There has been a fair amount of talk about whether California Wow membership deals (lifetime, etc ) and anger regarding earlier closing times…

Well, it’s all about costs and the number of members on average per outlet. As of Dec. 2006, revenue was up but overall net income was down considerably compared to about a year ago due to increasing the number of outlets from 5 to 9 (or is it now 10?).

On their website, it is stated that when there were 5 outlets there were 56,000 members (1st quarter 2006) or 11,200 (avg) members per outlet. As of the 2007 (1st quarter 2007), there were 78,000 members based on 9 outlets or approximately 8,667 (avg) members per outlet. Apart from the additional costs for opening new outlets plus a large fee for recent depreciation on tangible assets, the company’s costs per outlet are higher since there are fewer members on average per outlet than previously with 5 outlets.

It all boils down to controlling costs (as in any business) and trying to increase revenues. Earlier closing times, in effect, would decrease operating expenses. And of course, another goal is to move up the number of members substantially per outlet to increase revenues, which they are trying to do by offering better value memberships (hence, volume to bring in more money).

The question to ponder is whether such expansion has been too rapid to sustain financially in the year (s) ahead. At the moment, I wouldn’t say that California Wow will be closing its doors soon as there are ample liquid assets to continue to operate, including enough funds for payments towards current debt—yes, a lot of debt due to expansion.

Therefore, the company’s focus is lowering costs and increasing the number of memberships to gain higher net income to survive at the current number of 9 (or 10?) outlets. Since sunk costs (or start-up costs) for the additional outlets have already been taken into account in the books, things should be looking up as long as they can increase the number of members and reduce costs further.

Anyway, let’s hope so….things can change especially in business….

And the Thai connection is...............

how many threads do we need on this?

I think that he is talking about the health club chain who have a branch in Pattaya.