Lifetime Fitness 2010 Annual Report Download - page 23

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17
the misappropriation, loss or other unauthorized disclosure of sensitive or confidential member information, whether
by us or by one of our vendors, could have a material adverse effect on our business, operations and reputation
including material fines and penalties; increased financial processing fees; compensatory, special, punitive and
statutory damages; adverse actions against our licenses to do business; and injunctive relief whether by court or
consent order, regarding our privacy and security practices.
The health club industry is highly competitive and our competitors may have greater name recognition than we
have.
We compete with other health and fitness centers, physical fitness and recreational facilities established by local
non-profit organizations, governments, hospitals, and businesses, local salons, cafes and businesses offering similar
ancillary services, and to a lesser extent, amenity and condominium clubs and similar non-profit organizations,
exercise studios, racquet, tennis and other athletic clubs, country clubs, online personal training and fitness coaching
and the home fitness equipment industry. We cannot assure you that our competitors will not attempt to copy our
business model, or portions thereof, and that this will not erode our market share and brand recognition and impair
our growth rate and profitability. Competitors, which may have greater name recognition than we have, may
compete with us to attract members in our markets. Non-profit and government organizations in our markets may be
able to obtain land and construct centers at a lower cost and collect membership fees without paying taxes, thereby
allowing them to charge lower prices. Furthermore, due to the increased number of low cost health club and fitness
center alternatives, we may face increased competition during periods when discretionary spending declines or
unemployment remains high. This competition may limit our ability to increase membership fees, retain members,
attract new members and retain qualified personnel.
Delays in new center openings could have a material adverse effect on our financial performance.
In order to meet our objectives, it is important that we open new centers on schedule. A significant amount of time
and expenditure of capital is required to develop and construct new centers. If we are significantly delayed in
opening new centers, our competitors may be able to open new clubs in the same market before we open our centers
or improve centers currently open. This change in the competitive landscape could negatively impact our pre-
opening sales of memberships and increase our investment costs. In addition, delays in opening new centers could
hurt our ability to meet our growth objectives. Our ability to open new centers on schedule depends on a number of
factors, many of which are beyond our control. These factors include:
xobtaining acceptable financing for construction of new sites;
xobtaining entitlements, permits and licenses necessary to complete construction of the new center on
schedule;
xrecruiting, training and retaining qualified management and other personnel;
xsecuring access to labor and materials necessary to develop and construct our centers;
xdelays due to material shortages, labor issues, weather conditions or other acts of God, discovery of
contaminants, accidents, deaths or injunctions; and
xgeneral economic conditions.
We may incur rising costs related to construction of new centers and maintenance of 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 and ongoing 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, but higher costs in regions where we are opening new centers may be difficult to offset in the short-
term.