How do you build a billion-dollar fitness empire, especially in East Asia, when women don’t like to sweat and men don’t like to work out? Eric Levine, owner of Gold’s Gyms, 24-Hour Fitness, and California Fitness presents amazing marketing and branding strategies; successes and blunders; real estate lessons; cautions about landlords, partners, contracts and overseas laws; and critical cultural issues that grew revenues to $100m/year in Asia alone.
Successful international stories
A funny translation blunder
How to succeed and not have international blunders.
Eric Levine started in the fitness industry in 1979, when he was the first franchisee for Gold’s Gym, and opened a chain of six clubs. These six clubs were the most profitable in the entire Gold’s chain of more than 100 clubs. During that time Mr. Levine established Super Gym Advertising and Marketing company, the exclusive worldwide agency for all Gold’s Gyms, winning many international awards including the silver medal at Cannes! Eric then became a partner with Ray Wilson Family Fitness Centers, which grew to 72 locations. Eric went on to Asia and created California Fitness in Hong Kong, Singapore, Taiwan, Korea, Thailand, Vietnam, and Australia. His clubs broke every imaginable record for fitness centers around the world.
Eric then sold the chain of California Fitness centers to 24-Hour Fitness, retaining a share in that company. In 2004, 24-Hour Fitness sold for an incredible US$1.7 billion. Eric was also the founder of Planet Yoga and Bikram Yoga in Asia, the first large yoga studio anywhere. Eric is currently an investor with Mark Mastrov in New Evolution Ventures which owns and manages such companies as UFC gyms worldwide. Eric has an exciting new company, combined with Revolution Recrafted, in partnership with world champion boxing legend Manny Pacquiao. The new company is called Hitt by Manny and provides a boxing and full-body workout in a boutique setting. Eric is also the CEO of Eric Levine, Global Fitness Expert, a fitness consulting company specializing in all aspects of the industry.
Hello everyone, and welcome to Global Gurus. Every Friday, we explore stories of international business and speak with industry leaders operating around the world. I’m your host, Phillip Auerbach, of Auerbach international (www.auerbach-intl.com). Thank you for joining us.
If you’re tuning in for the first time, we start each podcast with a running segment called “Faux Pas Fridays,” where we explore funny bloopers or mistranslations that do not quite convey the professional image that your organization wants to project. And since today’s guest will talk about a very interesting mistranslation that happened to him in China, I’d like to add to that by giving an example of a sign in China outside a Mexican restaurant in Shanghai. The top of the sign, of course, was in Chinese and the bottom was In English. The following is the English translation: “Zapatos Mexican Cantina does not sponsor prostitutes in our establishment. If you are a prostitute, please refrain from entering our garden or restaurant. If you are unsure whether you are a prostitute, please ask one of our friendly security guards to sort it out for you.”
So, today’s guest is Eric Levine. He’s been in the fitness world for over three decades, and he started the very first franchise at Gold’s Gym, which was in Santa Barbara, CA, and then in Toronto. He sold the initial clubs and moved to the LA area, where he partnered with Ray Wilson to create 72 Family Fitness Clubs worldwide.
After that, he merged Gold’s Gyms with 24-hour fitness. He then expanded into Asia with a chain called California Fitness, growing his revenues from zero to $100 million per year by his third year, with an EBITDA of $38 million in earnings before interest, taxes, depreciation, and amortization. He broke every record in the fitness world and opened in Hong Kong, Singapore, Taiwan, Korea, Thailand, Malaysia, China, and Vietnam. In around 2008, he sold California Fitness to 24 Hour Fitness while retaining some 24-Hour Fitness shares. Chairman Mark Mastrov sold the company for $1.78 billion.
Eric loves adventure, meditation, yoga, and mystical stuff and has traveled to 89 countries.
Welcome, Eric. I’m delighted you’ve joined us.
Thank you, Philip. I’m glad to be here.
So, before we dive in, could you perhaps tell us a bit more about your background, how you grew up, and how you gained your global experience?
