Lifetime Fitness 2010 Annual Report Download - page 24

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18
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 20 states. We plan to open three new large format centers in 2011, one of which is in
an existing market. With respect to existing markets, opening new centers in existing markets may attract some
memberships away from other of our centers in those markets, thereby diminishing 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, six in the Detroit and Houston markets and five in
the Phoenix market, with future 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 near-term deceleration of our revenue growth rate.
If we cannot retain our key personnel and hire additional highly qualified personnel, we may not be able to
successfully manage our operations and pursue our strategic objectives.
We are highly dependent on the services of our senior management team and other key employees at both our
corporate headquarters and our centers, and on our ability to recruit, retain and motivate key personnel. Competition
for such personnel is intense, and the inability to attract and retain the additional qualified employees required to
expand our activities, or the loss of current key employees, could materially and adversely affect us.