If you live in Charlottesville, you can’t go far without passing an Atlantic Coast Athletic Club. And if you’ve never heard of it, you probably have heard of it’s acronym ACAC. Now with over 60,000 members across Virginia and expanding to northern regions, ACAC is on a mission to keep entire populations healthy and fit. With an emphasis on prevention and a unique model of medical fitness, this is a health club for everyone and anyone that strives for a life without illness.
You can thank Phil Wendel, founder and CEO, for creating this solution. Ranked as one of the top companies to work for in Richmond, Va, Phil is keeping his 3,000 staff members in his 10 clubs engaged, motivated and passionate about keeping their clients in tiptop shape.
Founded in 1984, the first ACAC location (in a former Safeway) had two goals: 1. Be Clean and 2. Don’t close. Phil was already a successful entrepreneurs, having grown his first company, Lakeland Travel (now WorldStrides) from the basement of his home into a 100 employee engine that booked 50,000 annual youth trips to Washington DC and generated $50 million per year in revenue. A college baseball player and outdoor enthusiast, Phil wanted to invite the masses on his health kick bandwagon. He saw the gaping hole in the fitness industry: the millions of Americans that went to bed every night thinking, “I wish I was more active–I should do something about that”. And with that thought, Phil set out to “do something.”
Take us to the beginning. How did you start Lakeland Travel?
I was 23. I was married at the time, and I had my first daughter. My wife was working. The initial idea came from working summers as a teacher in Chicago Public Schools, and I just couldn’t make ends meet. The first motivation for Lakeland Travel was when one of my co-teachers took a group of kids to Washington, DC in the spring, and asked me to go along as a chaperone. And at the end of that trip I said, “hmmm, why don’t we do this ourselves?” I had experience growing up in Washington and thought I could provide a more professional product.
I was also a basketball and baseball coach. In my third year of teaching, I encouraged other coaches in the school district, during spring or summer, to take a group of kids to DC and make a little extra money. Parents loved getting a respite from their preteens, kids had an educational experience, and the teachers were able to make a little bit of extra money taking the kids. Classic win-win.
When did you officially form the business?
After four years of teaching, I left. I was probably 25 or 26 at the time. I had made twice as much money taking kids to Washington, DC as I did as a teacher. I thought it was worth the risk.
Did you come from a business background?
I had no business interest whatsoever. My passions then were outdoor activities like baseball and football. I was also interested in history, government, and economics. I grew up in Northern Virginia – it’s a fun place to grow up, rich with history and politics.
Where was your first office?
In my basement in the Chicago suburbs [laughs]. And then we moved to a $100 per month shared space with a barber, and we were there for about a year and a half.
When you judge the success of the early years, what are the numbers that you think about?
Success came in the mid-70s after we had been in business for four or five years. The company was making money, the employees were really happy. I was able to pay them well, and we had about 95% retention of our customer base. Another win-win-win.
When did you decide to sell?
I had relocated from the Chicago suburbs to Charlottesville in 1979. I first looked at the option to sell in the early 90s. I said hey, maybe this company is actually worth something. I had no idea it had any value. I made the decision to sell in the late 90s. I was burned out, satisfied that I had accomplished something, and in order to take that company to the next step, we needed outside investors, and then I could also get a nice check. We were a $50 million revenue company. We had 100 employees and took 50,000 kids a year to Washington, DC.The deal closed in July 1, 1998.
That’s a lot of kids!
Well in 2013, WorldStrides takes about 90,000 kids. They’re Charlottesville-based. It’s probably one of the least known yet largest, most successful companies in town. They have offices in China, Florida, Salt Lake City…and they do a lot of music festivals. A lot of their growth has come through acquisitions.
So you’re a health nut. When did that start?
It was unusual for somebody who went to college in the late ‘60s to stay active after college. I continued to play baseball and I started to run a bit. A friend of mine in the mid-70s introduced me to weight training. It all became a part of my lifestyle.
People were making fun of you in 1972 or 1973 if you were doing something physical. You might be 28 or 29 years old and they were saying to you, “come on man, that’s for high school kids or college kids.” There were others in the 30s and 40s, but our industry really didn’t start until the 70s, and even then it wasn’t very impressive.
Why do you think there was a resistance to physical activity?
Did we all have good experiences in high school PE or varsity sports or junior varsity sports in high school? And doctors ran cigarette ads! In the 60s and 70s, the concept of physical activity was alien to most Americans.
So we’ve evolved. Modern medicine is about staying active your entire life.
Tell me about the beginning of ACAC.
I opened the first club in 1984, at the corner of Hydraulic and 29. I think before we opened it, it was a Safeway. It was just a clean, nice place to work out. I thought that was something the community could use.
But today, ACAC is more than a gym, correct?
Yes – nowadays it’s evolved. ACAC is a medical fitness facility.
The epiphany came in the mid-1990s. The club had been open for 10 years, bleeding a lot of cash. In the mid-1990s I read an article that said 150 million adult Americans go to bed every night saying “I know fitness is important. I wish I did more or I wish I did something.”
We realized that no one in our industry was attracting older adults. No one in our industry had medical affiliations. Nobody had made it comfortable for someone over the age of 34 or 35 to go into a gym. That was my aha moment. What if I build a health club company that could appeal to people who are (a) already active, that the market was then attracting, and (b) the other 150 million adult Americans that no one was attracting?
I said, “I could do that.” That was really the genesis of the ACAC you see today. We now have about 60,000 members in our 10 clubs.