I was born in Montreal, Canada. And didn’t enjoy the constant blizzards. When did they talk about global warming when I was a kid? I recall it snowing well before Halloween and continuing into May day after day. And now my brother, who still lives there, tells me it snows maybe ten days a year.
One of my goals was to get out of Montreal. I remember asking my dad. I was into golf, and I was watching the Hawaiian Open and looking at the ice on the inside of the windows of my house; I said to my father, “Why did you decide that the family should have a habitat here in this tundra?” You know, I decided to leave Montreal as soon as possible. And my first foray, it’s a very interesting story, I think. I was born in Montreal in a Jewish enclave called Coté St Luc. I think we were 100% Jewish.
So, I was into yoga and meditation, and my heroes were The Beatles. The Beatles found the Maharishi Mahesh Yogi and went to India, and that was the beginning of their, you know, spiritual story, which George Harrison stated.
And I thought, “Wow if they want to do that, I’m going to do that too. I had my bar mitzvah, and I had $3,600 in my savings account, and when I was 14, I took all my money, and I ran away to India. The only one that knew was my brother.
And so, it took two days before I got there. I had to fly from Montreal to Amsterdam, then to Dubai, then to Delhi. And two days ago, you know, my mother and father were wondering where their 14-year-old boy was.
And finally, I got through to my mother. And she said, “Where the hell are you? And I said, “I’m in New Delhi. And she paused and she said, “Oh, what new deli is that? I’ll come and pick you up. I was thinking about meeting a vendor who has a delicatessen on Roosevelt.”
So, that was my first crazy adventure into international waters.
Amazing at 14!
Yeah, well, So, then I traveled.
I wanted to be a golf professional. I played in Florida for a while and wasn’t good enough. I mean, when I got there, I was already a scratch handicap. And my caddy, I was 17, my caddy was 14. He was twice as good as me, and there was no way I was going to end up making that.
And I was lucky enough to… well, actually it was mine. My girlfriend at the time’s mother called me and said to go get the Newsweek magazine, and I said OK, you know, I was back in Montreal at the time. It was snowing. She doesn’t know. Go now. And first of all, I don’t know why she would call me. She didn’t like me. None of my girlfriends’ mothers liked me, apparently, and she was insisting. Anyway, to make a long story short, I got the Newsweek and on the cover was this Christie Brinkley-style beautiful blonde and water, and it said Club Med, The Geos that work there are the true gypsies of the world. I didn’t know what Club Med was. I didn’t know what a Geo meant, but I certainly knew what Gypsy meant, and I certainly liked the picture. And I read the article, and I’m telling you, when I put that magazine down, nothing was going to stop me from getting that job.
So, it’s a French company and I spoke French, being from Montreal, and I applied, and I remember getting the envelope from them. My heart was pounding So, hard that it said, “Felicitations!” Oh, Congratulations! I’ll see you on April 15th at Club Med Canyon, Martinique. I did it!
And the beautiful thing about Club Med was that every six months they sent you to a new village all around the world. I traveled from Martinique to Tahiti. I went to France, to Africa, to Greece, and all over the world, and it was not just that adventure, but also, the two other things that were extremely important to me. I mean, we got paid $60.00 a month, so it wasn’t that.
It was to travel to 600 new people a week from all over the world, and the people that worked with me were also, international gypsies that we’re looking at adventure, and I’ve got to appreciate the value of each culture and that there’s no right or wrong. Then everybody has a different mindset and they’re growing. They were brought up differently, and it was an opening to a certain type of intelligence on internationalism, and I enjoyed that.
That’s marvelous. It’s dovetailed in many ways with my background. That’s superb.
Really. Who were you? Were you also at Club Med?
I’ve never been to Club Med, but I was introduced to the world at a similar age, around 15/16 when I first started traveling.
At that age, it’s all big eyes and new experiences and fun and adventure. You know, as you get older, you go through all these different phases in your life. Life is like, “No, I’m not going skydiving anymore.” Most types of knowledge, instead of being more, OK, I’ll try it, you know, and we go through these different phases and so, but adventure travel, learning new things, what could be more exciting than that?
