A Balanced Approach

REVIEW SUMMARY
Business. BalanceDiet, Tampa and Miami Beach
Industry. Weight loss, fitness
Key. Firm bought a chain of diet centers that nearly filed for bankruptcy.

For a self-professed fitness and weight loss guru, Chris Palumbo gobbled up quite the hefty business venture one day late last year.

Palumbo, along with several business partners, bought a financially troubled chain of 22 weight management centers on the Gulf Coast, with locations from Brandon to North Naples. The acquisition itself, of Tampa-based Results Weight Loss and its affiliated brand, 1-800-Weight-Loss, cost a mere $71,000 — a fire sale price that reflected the previous owners' desire to avoid bankruptcy or foreclosure.

The purchase price, it turns out, was just a pittance. Palumbo has since committed to spend at least $1 million in an effort to mesh the old Results locations into his own company, Miami Beach-based BalanceDiet. “I'm very entrepreneurial,” says Palumbo. “I'm a little bit more willing to take a risk.”

That risk, now, is if BalanceDiet can successfully shift the way potential customers on the Gulf Coast think about the businesses of dieting and fitness. The fields don't traditionally operate under the same roof, despite obvious connections. “I think the approach of diet centers is wrong,” says Palumbo. “It shouldn't be just about losing weight.”

What it should be about, says Palumbo, is offering clients a “life transformation” that combines elements of weight loss and fitness. That's what Palumbo says he's put together with BalanceDiet, which features stylish weight loss centers built like spas, proprietary genetic testing, and a line of nutritional and cosmetic-centric products.

BalanceDiet, which has nine locations nationwide, also offers private counseling and individualized eating and exercise plans. The firm is a 1-year-old spinoff of Miami Beach-based elements, a high-end chain of women's health clubs Palumbo founded in 2004. Elements has about $5 million a year in sales, says Palumbo, and locations are spread from Miami to Fargo, N.D.

But while the businesses of nutrition and fitness would seemingly fit snuggly together, in practice, say some industry experts, it doesn't. Instead, it's an unfocused muddle. “When you combine fitness and weight loss,” says BalanceDiet Senior Vice President Felicia Sanders, “it has never worked.”

BalanceDiet nonetheless will give it a shot. The company isn't building a gym inside a diet center, or a diet center inside a gym, though with several cross-promotions, it might come pretty close.

Palumbo hired Sanders in late February to lead the integration of Results locations into BalanceDiet. Sanders has been in the fitness industry for two decades, including executive roles with Lady of America, a Miami-based chain of women's gyms.

Sanders thinks the time is right to make a big move in the industry, like the one Balance Diet has plotted. “The weight loss industry hasn't had a downturn,” says Sanders. “People always need to lose weight.”

That's true more than ever in Florida, which has an adult obesity rate of 26.1%, according to the Trust for America's Health, a nonprofit health advocacy group. While 28 states had higher obesity rates in the group's 2011 survey, Florida, like many other states, is fatter than in any previous study.

No surprise, then, that the nationwide weight loss market is a $61 billion industry, up more than 3% since 2008, reports Marketdata Enterprises, a Tampa-based research firm.

Move quickly
Yet Results, after some initial success in the early 2000s, began to flounder last year. The business was losing about $10,000 a day, says Palumbo, when it was put up for bid in lieu of bankruptcy. Technically, Results sought an assignment for the benefit of creditors, an alternative to bankruptcy known as an ABC. An ABC is an insolvency supervised by a state court.

One challenge for buyers in ABCs is the sale happens fast.

Palumbo learned that firsthand a few days before Christmas in December. That day he received a call from Irv Cohen, a local entrepreneur who previously ran J.P. Morgan Treasury Technologies in Tampa. Cohen is also an investor in BalanceDiet, and president of White Plains, N.Y.-based Apogee Wellness, a chain of Pilates-themed lifestyle centers.

Cohen told Palumbo about the Results opportunity. The chain, founded in 1987, was either going to be sold all together or chopped up into pieces. Up for grabs were the 22 Results locations, in addition to 100 employees and at least 1,600 active customers.

That was the good news. The tougher-to-swallow news was if Palumbo and Cohen wanted to make a move on Results, they had 16 hours to decide. “We had to assess what the company was and what they had very quickly,” says Palumbo. “We had to see how we could do better than what they had done before.”

The decision, ultimately, rested on Palumbo's belief that Results had some untapped potential, despite its problems. It helped that the initial cost of $71,000, essentially for assets and a client list, was so low.

On that front, Palumbo says he was pleasantly surprised a bidding war didn't break out for Results. He thinks possible suitors, competitors like Weight Watchers and Jenny Craig, were too focused on January — the weight loss industry's Super Bowl — to pay attention.

“It was apparent that a fresh approach, new products and updated services could really bring much-needed momentum to the business,” Palumbo says in a March 13 press release that announced the deal. “It is very rewarding and exciting to be involved in a comeback story like this.”

The right vibe
The strategy behind the comeback story includes two pieces running simultaneously.

The first step, says Sanders, is to recalibrate how the former Results locations operate, both internally and externally. For example, Sanders plans to add staff to many locations. The Results centers had no more than two employees in each store, says Sanders, which put heavy pressure on the pair to perform. Sanders would like to spread work among at least four employees.

Sanders is also reshaping BalanceDiet on the Gulf Coast through a new marketing and advertising plan. She hired an inside advertising executive and retained Clearwater-based JoTo Extreme PR for media relations.

Sanders, in the second step, is out to change the entire head-to-toe image of the former Results centers. Locations include offices in Cape Coral, the Carrollwood area of Tampa, Lakewood Ranch and St. Petersburg.

Sanders says the geographical diversity is an advantage. But those gains are zapped by the fact that several Results centers are tucked inside dull office buildings. That gives off a clinical, medical office vibe, says Sanders. That isn't what BalanceDiet wants.

“You don't want to answer the phone BalanceDiet,” says Sanders, “and still look like Results.”

So to make things look more like BalanceDiet on the inside, Sanders leads a remolding project at some existing locations. The work covers everything from painting the walls and redoing the floors to changing the signs. The company is spending at least $50,000 a store. The first remodel, going on now, is at the Dale Mabry Boulevard location in Tampa.
“Chris doesn't do anything on a general level,” says Sanders. “When you walk in, you know you're somewhere.”

BalanceDiet will close and relocate other locations, where renovation won't go far enough. Palumbo, who previously worked in commercial real estate development for a golf course and resort firm, says he will primarily look for locations in high-end shopping centers.

The ultimate goal, says Sanders, is to create an environment where the target client, women of any age, feel comfortable and welcome. Most customers at a weight loss center, says Sanders, want structure and predictability in a non-intimidating setting.

While that approach could appeal to people over 50, Sanders says BalanceDiet has no age limitations.

“Obviously baby boomers have an income that we want to tap into,” Sanders says. “(But) we will take people of all sizes, shapes and ages. Our brand can hit all demographics.”