Lifetime Fitness 2010 Annual Report Download - page 17

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Design and Construction. Our wholly owned subsidiary, FCA Construction, provides us with construction
management, architecture and design services and millwork fabrication. Comprised of approximately 80 employees,
FCA Construction is dedicated solely to the design-build of each new center and the remodel of existing and
acquired centers.
Our architecture division has developed a series of prototypical plans and specifications that can be easily adapted to
each new site. Project architects along with our construction management teams monitor quality and oversee the
construction progress of each new center.
Our construction division provides construction management teams, including on-site supervision, for each new site
and remodel, as well as administrative services, such as permitting, purchasing, project accounting and safety
administration. The construction management teams qualify subcontractors, bid each component of our projects to
ensure cost-effective pricing, and monitor cost progress for the duration of the project. By using similar materials at
each center, we not only maintain a consistent ‘look and feel,’ but we are also able to maximize buying power and
leverage economies of scale in purchasing.
Through FCA Construction, we are able to maximize flexibility in the design process, retain control over the cost
and timing of the construction process and realize potential cost savings on each project. Nearly all of FCA
Construction’s costs are capitalized as a part of the overall initial investment in the new center or the remodel. Any
remaining unallocated costs are recognized as an expense in the period incurred. Because FCA Construction
performs services solely for us, we do not recognize any revenue or profit related to FCA Construction's operations.
In October 2008, we announced the decision to reduce the number of planned new center openings in 2009 and
2010. We made this business decision as a result of economic factors including most notably the challenging capital
markets upon which we rely to fund the construction of new centers. In connection with this decision, in late 2008
and early 2009, we realigned our staffing levels and cost structure with the revised growth plan. As a result of these
actions, we believe we are in a position to fund our planned new center development for the foreseeable future
through existing financing arrangements and cash flow, and that we have a cost structure that aligns with our revised
growth plans. We will continue to evaluate our staffing levels and cost structure in the future.
Marketing and Sales
Overview of Marketing. Our in-house centralized marketing and creative design agency is responsible for promoting
and differentiating the Life Time Healthy Way of Life brand so as to connect and engage existing and new
customers to our centers, products and services. Our marketing and creative design initiatives focus on our
comprehensive, lifestyle-oriented approach of helping people set and achieve their health and fitness goals by
participating in activities that interest them – and helping them to identify new areas of passion – both inside and
outside of our healthy way of life destinations. In turn, these efforts further engage existing members in our
corporate business areas and generate new consumer leads for our membership sales force. Our in-house marketing
and creative design agency integrates four key areas, including member acquisition and retention, planning and
analysis, creative development and production and web development. By delivering centralized marketing and
creative design services to our centers and corporate businesses, we bring proven, experienced and innovative
strategic planning, creative design, member experience and production to our existing and new markets in an
efficient and effective manner. New membership and corporate business results are tracked to gauge the
effectiveness of marketing initiatives, which are adjusted, as necessary, to address changing center and corporate
business needs.
Overview of Sales. We have trained and certified, commissioned member engagement advisors (sales staff) in each
center that are responsible for membership acquisition and member retention. Our member engagement advisors use
our customer relationship management system to manage information about and relationships with prospects and
members, including fitness and related interests. During the pre-opening and grand opening phases described below,
we have up to 12 member engagement managers on staff at a center. As the center matures, we reduce the number of
member engagement advisors on staff to between six and eight.
Pre-Opening Phase. We generally begin selling memberships up to five months prior to a center’s scheduled
opening. We market to prospective members during this period primarily through a portfolio of broad-reach and
targeted consumer and business-to-business media as well as referral promotions. To further attract new members
during this period, we occasionally offer lower pre-opening enrollment fees.