Right. And you then got into the fitness industry, and you became extremely successful in that.
My father was a professional athlete, and we grew up in that mindset of vitamins and no smoking, no drinking, and exercise. We used to exercise every Sunday at the YMHA. My father would work every day and you would take me on the weekends. And it was all part of my life.
This is a fascinating story. After Club Med, I believe I spent four years at Club Med. I was an actor growing up, a child actor, and I thought, well, I should be able to make it in LA.
I was a stripper and a waiter, making more money than I was as an actor, but I finally landed a job. I had a great role in Mardi Gras in New Orleans, and it was with some big actors, and I thought, hey, I made it. I got up and we started rehearsing immediately, and I got a call from my brother at 6:00 in the morning, and he said, “Did you hear that Mardi Gras was canceled? And I said, “How could Mardi Gras be canceled?” and I hung up on him just like I wanted to go back to sleep. And then I got a call from my agent to make a long story short. He called me down to Sunset in West Hollywood, which was his agency. It rained every day that year in LA, by the way. And he says, “Did you hear Mardi Gras was canceled?” I said, how? How is Mardi Gras canceled? “It’s a yearly occurrence, you know. So, the unions went on strike”, and I said, “Well, where are we going to shoot it?” He said “no, no, no. Trust me, I have already spent that money twice.” I said, well, next year, never grasping at any possibility, you know, in the field. And he said, “No, no, it’s over. They have insurance. Get out of here.”
I went and I left that office and I’m standing on Sunset Blvd. I have a camera that’s worth nothing. When I sold it, the chain in my trunk was worth more than the car. But anyway, I’m standing on the curb, and I hear the sound of the car that I love. It was a Porsche turbo, and I was looking over, and I didn’t realize it. And I’m standing in front of a foot of mud, mud, water, and he comes by me. Tsunamis me. This is, you know, a perfect, perfect movie, and I get soaked from head to toe. It’s cold. The tears are meshing with the mud. You know what? I spoke. OK, that’s it. That’s it.
And I don’t know if you know LA, but I walked from West Hollywood to PCH Hwy 1. I walked to Venice Beach, which is about 4 hours away from the driving range. I left my car there. I finally made it to my room. I took my boots off, that’s all. I kept all the other freezing stuff on, and I looked up at the sky and I said OK. I get it. You don’t want me to be an actor? But I have no idea what I’m supposed to do now.
Show me what you want. So, I wake up in the morning, you know, depressed and freezing, and I make my way to Gold’s Gym, which was one of the clubs. At that time, men and women never worked out together. Even at the spas, women were present on Tuesday, Thursday, and Saturday. And in Gold’s Gym, the only women that worked out there were biker girls who were tougher than the Schwarzeneggers. And the frog knows, you know, I’m tattooed.
And I’m standing at the front desk when this beautiful girl walks in, and she says to me, “I worked there. She said, “Would someone? Would you be able to do that? Train me? And I looked behind me to see whom she was talking to. And I said, “Look at me here. You would want to work out here. Look behind me. Look at…” Yeah, she says. “I think it may be that you guys would get me in good shape. I’m doing a Playboy cover and I want to get in good shape.”
And I said, “Do you see the girls in here? Did you have to not be intimidated? She’s not. I think it would be interesting. And then my mind says, “Would you, would your friends feel the same way as you?” It’s just that I think so. And boom, from that moment I decided I was going to buy the name Gold’s Gym, and I bought the name, and it opened up as you mentioned in the opening for Toronto and Santa Barbara, and I changed the name from Gold Gym to Gold Fitness, which was easier for women and men, I did all my branding, all of everything, to feature women. And make it an intimidating atmosphere.
And when I sold my clubs, I had more than 50% women’s memberships, So, what I had done was get into the fitness industry because that’s what I knew. We took off like crazy, and that was the start of my four-year journey into fitness business ownership.
That’s amazing. What a great story. Can you share some of your many successes, internationally as well, and you know, how you opened them, and how things succeed for you?
O.K. Yes I will.
