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MONTREAL – A man walked into the Nautilus gym in Hayward, Calif., to speak with owner Leonard Schlemm and his business partner, Mark Mastrov, about purchasing the club. To show he was serious, the person opened up a briefcase packed with diamonds.
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Although they’d no plans to sell the company, having only committed to it a couple of years earlier, it had been tempting enough that Schlemm told the potential buyer to return as they evaluated the sale. “(Schlemm) went out, bought lots of books and spent 2-3 weeks asking questions and became fairly knowledgeable regarding how to value diamonds,” Mastrov recalls.
The potential buyer was then invited back together with his diamonds.
“Leonard took one look and said, ‘These diamonds aren’t worth anything,’” Mastrov said. “The enjoyment aspect of Leonard is the fact that he likes a challenge.”
It’s this willingness to think about new offers and concepts that has made Schlemm the powerful, yet often behind-the-scenes force who created and then sold the world’s largest chain of health clubs and someone who continues to shape the global fitness industry by purchasing the latest health insurance and technology trends, often in conjunction with partners who have long overlapped business, fitness, friendship and romance.
“His business savvy and innovation to expand his knowledge from the accounting world towards the fitness world continues to be enlightening,” said David Hardy, president of Franvest Capital Partners, a private-investment firm that are experts in the health and fitness industry.
Before heading south to first make his fortune, Schlemm was created in Montreal to a family that helped literally shape the city.
His grandfather was the urban planner who designed Atwater Avenue for the Society from the Priests of Saint-Sulpice, while his father was the previous president of the Atwater Racquet Club, where Leonard played badminton five days a week like a teenager.
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In 1983, having a Harvard MBA and a job like a strategy consultant at McKinsey & Co., Schlemm decided the time had come to apply what he’d learned. It wasn’t long in coming. Just 3 decades old, he was presented with an opportunity to create a US$45,000 investment in the San Francisco Bay Area Nautilus club – an average 5,000-square-foot-gym with five employees.
“To tell the truth, it was a bit of a random investment and while I’m involved with sporting activities when I was younger, it was more of a lucky coincidence,” said Schlemm, 63, in his office overlooking the expansive weight-room floor of downtown Montreal’s Mansfield Athletic Club, that was when the 3,000-seat Loews Theatre.
Part of the lucky coincidence was that certain of the five employees Schlemm inherited was Mastrov, who also invested in the club and it has become an important figure in the fitness world in the own right.
“When we first started working together, he was very helpful on strategic issues, legal issues, finance issues – areas that I probably didn’t have a lot of strength in,” Mastrov said.
“I was very good on the operations and individuals skills and getting out front with the members, which he didn’t enjoy as much. Therefore we didn’t overlap too much.”
Schlemm and Mastrov made two simple changes to the club that would wind up changing the face of the entire fitness industry.
At time, members mortgage free front for any three-year contract – a large limitation for people on a budget.
Instead, the partners decided to make Nautilus the first club to chop its memberships into monthly dues, something that has since become standard practice in the industry.
They also remarked that the price of paying an employee to run the leading desk overnight, while cleaning staff have there been, was relatively small, meaning the gym didn’t have to shut. The 24-hour gym was born.
The club was rebranded as Round-the-clock Fitness and began opening areas in the area.
“In the fitness industry, you will find very major economies of scale on a regional basis,” Schlemm said. “Inside a given market, the key to financial success had been the dominant player.”
First, 24 Hour Fitness took control of the San Francisco Bay area, then Southern California, Texas and so on until it end up being the world’s largest health-club chain, with more than 420 clubs, 20,000 employees and revenues estimated at more than US$1 billion.
Over the years, Schlemm has worked with celebrity athletes including Andre Agassi, Magic Johnson, Shaquille O’Neal, Lance Armstrong and Steffi Graf as investors.
“Some are extremely down to earth, some you cope with several business reps, lawyers and accountants, plus some are directly involved,” he said.
Wanting to grow past the U.S. in early 1990s, Schlemm and Mastrov looked to Russia. Since 1997, he has been leader of Sila Holdings, which runs the biggest chain of fitness centres in that country.
