A Fitness Chain Right Out Of a Developer's Dream

I thought I knew how fitness centers make money.

They sell lots of memberships at low prices, assuming many people will stop showing up. The fitness center is built and staffed for the regulars, so the money from the no-shows is profit.

That's not how entrepreneur David von Storch does it.

"Our model is different," said von Storch, founder and owner of three Vida Fitness centers in downtown Washington. Von Storch has built high-end fitness centers that depend on members coming often and signing up for extras, allowing him to spread the considerable cost of finding new members (hundreds of dollars per find) over multiple years.

"If a member quits after the first year, we are not doing what we should be doing," he said. But it isn't easy. Washington is a transient place, so long-term memberships are less reliable than in other cities.

The first Vida (Portuguese and Spanish for "life") opened in the Verizon Center in August 2006; the second opened last October at 15th and P streets in Northwest, up a few blocks from me at The Washington Post. The third opened last month at the Renaissance Hotel at 9th Street near the new Washington Convention Center.

Von Storch said his fitness centers make money; he won't say exactly how much. Von Storch put up $5 million of his own money into the three centers, around half the capital investment.

A little background: Von Storch is 50 and a Harvard Business School graduate. He is fond of quoting Warren E. Buffett (a Washington Post Co. board member) about reinvesting in your business and being smart with cash.

Von Storch started developing malls for the Rouse Co. during the 1980s, then quit and took his savings to start a nightclub in Adams Morgan called the Dakota in 1986.

The Dakota was a success -- and a learning experience about the pitfalls of a cash business -- and he sold it in 1988 for a profit. He then started Capitol City Brewing Company, a chain of local micro-breweries that has pushed his net worth into the tens of millions. He also owns a commercial building on U Street NW, where his company offices are located. He drives a Smart Car plastered with advertisements for his businesses, and files a two-inch-thick tax return. His splurge is a 2,500-square-foot condo overlooking Miami Beach.

The von Storch empire, also known as Urban Adventures, includes two spas and a haircutting company, called Bang Salon. Urban Adventures will gross more than $30 million this year, with a profit margin in the neighborhood of 10 percent, von Storch said.

Most people want to own restaurants or sports teams, but von Storch is a workout nut who always wanted to own a spa. He is one of the few businesspeople I know who readily cop to mistakes. He told me tales of depending too heavily on an unreliable partner and of expanding his brewery chain too quickly, errors that cost him a couple of million dollars.