So, when I mentioned Club Med earlier. I learned about branding. They were an international organization with 80 locations, probably 50 or 60 countries.
So, they had to know something because, as you know and I know, each culture is different. There are lots of nuances, and you have to know what you’re doing. So, they obviously knew.
And I watched that even though the food was OK, the rooms were not great, 2 star, 3 star, and our sports were kind of OK. Our shows that night, which I was putting on, were camping at best. In the parking lot, Philip, everyone was crying when they had to go home. Everybody! Doctors would give up their practice if they could stay a few months and be the doctor on the scuba boat.
So, I realized, well, hell, it wasn’t about money. It wasn’t about any of it. It was about the experience that they got. That the value of that week could not be duplicated. If you paid 20 times that, we, as Geos, got paid $60.00 a month, as I mentioned, and 1000 people would have taken our job, you know, waiting to take our job when I found out years later, the gentleman that hired me, who interviewed me in New York, said I was the only one they hired out of 1,000 people that weekend.
And I said, “Why? Was it because I spoke French?” She said it was that wild sparkle in your eye that told us that’s what we wanted and that I’ve never forgotten that. That’s one of the best compliments I ever got. But I learned about branding through the club.
They would do a 15-second commercial called “You See,” you know, someone just blowing their hair in the breeze at the Breeze Club Med, the antidote to civilization. And I’ve homed in on that. And when I opened up my first Gold’s Gym, I also opened up a super gym advertising. And I started doing advertising and marketing for all fitness centers. I was the official Gold’s Gym at the time, it was more of an advertising firm, and it had grown to about 100 locations. And on the second commercial that I made, I made it, did it myself, directed it, wrote it, and shot it. I came in and won the silver medal at the Cannes Commercial Festival, behind Michael Jackson.
And they used my commercial as a promo for the world to get people interested. So, I realized that, hey, I’m good at this and that has helped me, I believe, through all that I’m doing. I know that marketing is a big factor in success in every country.
I took that with me when I worked through all the different clubs, as you mentioned, Gold’s Gym, Family, Fitness Centers, Family, and Fitness Centers. What a perfect name. During the Reagan era, you know, families were cool. And that worked exceedingly well. I had my partner, Ray Wilson, whom I spoke to yesterday. He’s 95. It’s still my mentor and we partnered in that and then we merged with 24-hour Nautilus, called 24-Hour Fitness. Mark Mastrov was a founder of 24-Hour Nautilus, and I retained a big shareholding, the third biggest in the company, but I didn’t want to be part of big corporations. So, I went and opened up a California Fitness center in Hong Kong.
Originally, our plan, for Ray, and me was to open up in the Philippines a low-cost fitness center. But when I landed in Hong Kong and I couldn’t sleep, Hong Kong it’s not that big of an island. I walked almost the whole island. I saw that everyone had a brand name. You knew if you were a bank teller if you had a Chanel bag or a Hermès bag. And I’m thinking, well, how would they do that? And I realize that branding is so, important to the Hong Kong people.
And I said to Ray, I think I’m going to stay here. And I’m going to open up a high-end fitness center. And in Hong Kong and throughout Asia at the time, before the handover from the British to China in 1996, there were no fitness centers. None. None.
And here I am. I did not know anybody there. I don’t know anybody. I’m in Hong Kong, and it’s an international situation. You had to learn English in the Chinese school system at the time. Now you don’t. No one speaks English — Sadly we all know what’s happening in Hong Kong. — But at the time, everyone spoke English. There’s a huge expat community.
So, I figured, you know, let me open up in Asia. I’d better start with the international situation. So, there you have it. I’ve already moved to Hong Kong, and everybody is telling me the Chinese will never work out. Women will never sweat in front of a Chinese man or any man. You’ll never find a location over here. A couple of 1,000 square feet. The leases are for one year. That’s as long as you’re going to get. And the leases are one year at best. Go home, go home. Everything was against it. I’m thinking, “Geez, I’ve already visualized this, I’ve manifested it. I’ve already seen the club. It’s four stories. It’s a ground-floor entrance. It’s 40,000 square feet. I see and hear the music. I see the people. I smell the scents. I could even feel the money I had already manifested to a definite level. It’s impossible that I’m going to fail this is impossible to fail, impossible.
