Just nine years ago, the young Galiani brothers brought a piece of California's Muscle Beach to the Washington area, opening a Gold's Gym in Fairfax City and then expanding their franchise to eight health clubs.
So it makes perfect sense, according to the Galianis, that in their thirties they have managed to take over their famous parent company: Gold's Gym Enterprises Inc. of Venice, Calif.
In a day, Kirk and John Galiani have gone from owners of a regional franchise based in Falls Church to chief executive officer and chief operating officer, respectively, of one of the nation's largest health club chains. The deal, which was announced yesterday, is valued at between $50 million and $100 million, according to Florida investment firm Brockway Moran & Partners. The firm provided substantial financial backing for the deal but disclosed few details.
"We share a philosophy: Patience isn't a virtue. It's a problem," said 32-year-old John Galiani by way of explanation for the brothers' speedy corporate climb.
The Galianis believe they can better position Gold's Gym, which hasn't always been able to fight off encroaching competition, in a steadily growing industry that is still fragmented but rapidly consolidating. The industry now has an estimated $9.6 billion in sales annually, according to the International Health, Racquet & Sportsclub Association.
Within the next five years, the brothers hope to double the number of Gold's Gyms to about 1,100 through acquisitions, franchised gyms and new corporate-owned centers. Eventually, they may take the company public.
"We believe there will be a few major players," Kirk Galiani said. "We will have the wherewithal to compete for the long term."
Closely held Gold's Gym does not release its sales and earnings figures. Under the terms of the buyout, Brockway Moran and the Galianis have the largest stake in the new firm, to be called Gold's Gym Investments Inc. The former owners also have shares in the new company. Jeff Skeen, a business partner of the Galianis', also will join the new company as chief information officer.
Gold's Gym was founded in 1965 by Joe Gold, a bodybuilder who became a tourist attraction himself on Muscle Beach. He had been on magazine covers and toured with Mae West before he opened his first health club. In 1979, Gold sold his company to two bodybuilders and an architect named Ed Connors. (He went on to found another fitness chain, World Gym International.)
Although the three managed to expand the chain from one location to 534, they acknowledge that in recent years they were unable to fight off advances by strong competitors. In their quest to grow, rivals Fitness Holdings Inc., operator of 24-Hour Fitness clubs, and Town Sports International have even managed to snap up Gold's Gym franchises across the nation.
The owners of Gold's Gym had first dibs on the franchises, but they did not have enough cash to make the acquisitions, said Connors, former chief financial officer at Gold's Gym.
"It was time for us to do something," he said. "You could see the urgency there."
Connors said the Galianis had a good expansion plan and better access to major investment firms. In addition, the older owners of Gold's Gym were ready to make room for fresh ideas.
"I think you have to have the good sense to know when to step aside and let new blood come in," Connors said.
The Galiani brothers started in the fitness business in 1990. Kirk had been a commercial real estate broker struggling to find business during the recession. He had done demographic research for a health club customer looking for a new site. Although the client didn't take the location, Kirk Galiani saw an opportunity in the health club business. So he brought in his younger brother, then a financial planner.
After their father, Al Galiani, co-signed a $150,000 bank loan, they opened their first Gold's Gym in Fairfax. The brothers have since repaid the loan and often tease their father for his nervousness about the deal.
"We'll never let him live it down," joked 34-year-old Kirk Galiani.
The brothers have worked closely for nine years, sharing the same office, eating lunch together three times a week and, of course, spending time together at family gatherings. At their Falls Church headquarters, their desks face each other.
Such close working quarters do not bother the Galianis, or so they claim, because their personalities seem to mesh. Kirk Galiani, called the "tornado" by at least one employee, is intense and sometimes high-strung. He wants to expand the business as fast as he can.
John Galiani tends to have a more calming effect on people, including his older brother, and takes a more cautious approach to managing the company.
"Together, we can usually work out and understand every aspect of the business," Kirk Galiani said. "It would be tough to replace him or myself."
Kirk and John Galiani, founders of a regional Gold's Gym franchise called the G Group, led the buyout of the parent company. They now are chief executive and chief operating officer, respectively, of Gold's Gym Investments Inc.
The G Group Business:The Washington area franchise of Gold's Gym, a chain of health and fitness clubs
Started: First location opened in 1990 in Fairfax City and was sold in 1996; now has eight area locations
Area locations: Van Ness and Southwest in the District; Greenbelt in Maryland; Annandale, Baileys Crossroads, Clarendon, Rosslyn and Tysons Corner in Virginia
Membership: 51 percent men, 49 percent women
SOURCE: The company