym chain, 4 Minute Fitness, about rebranding BJ’s House of Fitness as a 4 Minute Fitness franchise location. Barry would have to pay hefty franchise fees and give 50 percent of revenue to 4 Minute Fitness. In exchange, 4 Minute Fitness can connect Barry to business financing and centralized billing and scheduling software to streamline his operation.

Nationally, U.S. economic growth has slowed, but the $27.6 billion gym and health club sector has continued to grow. The newly released Pittsburgh City Economic Report notes continuing population growth of 1.5 percent, fueled by young, college-educated workers moving to the city for its rising tech sector and low cost of living.

With his reserve funds rapidly draining from the increased rent, Barry fears he may have to close BJ’s House of Fitness unless changes are made, and fast.

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