Lifetime Fitness 2009 Annual Report Download - page 24

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x delays due to material shortages, labor issues, weather conditions or other acts of god, discovery of
contaminants, accidents, deaths or injunctions; and
x general economic conditions.
We may incur rising costs related to construction of new centers and maintaining our existing centers. If we are
not able to pass these cost increases through to our members, our returns may be adversely affected.
Our centers require significant upfront investment. If our investment is higher than we had planned, we may need to
outperform our operational plan to achieve our targeted return. Over the longer term, we believe that we can offset
cost increases by increasing our membership dues and other fees and improving profitability through cost
efficiencies; however, higher costs in certain regions where we are opening new centers during any period of time
may be difficult to offset in the short-term.
The opening of new centers in existing locations may negatively impact our same-center revenue increases and
our operating margins.
We currently operate centers in 19 states. We plan to open three new large format centers in 2010, two of which are
in existing markets. With respect to existing markets, it has been our experience that opening new centers in existing
markets may attract some memberships away from other centers already operated by us in those markets and
diminish their revenues. In addition, as a result of new center openings in existing markets, and because older
centers will represent an increasing proportion of our center base over time, our same-center revenue increases may
be lower in future periods than in the past.
Another result of opening new centers is that our center operating margins may be lower than they have been
historically while the centers build membership base. We expect both the addition of pre-opening expenses and the
lower revenue volumes characteristic of newly-opened centers to affect our center operating margins at these new
centers. We also expect certain operating costs, particularly those related to occupancy, to be higher than in the past
in some newly-entered geographic regions. As a result of the impact of these rising costs, our total center
contribution and operating margins may be lower in future periods than they have been in the past.
We have significant operations concentrated in certain geographic areas, and any disruption in the operations of
our centers in any of these areas could harm our operating results.
We currently operate multiple centers in several metropolitan areas, including 24 in the Minneapolis/ St. Paul
market, nine in the Chicago market, eight in the Dallas market, and six in the Detroit market, with future continued
planned expansion in current and new markets. As a result, any prolonged disruption in the operations of our centers
in any of these markets, whether due to technical difficulties, power failures or destruction or damage to the centers
as a result of a natural disaster, fire or any other reason, could harm our operating results. In addition, our
concentration in these markets increases our exposure to adverse developments related to competition, as well as
economic and demographic changes in these areas.
If we are unable to identify and acquire suitable sites for new sports and athletic, professional fitness, family
recreation and spa centers, our revenue growth rate and profits may be negatively impacted.
To successfully expand our business, we must identify and acquire sites that meet the site selection criteria we have
established. In addition to finding sites with the right demographic and other measures we employ in our selection
process, we also need to evaluate the penetration of our competitors in the market. We face significant competition
for sites that meet our criteria, and as a result we may lose those sites, our competitors could copy our format or we
could be forced to pay significantly higher prices for those sites. If we are unable to identify and acquire sites for
new centers, our revenue growth rate and profits may be negatively impacted. Additionally, if our analysis of the
suitability of a site is incorrect, we may not be able to recover our capital investment in developing and building the
new center. Due to the current credit environment, we have chosen to slow down our new center expansion plans.
Accordingly, we expect our revenue growth rate to decelerate near-term.