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Strategies & Market Trends : BFT: Will the tulip craze ever break down? -- Ignore unavailable to you. Want to Upgrade?

To: David Leith who wrote (153)	3/24/1998 9:35:00 PM
From: put2rich	Read Replies (1) \| Respond to of 650

David, Just some inputs from reading your thoughtful insight, since I have a large stake in seeing it down (at least to low 20s soon). 1/ The adv. of a large chain is easier to hook young people into the expensive 2+ yrs contract, since young people move more often. 2/ Most gyms are crowded only between 5PM until 9PM. Most unemployed / poor people hardly afford the due nor are willing to join any club. 3/ I guess the cost of building lease, utilities, ads are relatively large compared to dues. 4/ Don't know why but salesmen even in non-Bally gyms try to sell you contracts with variable costs (like used car biz) - bigger commissions since base salary sucks, orders from management? Of course it seems BFIT is the worst in this used-car biz. You are right that it is scarry that if they have positive cash flow then they can hype higher. So far the performance has not been not better than last year while the price rose 5-6 times. If the economy is good real estate leases and wages cost more, if there is recession then memberships fall. In LA/ORANGE COUNTY areas the competition is tough since there are other chains, I don't know about other regions. Just hope that BFIT face tough competition from small gyms as well as from other chain expansion.

To: David Leith who wrote (153)	3/25/1998 12:14:00 AM
From: Pancho Villa	Respond to of 650

Thanks for your views. Put some more time into it and give us your views. >The thing that amazes me about this company, and I have not crunched the numbers, is that on an operating basis (excluding capital expenditures and debt service) that it is not strongly cash flow positive. How is it that they can't fill their gyms to the point that they reach break even? Are they that expensive to operate? It does not take too much of an imagination to imagine an operating turn-around of this company, unless there is something so fundamentally flawed with their leaseholds and structure...it should be so simple. < Even before their huge debt service charges their margins are rediculously small. Operational efficiencies? they have a bunch of accountants from EY trying to straighten things up for several years and the cash flows get more negative by the quarter... read the 10K they have something like 13-14K employees. Just the collections department has more than 500. part timers are about half which means they employ about 20 full time people per gym. One more point small gym operators don't have: the 7 figure paid executives BFIT has. After all, Mr. Hillman and his combo outrageous compansation packages are the best asset for us the shorts. Pancho