Little Gym International

Franchiser's success wasn't child's play
1 commentby Susie Steckner - Sept. 17, 2008 12:00 AM
bizAZ
The Little Gym International Inc. has experienced enormous growth and soaring profits in the past decade, so it's hard to imagine that its chief executive has made many missteps along the way.

But Bob Bingham readily admits a few, namely his overconfidence that the company's plan to go public would be a slam dunk. It wasn't, and with no solid Plan B, he was left with few options to survive.

Bingham, 62, president and CEO of the Scottsdale-based company, talks about what happened and how he turned it around:
The Little Gym, which offers non-competitive, fun programs to help kids develop motor skills, was a fledgling company when Bingham was asked to take the reins in 1993. At the time, he had a background in broadcasting and was in the process of selling radio stations he owned in several Western states.

Bingham didn't know anything about franchising, but he knew how to turn around companies, something he did in his broadcast career, and that's exactly what the Little Gym needed.

Franchise owners were dissatisfied with the company. But the company's priority was expanding, not making them happy. Bingham took the helm with a new goal. "I wanted to focus our energies on the success of the franchise owner first," he said. "Our success would follow their success."

By 1996, the company decided to go public. Bingham sees now that it was a "terrible idea."

"We weren't far enough along on our growth path," he said.

It moved ahead with an initial public offering, raising $7 million of the $8 million it needed. Then, another kid-focused chain, the Discovery Zone, went bankrupt. Funds quickly dried up for the Little Gym, and the IPO never materialized.

"We were so sure that it was going to work, we didn't have a Plan B," Bingham said. "Every good CEO needs to have a Plan B for every eventuality, and this one didn't."

It was a big hit financially, and Bingham had few options but to downsize quickly and severely. "It was very, very painful," he said.

The staff shrank from 28 full-time employees to five, leaving Bingham to figure out how to keep providing quality service and support to franchise owners.

His idea: Ask the franchise owners to work part time for the company and help guide their peers. Everyone agreed. Bingham said necessity truly is the mother of invention.

It worked. The company went from losing $1.1 million in 1996 to turning a profit in the third quarter of 1997.

Success followed. From 1997 to 2006, it experienced year-over-year, double-digit growth.

The company today has 315 franchises in 20 countries, up from 35 franchises in 1996. In the next three or so years, it is on track to hit 500 gyms in the United States alone.

"We've been very blessed," Bingham said. "We're a debt-free company. We're healthy. We're strong."