Question: Trouble at Curves International

Curves International, whose 30-minute workout and singular focus on women made it among the world's fastest-growing franchise organizations, seems to be losing a lot of steam. According to a May 27, 2014, article in Forbes, since 2006 Curves has shed more than 4,000 locations, from a peak of 10,000 in 2006 to 6,000 today. Its north American locations dropped 65 percent during a similar period. That drop ranked Curves seventh worst among franchises with an initial investment of up to $150,000. While opinions vary about what went wrong with Curves, a consensus has emerged on four points:

(1) the company failed to keep up with changing trends, including more flexible hours for busy working women,

(2) cheaper competition,

(3) the poor economy, and

(4) the company sold too many franchises that are located too close together.

Of the four reasons, a failure to keep up with changing trends may be the biggest culprit. Some Curves locations are open for limited hours, causing patrons to look elsewhere for their workouts. Also, 24-hour fitness centers, including Anytime Fitness and Snap Fitness, have opened in many areas, providing busy women even more flexibility than Curves. Some members may have also tired of Curves's bare-boned approach and gravitated to fitness centers that offer aerobics classes, Yoga, Pilates, and dressing rooms with showers. Founded in 1992, Curves was an instant hit, largely because it targeted an underserved part of the market: busy and unfit women. Curves's founders believed that many women 30 years old and older cared deeply about their health and appearance but didn't want to join a fitness center full of people who were already fit. So they created a fitness center "just for them" that was convenient, affordable, and restricted to females.

The Curves "concept" was structured on a stripped-down version of the traditional fitness center, based on a tightly structured 30-minute workout using 8 to 12 exercise machines. Curves fitness centers do not have locker rooms, showers, aerobic classes, or juice bars. Instead they're designed to be convenient and quick. Members pay $99 up front to join, through the fee is often discounted. Monthly dues vary, averaging about $44 per month. In 2012, Curves was acquired by north Castle Partners, a private equity firm. Its new owners disagree with the critics and blame Curves's troubles on franchisees. The gist of their argument, which is laid out in the Forbes magazine article mentioned above, is that people who bought multiple Curves franchises were the wrong owners for Curves. "If you aren't there working it and working in the community to try to bring new people in and providing great service to your members ... often those locations are not going to do very well," Jon Canarick, managing director of north Central Partners, was quoted as saying. The inference is that failed franchisees were motivated primarily as investors rather than owners. In regard to turning Curves around, north Castle Partners has several things in mind. The plans involve strengthening the company's existing fitness and weightloss programs, as well as pushing nutrition bars and apparel. There may also be some cross-initiatives with Jenny Craig, a company that sells weight-loss and diet programs and is also owned by north Castle Partners. Curves also hopes for a lift from its new spokesperson, Jillian Michaels, who became known as a result of her appearances on nBC's The Biggest Loser.

Questions for Critical Thinking

1. Why do you think Curves failed to respond to changing trends? To what degree do you think this single factor contributes to Curves's recent troubles?

2. To what degree do you believe that Curves's former owners (the franchisor) is culpable in the failure of so many Curves franchise locations? What is your opinion of north Castle Partners's turnaround plans for Curves? Do you believe that Curves will continue losing franchises, or do you think the company will recover and start growing again?

3. If you were thinking about buying a franchise, write three questions that you'd ask a franchise organization you were thinking about buying into as a direct result of reading this feature.

4. The "You Be the VC 15.1" feature focuses on IceBorn, a rapidly growing franchise organization that furnishes its franchisees state-of-the art, 24-hour, on-demand ice and water vending machines. If you were the CEO of IceBorn, what lessons would you learn by studying Curves's troubles?