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CHILD’S PLAY

Rapidly expanding Little Gym chain has big customer-drawing power

By Neil Janowitz

To some it may seem as if the fundamental purpose of The Little Gym — to help develop motor skills in kids — is redundant. As most parents will attest, the last thing small children need amid days spent careening around the house is an engine tune-up. But whether it’s the safe, structured environment, the courteous instructors or simply the moment of respite offered by the Little Gym, thousands of families are buying into the idea — just as Little Gym CEO and President Robert Bingham himself did 13 years ago.

Bingham owned and operated a radio station in Seattle at that time, and remembers the moment his two sons returned from their first class at the Little Gym. “Immediately, I could see the tremendous impact that the Little Gym’s curriculum had on my children,” said Bingham. Thus, when the executive board of Little Gym International later asked him to become the company’s COO and president, Bingham, who had just sold off his radio station holdings, leapt at the opportunity. (Bingham rose from COO to CEO in 1994.) Once aboard, Bingham says he made few changes to the business model put together by founder Robin Wes, who had opened the first Little Gym in Bellevue, Wash., in 1976.

At every location, classes and services are offered for children from infancy to age 12, in 20-week semesters. Each semester costs about $300-$450, depending on location, with a membership fee of $30-$50 tacked on annually. If that sounds hefty, Bingham says the company is targeting middle-to-upper-class families that can afford to put a child or two through the courses. The children participate for 45 minutes to an hour in gymnastics, karate or sports skills classes, all set to custom music written and produced by Wes, who is now the head of music development. The curriculum is designed to start children on a life of fitness, which health officials say is desperately needed in today’s society.

“Childhood obesity has been steadily getting worse,” said Sarah M. Lee, a physical activity specialist at the Centers for Disease Control and Prevention. Lee has a Ph.D. in exercise and wellness education, with a focus on youth fitness. “Since 1980, the number of kids between the ages of 6 and 11 who are overweight has doubled.” Health officials say children are spending too much time slouched around the TV, playing computer games and eating, and too little time exercising.

The benefits of the Little Gym are therefore obvious. “We know that kids who are exposed to fitness-skill-based systems of both the physical and educational variety generally stay more active,” said Lee. “And instilling these behaviors at an early age will influence kids to maintain that healthy lifestyle as they get older.” Bingham takes it a step further. “Beyond developing motor skills in children,” he said, “we want to help them grow intellectually and socially, and in so doing, build their confidence.”

But though young children may need help with their confidence, investors seem not to. There are at present 43 international Little Gym units and 217 domestic ones, all of them franchised. (There were eight company-owned gyms, but these were turned over to franchisers in 2002.) Bingham says he expects to open 60 new units over the coming year and plans to continue expanding by 60-70 stores per year going forward, almost entirely in the U.S. To date, the company has awarded 335 franchises in the U.S., including the ones currently open, and most franchisees are well under way in the process of opening their places. The result of such relentless growth has been an increase in annual revenue from $20 million six years ago to an anticipated $100 million by the end of this year.

Those are the kinds of numbers Ythan Lax hoped he would see when he opened the Perinton-Pittsford Little Gym in Fairport, N.Y., two years ago. A former telecommunications executive, Lax found himself at a crossroads when his company was dramatically shrunk, leaving him jobless for the first time in two decades. Reluctant to start over in a different company, Lax was open to all career suggestions, and received the most compelling from his sister, whose daughter was loving every minute of her classes at the Cranford, N.J., Little Gym. Lax looked into Little Gym, liked what he saw, went ahead to open one and has not looked back since.

“The appeal is that they’re a destination business,” said Lax, who has since opened a second unit in Greece, N.Y. “It’s not an impulse thing.” That makes his facility an attractive neighbor for stores that rely on spur-of-the-moment shoppers, such as the restaurants and coffee shops that flank the Little Gym at the Perinton Square Mall — all of which, Lax says, “love us. They reap the benefits alongside us.”

The store’s aesthetics also factor into Little Gym’s success. Too often gyms are located in massive warehouse complexes, with 50-foot ceilings and a drab, industrial feel. Little Gyms slide tidily into retail spaces of between 3,800 and 4,300 square feet, and they brighten up shopping centers with their pastel paint schemes and large showcase windows.

Though new to the game, Lax knew what he was looking for when he set out to find a shopping center. “I wanted an affluent plaza, an ‘A’ mall with a central location and neighbors that would provide a lot of walk-by traffic,” he said. Since they function as destination spots, Little Gyms need not rely on anchor stores to draw attention; if anything, they eventually act as the anchor.

Once he found his spot, Lax divided up the space exactly as the company prescribes: The main room gets 2,500 square feet to accommodate the bars, mats, springboards and other equipment. The lobby, a heavily windowed section that doubles as reception area and observation point for enthusiastic parents, measures 600 square feet. An additional 300 square feet off the main area received a tiled-floor treatment and functions as a space for the dance programs, birthday parties and an arts and crafts center. The remaining real estate is used for storage and an office. With corporate headquarters’ guidelines and advice, Lax says, the entire process was painless and fell well within the expected setup and franchising costs — generally about $200,000, Bingham says.

What results from the Little Gym schematic is a storefront that Bingham calls “attractive, but upscale.” And that’s just what Angelo Crecco, proprietor of the Perinton Square Mall, hoped for when he approved the space to Lax. Crecco, who has a background in residential and commercial real estate, has owned the mall since 1983, during which time he has seen enough businesses fail to make him suitably nervous.

“I had some reservations, just as I would with any tenant coming in with a new concept,” Crecco said. “But knowing my community, it didn’t take long for me to realize the potential.” In the end, Crecco’s instincts proved sound. “It’s been a great draw for the plaza,” he said. “With all of the mothers walking around, it generates a lot of business for the other stores,” he said. “And the noncompetitive program gets the whole community involved. My daughter even sends her two children there. Everyone is very pleased.”

And that’s precisely what bodes best for the future of the Little Gym — not the reception it receives from landlords and investors, but rather the enthusiasm of the parents. Lax reports a retention rate of close to 80 percent from semester to semester and attributes it to various factors, including knowledgeable instructors and the closeness of a neighboring Starbucks. And none of that comes as a surprise to Bingham.

“We’re not trying to take the place of sports or other activities,” he said. “The distinction is that we’re building skills to complement the other areas of their lives. It’s very visible to parents, who can see the growth.” And not the kind of growth kids get sitting on a couch playing computer games.