John Treharne's no-frills approach to financial fitness

After seeing the success of budget gyms in America and Germany, John Treharne brought the idea to Britain, where it's proved just as popular.


John Treharne brought the budget-gym concept to Britain

Business gurus often urge budding entrepreneurs to 'follow their passion'. It's a nice soundbite, but it's not enough in itself, says John Treharne, 59. The reality is that "you need to have a solid business plan".

This unsentimental approach delivered Treharne his first success as a gym owner. Having trained as an accountant, the former England squash player ended up running Coral Leisure's chain of squash clubs.

He rapidly became convinced that the market for squash facilities was saturated few women played the sport, and the clubs didn't provide "a social and welcoming environment for people of all ages".

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There were simply too many clubs chasing a limited amount of business. But he also realised that there was good money to be made by buying up struggling clubs in decent locations at low prices and then adding extra facilities to make them more attractive.

It was 1991 the economic backdrop was grim and, as Treharne admits, leaving his secure job during a recession was "very risky". But he'd done his research and was "very confident" in his idea. "At no time did I ever feel tempted to walk away and return to a day job."

He was right to be confident. Just one year after founding Dragons Health Clubs in 1991, he won backing from private equity investors Lazard Leisure Fund and Quester Capital Management. Over the next few years Treharne steadily built a portfolio of five clubs, before listing on Aim in 1997, to raise more funds.

The pace of growth picked up rapidly, and by 2000 he had 21 health clubs, and an annual turnover of £17m. But by then his backers were eager to realise the profits on their investment, and the chain was sold to Crown Sports for £31m. Treharne, who owned 12% of the shares, made more than £3m.

He stayed on as managing director of the business for another three years. However, by 2006 he had spotted his next gap in the market. Budget gyms had proved a huge hit in America and Germany, whereas British clubs still focused on providing luxuries, such as pools and saunas. These greatly increased costs (and thus the price of membership), but attracted few extra customers.

After researching the idea for a year, Treharne decided the budget approach could work in Britain too, and launched The Gym Group in 2007, once again with private-equity backing.

The aim was to make gym membership more affordable. Basic administration is done online, while Treharne also delegates a lot to the gym managers, "who are regarded as little more than key holders by many chains". This helps to keep head office costs down.

As a result, fees are as low as £10.99 a month in some areas, with no minimum contract term and only a small joining fee, compared with a total cost of around £700 a year for some of the major chains.

The no-frills approach seems to be working. His first gym, which opened in 2008, quickly attracted 7,000 members. There are currently 38 clubs, with a target of 50 by next year.

So what's the key to his success? Research, he says you have to get it right, because "the first few things that you do will determine whether you succeed or fail". Indeed, "if the first site is a failure, then there won't be a second".

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

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