I remember leaving a landlord who was so pretentious that he was blowing cigar smoke rings right over my nose. He was a master, and I’m thinking I said, “Can you stop smoking, please? ” Well, I’m not going to start smoking because of this. The meeting’s over. There’s no way I’m going to rent you my place for any amount of money. There’s no such thing as a gym here. They evicted me. So, I left that kind of depression and again thought, is my manifestation not working anymore? And sure enough, I walked down the street a different way than I normally get to this area of international restaurants and shops, and I saw a sign going up. On a building that I had never seen before, guess what? Four stories, all glass, ground floor, entrance, escalators exactly on the side that said: “For lease.”
It was exactly as I had imagined. Now to the tough part. OK, I’m in Hong Kong. I don’t know anyone. How am I going to persuade that landlord to give me his space?
So, across the street from that structure, there was a restaurant called California. And I had heard about this billionaire from Montreal, a Jewish guy. And I found while traveling around the world that Jewish people help other Jewish people. That’s what I found throughout all my travels. Which is a beautiful thing. And I stopped in, and I said I heard that Allan Zeman owns this restaurant, and she said one set. He comes over and says, “I’m Alan Zeman. And I said, “Mr. Zeman, Hii. I’m Eric Levine. I’m also from Montreal.” He said oh! How are you? One thing led to another, and I sat down. So, what are you doing here? I said I’m trying to open up fitness centers, so that’ll be good. Hong Kong requires it, and I specifically mentioned the building across the street from you. That’s what I wanted, and he laughed.
He said that’s 40. I said, “1000 square feet.” Yeah, he’s going to put a gym in there, yeah. I said, “Well, how are you going to do it?” “Well, first I have to meet with the landlord,” I explained. So, William, he’s my friend. Let me make a phone call. The landlord came down, So, this was all within half an hour of getting cigar rings. to make a long story short, the guy says, “Sure, I’ll rent you the space,” he says. Can you afford it? And I’m known for my big cojones, and I’m thinking, of course, I can afford it. Yes, it’s 250,000 U.S. dollars a month. Right.
I bit my lip and, being a salesman, I just showed no emotion. I said, “Oh, that’s interesting, yeah. Of course, I can afford it, I said. OK, well, I need six months in advance. Now it’s a million and a half dollars. So, OK. And he said, “Well, if you’ve come up with that kind of money and you show me certain covenants….” To make a long story short, I called my partner, Ray Wilson, at the time, about 75 years old. I said to Ray, “I’ve got great news. What’s that? And I found the best location! He was in California at the time. He said, “Well, how much is it?” I said $250,000 bucks” He said, “How did you get it so cheap? If it’s a yearly cost, that’s the cost of a California club.”. About that: And I said, “a month, Ray, a month.”
And I thought I gave him a heart attack because I didn’t hear anything for a few minutes. I thought he was dead. And he came back to life. And to make a long story short, on March 3rd, we opened up the first California Fitness in that location. It cost us four and a half million, not including the deposit. So, we’re in for 6 million plus, plus, plus. We made our money back 90 days after opening.
Wow, six million.
It’s crazy and it was so exciting. So much so, that I remember one day and thinking, “You know, I haven’t slept this week. And it was all too exciting, what with the adrenaline and everything.”
We pre-sold 3,600 people at about $1,200 each, and honestly, I would have to say 90% of them had no idea what they bought.
And that’s how I started in Hong Kong, in Asia, doing fitness.
That’s amazing. What a great story. You had told me a story before about the sweatshirts, I guess for California fitness. Perhaps you could share that with us.
Perfect for a master of translation like yourself.