“He used to have to travel available each month and in those days it was kind of the Wild West where you couldn’t look for a taxi and just had to pay regular citizens,” Mastrov said. “Leonard would navigate by using ease where many people could be very scared. He was extremely humble and nobody would even bother him.”
In a given market, the important thing to financial success had been the dominant player.
He and Schlemm appear at first sight close friends who still interact on various initiatives even today.
“We think a great deal alike. He is able to finish my sentences, I’m able to finish his,” said Mastrov.
After 20 years within the U.S., where three of his four children still live, Schlemm gradually left Mastrov to operate 24 Hour Fitness and moved his home base back to Montreal.
There, he started the Mansfield Athletic Club chain, and acquired the 89-year-old Atwater Racquet Club, where his father had been president.
In 2008, he met Annick-Isabelle Marcoux, who was being employed as vice-president of BMO Harris’ Private Wealth Group in Quebec as well as leading an every week spinning class at among the Mansfield clubs.
“I’d inspired to satisfy the owner of the business simply to sadly realize that he’d been sitting ahead of me for 3 years straight within my spinning class and never noticed,” Marcoux said.
Schlemm hired Marcoux, 46, as his investment adviser and the relationship grew because the two realized they had many common interests.
A former national champion mountain and road biker and Ironman competitor, Marcoux joined Schlemm in raising money for charities through events such as the Enbridge Ride to Conquer Cancer.
“We started a relationship based on using fitness and business in order to do good quality,” she said. “It’s quite amazing how he is able to make use of the same stamina he does in marathon running … in businesses.”
A partnership developed plus they were married in 2013.
Schlemm said he and Marcoux were so compatible running a business he asked if she would leave her career in finance to operate the Mansfield Athletic Clubs.
“I needed to produce a legacy,” Marcoux said. “I participated in creating and building something and that i wanted to leave something behind and I knew it had not been going to be within the financial industry or perhaps in a large corporation.”
Before they were married, Schlemm said he spent a year . 5 attempting to convince Marcoux to become listed on his enterprises. She finally chose to take the opportunity as he was looking for a fitness brand to keep company with a 42,000-square-foot space he had leased in Toronto.
In that space, Marcoux chose to open Canada’s first Hard Candy Fitness, a joint venture with Madonna that opened its doors in 2014.
“Having grown up (listening to) Madonna, (I said), ‘When you get a Hard Candy, I think I might consider joining in,’” Marcoux said. “She’s vibrant, she has a power that really I don’t even get in 25 year olds. She’s quite a role model.”
Today, Marcoux is president of the three Mansfield clubs, the Atwater Racquet Club and difficult Candy Fitness Toronto, while Schlemm is a partner within the 21 Steve Nash Fitness Clubs in B.C. alongside Mastrov.
Schlemm sold his curiosity about Round-the-clock Fitness last year to investors inside a US$1.85-billion deal that included the Ontario Teachers’ Pension Fund and the New York-based private-equity group AEA Investors LP.
Marcoux asserted while her husband excels at strategic planning, her strengths, like Mastrov before her, lie more in the day-to-day operations.
“It’s absolutely a 10-on-10 partnership, and also the beauty of it’s we have the same interests and the same passions, but we’re fundamentally completely different individuals,” she said. “We absolutely complete each other.”
Marcoux and Schlemm also provide investments in about 600 clubs in Europe, as well as interests in a number of non-fitness-related ventures such as medical and software companies.
We have the same interests and the same passions, but we’re fundamentally completely different individuals.
Together, they’re managing partners of the LangLeven Group, Canada’s first and just private-equity firm exclusively focused on growth opportunities in the United states wellness sector.
Through this, they are investing in evolving fitness technology, for example LIFT Sessions, an online platform that gives use of customized fitness training on demand from the location.
They will also be looking to investments in wearable technology – including companies in Quebec – though they decline to mention any sort of brands, citing the fierce competition.
“There’s an amazing movement and right now, something in Quebec is actually likely to blossom in 2016,” Marcoux said. “One of them is going to succeed from the pack and the question is who’s going to buy them.”
It’s through this combination of fitness and finance that they hope to continue making an impact.
“Our legacy together is that we want to really help people look after themselves,” Marcoux said. “It isn’t about living long; it’s about how you are going to live long.”