I guess the boredom set in when I thought we had the product down pat at Lakeland. From that point on I was looking for some sort of a challenge. I didn’t even know I was entrepreneurially-oriented. Then, when this opportunity came across my desk – building a club company that would serve (a) older adults, (b) people who were deconditioned, that was the inspiration. And if you’re doing your job right, you get good returns as an investor.
Do you think that’s a standard way that people see business?
Not necessarily. It probably varies by individual. Teaching is fun. Travel was fun. With ACAC – fitness is fun. Again, a win-win – the customer, the student, the person that works for you, the person that invests in the business. Everybody wins, if it’s done right.
It sounds like you had an established philosophy on management by the time you started ACAC. Did you continue to learn?
Absolutely. Every day. It’s funny, I was not a good student in high school or college. I have become more of a student in the second half of my life. I do a lot of business reading and a lot of observing others. When I built our first big ACAC, the one we put in Albemarle Square – it was a by-product of visiting over 200 different clubs in the country, and taking away best practices.
Is there anyone you look up to or have watched?
Sam Walton said he never had an original idea; he just spent four to five years going around the country looking at successes that other people had had, and replicating them. We did a lot of that in the early years with ACAC. Our industry shares a lot – when you’re involved with this industry, you know which are the good ones. You go see them and look at their best practices.
Where is ACAC going?
We could double over the next 3-4 years because we’re so closely aligned with medical fitness. ACAC is now larger than Lakeland was when I sold it, both in terms of employees and in terms of revenue. We’ve had a lot of the best hospital companies in the world that have reached out to us over the last few years, looking for us to manage population health in their areas. That’s pretty exciting.
Medical expenses in the United States are more than double what they are any other place in the world. Our quality of care is excellent. But I think one of the ways you’ll see Affordable Care function in a positive way is encouraging population health.
Right now if you’re a medical school student, you’re taught how to fix sick people. I think we’ll see a big change with a focus on prevention. I think as a fitness company, we are probably the best in the country – I really believe that – at managing population health. We have 22,000 local members, which is unheard of for a club company in a city of this size. And a lot of that has been our ability to attract what our industry calls the deconditioned – the 150 million I spoke of earlier.
What makes ACAC unique?
It’s not just to be there for people who are already fit – but rather to attract a lot of the other Americans who aren’t doing the right things with their bodies. Why not serve people who want us but are afraid of us?
What’s your definition of founding?
With both Lakeland and ACAC, we looked at things differently. Perhaps that’s a founding concept. With student travel, we tried to make an experience that was fun and educational concurrently. I don’t know if you want to call that a founding, but you can. I think it’s doing something slightly different in an industry that already exists, that hasn’t done it before.
Who is someone in Charlottesville you admire?
There are a ton of people I think of who have done absolutely great things. Coran Capshaw has been phenomenal for the community. John Grisham, though you probably wouldn’t call him an entrepreneur. Howie Long. I know all of these people a little bit – not a lot. I admire what they’ve done.
Do you think Charlottesville is good at incubating?
Yes it is. You’ve got UVA, and you’ve got one of the best places to live in America. I think Charlottesville is a startup haven for a lot of the tech companies. But I’m not tech savvy– a lot of folks have done extremely well in that area. SNL does a great job locally. There’s just a ton of good stuff going on here.
PRA – Pharmaceutical Research Associates – I know I missed on that one. They were a tenant of mine, when I owned a building on Seminole Trail. And they said, “would you mind lowering our rent and we’ll give you 20% equity in the company?” And I said, “I’m not willing to do that.” I should have! [laughs] Missed opportunity. [Editor’s note: PRA currently has 11,000 employees and a valuation of $2.3 Billion]
In the early 80s or late 70s – if my daughters wanted to come back and live in Charlottesville, there were no jobs for them. They could maybe work for their dad, who had a couple of successful companies, or they could work for UVA, but as a city we weren’t very employer-friendly. I think that’s changed radically. I think there’s an awful lot of good jobs to be had.
Any areas of improvement for Charlottesville?
There’s a no-growth attitude of a lot of people. When they moved here in 1980, they said “this is a great place to live, and I don’t want anyone else to come here.” But we don’t want to restrict the number of people we can have. I think it’s a lot better community today because there are great job opportunities. I’ve liked the growth.
How do you define success?
The fitness industry is notorious for having low-paying jobs. ACAC probably pays nationally in the top one-tenth of one percent. We created job worth for exercise physiology grads from UVA as trainers – that I define as success. Being able to pay more hourly to front desk people that render exceptional levels of customer service – that I define as a success.
When we became profitable, we started offering insurance benefits and 401Ks. We’ve created career paths in fitness. And concurrent with that, retention rates of members were and continue to be high. I’d say that’s pretty successful.
Is failure a word you think about?
Oh I’ve blown a few in my life! [laughs] With Lakeland, one time we thought we could print some t-shirts. Doesn’t every 13 year old kid want a t-shirt? So we bought 10,000 t-shirts and tried to sell them to our kids on tour. That idea went in our white-elephant room, so, yeah, I’ve had a few of those.
Lee Iacocca, the CEO who was very successful in turning Chrysler around, had a great line – “You don’t want to depend too much on your bean counters, because they want to get up to 99.9% certainty.”
When I get up to 80% certainty that some decision is the right thing to do – it’s time to push the go button. So that isn’t to say we haven’t started things within the clubs that haven’t worked. But concurrent with that, for me it’s been a lot of gut instinct.
I talked about those two aha moments – one was doing educational travel professionally, and the other was doing fitness for anyone other than fit 18-34 year olds. I saw those as rather easy challenges. I had a high level of certainty that I could accomplish those things. 100%? No. But enough that it was worth taking a run at it.