I know there’s no such thing as personal training at my age. I started that and I’m thinking I want to have beautiful uniforms and I’m going to put something, uh, phrased in Mandarin. “At your service” is what I came up with, you know, at your service. I thought, OK, and I’m thinking, OK, I’m going to have 20 locations. So, I’m going to need it. I’m going to need 1,000 jackets. So, you know, they told me 500 jackets is, let’s say, $50.00, but if I go for 1,000, it’s $20.00. So, I said OK, let’s do 1000. So, I’m so proud of it and I’m having an all-staff meeting.
My assistant, by the way, was the one who suspiciously said, you know English very well. She’s always been known to speak Cantonese and English. I should have thought and never really heard her speak Mandarin anyway. I have an all-staff meeting there, and I’m so, proud of myself. I put my jacket on and I turned around and everyone was hysterical. — which isn’t a good sign.
And I say, “OK, So, what’s so funny?”
The wording of type of phrase that I wanted “at your service” was what a prostitute would say to her client. “I’m at your service. What can I do for you?” So, that was one of my first cultural lessons. That was an early one, but certainly, there were many more through my years of traveling and opening up businesses in other countries.
One of the things that you mentioned about the translation business is that one of the services that we offer is what I call Name Screening to exactly avoid that kind of situation, to evaluate your company name, your slogan, your product name. They should all be screened in at least ten major languages before you plunge in and do anything. Because that can happen.
And, you know, Phil, you’re so right. And it’s not just about the obvious stuff.
You know, OK, mine was an obvious mess up. And I caught it early.
So, the damage was done. I was defeated by whatever I locked in. But how many things go on that no one stops and tells you, hey, that’s not the way we look at that phrase? That doesn’t make us feel comfortable or like, you know, the subtleties that build up through the years. And people take it in so many different ways. You have to do your due diligence. Have someone like yourself, like your company, watching your back and leading you, because mistakes can be huge. Mine was a small one.
But it all woke me up. They woke me up.
And another thing that I learned, Philip, was that early on, which was so important that Canadians or Americans would never know. I don’t think any Westerners would know this. I learned the phrase. “Taking someone’s face” or “giving someone a face”, and you know, in our world, we all have egos, we have the reputations that we try to make and protect.
But in Asia, “taking someone’s face” is so deep that they will either honor you for life if you “give them face” or despise you if you take their face,, and things like that. Thank goodness I learned that early. Because when you’re traveling around the world, you better understand what their culture is, what their hot buttons are, and the earlier you learn them, obviously, the easier your life is going to be. Whether you’re just living there as a tourist, as an expat, or doing business.
You have to be aware of the culture. They’re important for what they place importance on. And how can you merge with them? I mean, I had to lead because there’s no fitness there, So, I had to do what I had to do to get everybody interested in fitness.
And then, obviously, others came, and, like the rest of the world, you can lead, but you have to be sensitive. In terms of culture, so you don’t become the big, obnoxious Canadian or American, imposing your will on everyone. It has to be that sweet spot of yeah, of course, I’m going to teach fitness because we know that we were educated in that.
But I’m not saying you have to look like Arnold Schwarzenegger. The looks of the women there were something they didn’t want; they wanted thin and thin and modelesque. And the men didn’t want muscles at first. They wanted more of a Bruce Lee look, let’s say. And as things progressed, things progressed. So, my ads had to reflect that. And I was lucky enough that Cindy Crawford was my spokesperson. And she was ranked number one in the world at the time.
And so, women say, “OK, so. It’s about that look. And, you know, that was from immersion into the culture. I’d been in Hong Kong for a couple of months; I went to all the bars; went to nightclubs; went to restaurants; and went to fashion shows. I went to every place that I thought my members might go to. I would hang out with them to see what they were wearing and try to understand what it was that they wanted.
Certainly, different than the girls in California, certainly different than the men in Muscle Beach, but that’s not going to work.
And the name California Fitness was inspired by my logo, which featured sunglasses, palm trees, and the sun. So, you don’t know if they’re Asian or not. Worldwide, people like California, Hollywood, beaches, and Baywatch.
But not everybody loves America.
So, California Fitness. He had that excitement and mystique without roughly ruffling anybody’s feathers. And those are the types of things you have to know when you’re doing international business. You know what it is, I mean?
