Private Fitness

Private Fitness, LLC

I. Background of the Case

A. Summary of the Case

Rosemary Worth opened Private Fitness LLC, a small health club located in Rancho Palos Verdes, California, an upscale community in Los Angeles area. Opening the said business, Rosemary used almost all of her personal savings plus additional bank loan in renovating the fitness facility and buying the necessary fitness equipment for her health club. She contacted five instructors to run and conduct class and training sessions. And she even hired Kate Hoffman as manager to handle the marketing, management and operations of Private Fitness who also one of her instructors and a long-time friend.

However, Rosemary found out that there is a theft incident occurred, committed by her friend, Kate. Kate have been dishonest and was caught stealing from the cash drawer.

B. Case Facts

1. Rosemary Worth had been working as aerobics instructor and fitness model where she won many local fitness competitions. She wanted to go into business and opened Private Fitness to increase the standard of her living by capitalizing on her reputation and knowledge in the field of fitness and wants to spend more time with her children.

2. Private Fitness does not offer membership for open access to fitness equipment and classes compared to large health club in the area.

3. The said fitness facility has been operating for six (6) months.

4. Her fitness instructors were being paid on commission basis ranging from 20% to 50% of revenue depending on the instructor’s experience and on whether an instructor brought the particular client to Private Fitness.

5. Kate Hoffman who is the manager was being paid with a salary plus a commission based on gross revenues, since she is teaching a class as one of the instructors and also doing staff works as front desk.

6. Rosemary caught Kate stealing from the club and did not record the new fitness client who is working out and was being handled by Kate herself, even worse is that Kate is giving discount in exchange of writing checks out directly to Kate.

II. Statement of the Problem

What should Rosemary do to manage and make her business work effectively without her stepping in and doing everything herself?

III. Objectives

A. To operate and gain profit effectively and efficiently.

B. To ensure that all revenues are all recorded.

C. To implement better procedures or controls that she could use to protect her business.

IV. Areas of Consideration

A. External Factors

1. Remote Environment

a. Location

1) Private Fitness, LLC was located in Rancho Palos Verdes, California, an affluent suburb of Los Angeles. Rancho Palos Verdes is translated as “Ranch of Green Trees” or “Ranch of Sticks”, known for its large tracts of open space and expansive views of the Pacific Ocean.

2) Based from 2010 United States Census, Rancho Palos Verdes has a total population of 41,643 with 15,561 households, 67% were married couples, 33% were children and the rest were single individuals and individuals living alone who were 65 years of age or older.

2. Industry & Operating Environment

Considering the factors on the remote environment, the following areas might affect to resolve the said problem.

a. Competitors

There is already an existing industry with well-known and established health club in Rancho Palos Verdes.

b. Customers

Target customers for Private Fitness were the average income earners, giving consideration to rate of the classes and training with quantity discounts.

B. Internal Factors

1. Tangible Assets

a. Physical Structures

There will be possible target customers who will go to the said health club since Rosemary Worth rented a building located in a convenient strip mall with ample parking, which was formerly a fresh food market, which she have renovated and placed