"I wanted it to be a place," he added, "where people could attend conventions, learn something about fitness, enjoy some exercise -- a place that would bring balance back into their lives." The result of this mission was The Houstonian, which opened in 1980 and was showing a $1-million profit by the end of 1981.
As Fatjo had hoped, The Houstonian resurrected exhausted businesspeople. Its programs began with thorough physicals, moved into exercise classes, and continued with programs on stress, nutrition and smoking. But Fatjo was well aware of the limitations of the approach. "The Houstonian had been elitist by design," he explains. "We thought that by having an impact on the health and fitness of executives, we'd also have an impact on their employees." In an isolated instance or two, the strategy worked. James T. Ketelsen, the chairman of Tenneco Inc., who had discovered that he needed coronary bypass surgery during a Houstonian physical, subsequently set up a fitness center for the employees at Tenneco's headquarters. But for the most part, The Houstonian's message -- that it was possible to have a healthy and rewarding life as well as a productive and profitable one -- remained a gospel heard by only a few.
In January 1982, three months before he met the Kuntzlemans, Fatjo gave Horace Irwin the task of researching the fitness industry, with the intention of eventually marketing The Houstonian's programs nationally. Then Charles and Beth Kuntzleman turned up, at what was possibly the perfect moment. Their fitness program was a sophisticated and appealing product, and they had years of solid experience in implementing such programs for customers like the national Young Men's Christian Association and Phillips Petroleum Co.
Initially, Fatjo's aim was simply to market Living Well through corporations, much as the Kuntzlemans had done. A company's employees, sometimes subsidized by the company itself, would pay around $150 each to take one of the program s three basic 12-week courses (diet and nutrition, cardiovascular health, and overall wellness and stress management) at their workplace. "A person comes twice a week, for 15 minutes of lecture and 45 minutes of exercise," Fatjo explains, adding that the client's progress is closely monitored and analyzed with the aid of computers. Introduced in July 1983, this incarnation of Living Well has made itself welcome in a variety of settings. Its customers range from the Chapelwood United Methodist Church in Houston to Allied Corp., the $10-billion-a-year conglomerate based in Morristown, N.J.
The customers, for the most part, have been satisfied. Lorraine Daigle, corporate manager of occupational nursing and special medical programs at Allied, likes Living Well's emphasis on aerobics and stretching exercises (no expensive machines are needed), and its computer-based monitoring system, which allows her to keep track of financial payoffs to Allied as well as individual self-improvement more easily. Daigle herself signed up for the first program, and is now both a convert and an ex-smoker. "I'm sorry to say that I used to be a three-packer a day . . . I've just completed 10 months of abstinence," she notes. Although still waiting for the results of an in-house study of Living Well's effects, she is convinced that there are bottom-line benefits. Living Well's own studies report 55% reductions in their customers' health-care costs; productivity improvements of 52%; reductions in absenteeism of 58%; reductions in turnover of 33%; and a return on investment of $5.60 for every dollar spent on the program.
But as Living Well began to make its way into the marketplace, a number of problems surfaced. The national distribution system Fatjo had outlined to the Kuntzlemans depended on signing up fitness professionals who were already active in the field and transforming them into entrepreneurs. But these professionals were not, for the most part, good businesspeople. "They didn't have a sense of going for the jugular, of closing the sale," Charles Kuntzleman explains. Fatjo also recognized that the Living Well program could lead to a dead end. Once participants had been through the three courses, they were left on their own, predisposed to backsliding. And Living Well was left with the need to go out and find new customers.
Then, one winter day, Fatjo was reading an article in Time magazine on the fitness industry: What he read began to fit together with Irwin's market studies and with his own experiences at BFI and The Houstonian. Health and fitness, Fatjo suddenly realized, had much in common with trash. It was an immense industry -- Time put it at $35 billion annually -- but it was highly fragmented, with a somewhat less-than-august image. And it was hamstrung by a lack of capital for expansion. "It absolutely amazed me," Fatjo recalls. "Here I'd been involved in health and fitness since 1975, and I had no idea of the scope of the industry. It was bigger than tobacco, and rapidly catching up with alcohol. I related this to the founding of Browning-Ferris."
Waste disposal, Fatjo had once concluded, was in industry searching for an identity. Fitness, he concluded just one year was groping for that same sense of self.
"When you think about tobacco, think Winston or Camel or True, when you think about alcohol, you thin Dewars or Budweiser or Coors. But when you think about fitness . . . " Fatjo pauses, running the question through his mind one more time, "you don't think of an thing -- there's no industry leader, no acknowledged national presence. We resolved to become that company."
Fatjo, to lie sure, was not alone in this ambition. Five years ago Control Data Corp. (CDC) of Minneapolis was concerned with rapidly rising health-care costs, and in response implemented a corporate "wellness" program of its own design. Dubbed StayWell, the program was remarkably successful and generated a lot of outside interest. In 1981, CDC established StayWell as a product, and has so far offered the program to some 55,000 employees of 44 different corporations. StayWell 'resembles Living Well: At the moment, in fact, the principal distinction between the two packages may lie their prices. StayWell's full offering costs $150 per person per year as opposed to Living Well's $450 price tag for a 36-week program.
In April 1983, Bally Manufacturing Corp., in Chicago, also became a major player in fitness, acquiring Health & Tennis Corp. of America (HTCA) for $72 million plus a five-year earn-out of around $56 million. HTCA had been built up over a period of 22 years by fitness fanatics Roy Zurkowski and Donahue L. Wildman, who purchased troubled but nonetheless promising athletic clubs. It now encompasses 287 centers in some 21 states, with almost 1.3 million members and annual revenues of $264 million, all of it backed by Bally's $1.3 billion (1983 revenues) clout. "I'd call that a national presence," says a spokesperson.