I’ll give you an example. Another one at my grand opening, I had the governor, Governor Patten, come and cut the ribbon. And there was another club that opened up soon after, a few months later, and they called it New York Fitness. I was showing pictures of Cindy Crawford and some local Hong Kong models. My competitors were showing various muscled African American men grimacing and doing the heavy lifting.
That’s wrong in Hong Kong and Asia. It’s ridiculous.
It’s the exact opposite. For whatever reason, I don’t want to, you know, criticize. He didn’t do his homework. He didn’t understand who his market was, and obviously, they failed, but it’s not so, you know, look that maybe worked in 100 countries.
But he didn’t realize that that was not the case at that time in Hong Kong. And that’s a perfect example of not understanding the country that you’re in, the culture that you’re working with.
Two things I wanted to add just for our listeners. The concept of saving face is very Asian, but it’s also, very Middle Eastern, and very Muslim.
And it’s an issue for Indians for that matter, too, and to some extent in Latin America. And it’s the idea of saving a person from embarrassment, making sure that the person’s dignity and respect are maintained, and doing nothing that might embarrass or offend the person publicly.
I wanted to ask about something else you said. One of the obstacles to the opening in Hong Kong was that women didn’t want to sweat. So, what did you do then? How did you bring women into your gym?
So, that goes to the point I made earlier about leading without forcing. So, I hired a great public relations firm, a lady called Carlene, and her accent was so strong. I never understood a word she ever said to me. Instinctively, I thought she was the one — true story, and I spoke. I want all the celebrities, all the actresses who are rich ladies in Hong Kong, I want everybody here. I want the movie stars. I want to be a billionaire. I want everybody here. And I don’t care what we do, we’ll pay a couple of actresses to come, or whatever we have to do to attract them.
Demonstrate that your California membership card is more important than a black Amex card.
And that’s what we did. We had the movie stars come in. We had Governor Patton when Governor Patton cut the ribbon. – And the law in Hong Kong is where the governor goes, all the media has to go. — We had all the top movie stars there. We had Allen Siemens there. We had billionaires. We had an A class endorsement from Cindy Crawford.
We made it so that it wasn’t about sweat, it wasn’t about working out. Iit was about, “The coolest place to be.” You go there, you’re a cool person. Yeah, it’s not about sweating. It’s not about working out. But we called it “exercise entertainment” because we had the DJ playing the music, and the last thing you thought when you walked into that place was, “Of course, we had hundreds of pieces of exercise equipment, and equipment was working out. You thought it was either a casino or a cool nightclub. So, I obliterated the sweat and everything else.
That’s fantastic. It’s a superb way to brand something and make it work. It’s outstanding.
Before we end, can you give me another sort of cultural blunder, either that you know about or that you encountered, or something from your experiences?
Well, if we had a few days, I could give you about 1000 of them, right? Let me touch on a few very important ones, I think, for your listeners.
Number one, never forget that you’re a guest in that country. Never forget that you will never win a lawsuit against a local in that country. Don’t even… Whatever you have to do, you settle. If that’s possible, you will not win, regardless of right or wrong. That has nothing to do with it, OK.
And I’ve opened up in dozens of countries. It’s always the same. And I have another really interesting story to tell you, but I’m not sure how much time we have.
So, that’s rule #1. You’re always a guest, you know. I was in Thailand for ten years and had a public company there. I’m married to a Thai lady and have a Thai son and I’m a guest. And remember, another very important thing when you’re doing business in some countries. You have to have 51% of a local person to be your partner.
Now your lawyer will say, well, like Thailand, for instance, a non-Thai cannot own land. Cannot own a business. I own my own business. And yet there’s, you know, the Four Seasons and everything else there. How is it done? It’s done through nominees and lawyers.
However, if your company is targeted by the authorities or anyone in positions of power, you are in jeopardy. Let me give you an instance. And another key point is: who is your partner? You could be in a situation where everything looks great and your lawyer says, “Yes, we’ve papered it properly,” even though on paper they own 51%. You realize you have the power, et cetera. That’s not assurance enough, OK? That is not enough.
For instance, your landlord Is your partner, OK? And in your lease, every three years your lease goes up by fair market value, OK? You go ahead and you get the biggest real estate that will do, and they’ll come back, and they’ll tell you and the landlord, based upon our due diligence, that the area has gone up 3% in rent and you’re a 51% partnership.
My brother-in-law has a real estate company, and he says it’s gone up 103%. Did he shut down the lights because you didn’t pay the increase? You lose your business, and that happens, and it will happen. And what I’m saying is that it’s not all that you think it is. You have to realize that the dangers are there, and you are not one of the locals, no matter what, no matter how you can give to charity, you can do everything as a good person. Be aware at all times there’s always a risk that something could happen and there is no recourse.
There’s no American embassy. You know, there’s no Canadian embassy, you know, and some countries are worse than others. Some countries are moving towards more international travell. But still, and I’m not talking about 20 years ago, I’m talking about today, countries can go backward, can get worse, as we’re looking at perhaps Hong Kong.
Burma turns out to be OK to open up and invest in this. It was only eight years ago, right? All the money, trillions of dollars, is going into Myanmar now, right? The key is also there. Everything looks beautiful. But boom… gone… overnight.
So, you have to do your due diligence, hire companies like yours, fill up, hire consultants that have done well and done poorly, that can tell you, OK, what country are we talking about here and take you through the necessary steps, and it doesn’t matter how much your consultant costs you, you’re going to be saving 1000 times that, which you may not take into doing it.
It’s funny because I had companies in Korea in Seoul, So, you know, Koreans, it’s not easy to culture. It is difficult for expats to do it, even Koreans, and most countries have a contract. A written contract means nothing.
Right. Get that straight. OK, we believe in them in the Western world. In many countries, It’s a joke, it’s a farce. And I remember John Kerry being so perturbed that the North Koreans continued with their nuclear program even though we were giving them rice. We had an agreement. That’s what I’m trying to tell your listeners, right? Wise Up!
It’s not an American thing or Kerry, it’s their thing. If you do, we weighed all the issues. Do you want to take that shot? Go ahead, get the best lawyers you can, the best accountants you can, hire a PR firm, do your due diligence, and be careful.
Absolutely, yeah. And in Western culture, we think contracts are sacrosanct. But especially in Asia and in the Muslim world or the Middle East, what matters 100 times more are your relationships: your relationship with your partner, your trust and rapport; and your confidence in each other. It doesn’t matter what the paper says.
Before we close, I presume you do a lot of fitness in your spare time, but what else do you like to do to relax or just have non-work time?
Well, thank you for that question.
I enjoy doing meditation. And yoga. I still travel all the time. I love learning new things. I’ll tell you one of the funny things and one of my funny travel stories. So, we went to Mongolia. We went with a Thai Buddhist monk. They were teaching meditation. It was the end of May. There was a blizzard. It was a snowstorm. And, as previously stated, I am a vegetarian. So, we go to the salad bar, and everything goes as usual. I don’t want to say normally it starts as an expected salad. The next bin is for nuts and fruits. The next bin is dairy. The next bin is fish, then seafood, then the dog, then seafood, then chicken, then beef, pork, horse, and “other.” This is the most famous restaurant in Ulan Bataar. It was the “Other” that got me.
So, that’s why I still do lots of business and am interested in doing interesting things in business around the world. I love people and adventure. And you know, I think I’ve never changed. I started at Club Med, and I hope I have that same sparkle in my eye that they hired me for.
That’s great. Well, you certainly do. You certainly have the Joie de vie for the joy of life and the joy of living.
Thank you, Phillip.
So, thank you, Eric. It’s been an absolute pleasure to get to know you and get your stories and to learn from you. You have great insights that our listeners will benefit from. So, thank you so much.
My pleasure, Phillip. I’m honored. I know how important you are and what your work is. And thank you for having me.
Thank you. So this has been Philip Auerbach of Auerbach International (www.auerbach-intl.com). Please join us again next week for another edition of Global Gurus and their stories of international business.
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