Building a $200M Fitness Empire | Peter Taunton - Founder of Snap Fitness

Here are the top 10 key takeaways from Peter Taunton's journey of building a $200M fitness empire that every entrepreneur should understand.

1. Early work ethic shapes entrepreneurial success

Peter Taunton credits much of his success to the strong work ethic instilled by his father at a young age. Working in his father's grocery store from age eight gave him a front-row seat to what an honest day's work looked like. His father would work from dawn until dark, providing young Peter with valuable nuggets of wisdom during family conversations.

This foundation of grit and determination proved essential throughout his entrepreneurial journey. When Peter made his first significant exit (selling 40% of his company for $47 million), he called his father to express his gratitude for teaching him the character, fight, and grit needed to succeed. This early influence shaped his approach to challenges, giving him the resilience to push through difficulties rather than giving up when things got tough.

2. Calculated risk-taking is essential for growth

Peter emphasizes the importance of calculated risk in entrepreneurship. When expanding from his first successful gym to a second location, he made sure the first gym generated enough cash flow to support the new one if it struggled. This conservative approach allowed for growth without endangering the entire operation.

His strategy involved understanding exit options with landlords and limiting exposure if things didn't work out. Even as his business grew and generated more cash, Peter remained disciplined about risk management. He consistently reinvested in his business rather than dramatically upgrading his lifestyle, treating cash as "sacred."

Peter advises entrepreneurs to assess risk based on their stage in the journey and available resources. The key principle is to never "bet the farm" because no one wants to start over from scratch. This methodical approach to expansion helped him grow from one gym to seven over ten years before launching Snap Fitness.

3. Customer service as a competitive advantage

When turning around his first failing gym, Peter recognized that exceptional service could differentiate his business without requiring large capital investments. He emphasized that they were in "the service business, not the gym business," making the guest experience paramount.

He implemented simple but effective changes: ensuring cleanliness, maintaining equipment, greeting members by name, and thanking them when they left. These service elements created value when the facility itself couldn't compete with newer, better-equipped competitors. Peter's focus on personal connections allowed the community to rally behind his business.

This service-oriented approach carried through to his Snap Fitness model, where he removed barriers to joining by eliminating long-term contracts. His transparent message to customers was: "If I can't earn your business and your trust, I don't deserve your loyalty." This customer-first mindset became a key differentiator that resonated with consumers and drove his business success.

4. Effective leadership requires decisive action

Peter's leadership philosophy centers on making tough decisions rather than leading by consensus. He demonstrated this on his first day managing the failing gym when he fired an employee who challenged his authority. This decisive action established his leadership and showed others he was serious about turning the business around.

At the same time, Peter believes in leading by example. He took on the least desirable cleaning tasks himself, signaling that no job was beneath him. This approach, learned from his father, earned respect from employees who saw him willing to work alongside them rather than just giving orders.

While Peter values employee input, especially from department heads who understand their areas, he emphasizes that final decisions rest with leadership. He typically asks for opinions before sharing his own to avoid influencing the group, but ultimately takes responsibility for charting the company's direction. This balance of listening while remaining decisive is crucial for effective leadership.

5. Finding your niche through market testing

Peter's expansion strategy demonstrated the importance of testing concepts in different markets. He started with one successful gym, then tested the Snap Fitness model in various locations: first an urban area, then a mid-sized market, and finally a small town of just 3,500 people. This methodical approach allowed him to verify that his business model worked across different demographics.

The small-town test was particularly significant. Peter told his wife he might "lose his ass" on this location, but he needed to know if the concept could work everywhere. To his surprise, the small-town gym performed just as well as the others. With lower rent and operating costs in these locations, he actually needed fewer memberships to break even.

This comprehensive market testing gave him confidence to scale rapidly. By proving his model worked in communities of all sizes, he had validated a franchise concept that could potentially work anywhere. This systematic approach to market validation provided the foundation for his nationwide expansion.

6. Franchise model as a rapid growth vehicle

Peter strongly advocates franchising as a growth strategy. He built Snap Fitness from an idea on a legal pad to a $100 million valuation in just six years using the franchise model. This approach allowed him to scale without the massive capital requirements of company-owned locations.

Franchising leverages other people's money and passion for growth. Peter started Snap Fitness with just $400,000 of his own capital and built it into a $200 million enterprise. The franchise model allowed him to expand rapidly while minimizing his own financial risk.

The model works because it meets the needs of aspiring entrepreneurs who want to be their own boss but prefer a "business in a box" approach. A well-designed franchise system eliminates much of the "road rash" typically associated with startups by providing proven systems for site selection, buildout, marketing, customer acquisition, and operations. This allows franchisees to focus on execution rather than reinventing the wheel.

7. Prioritize creating administrative infrastructure

One of Peter's key insights was recognizing the value of building a strong administrative infrastructure. He created a centralized hub at Lift Brands that housed legal, accounting, marketing, sales, human capital, intellectual property, and technology. This infrastructure could then support multiple brands beyond just Snap Fitness.

This approach created significant value for potential acquirers. While his company might be valued at a certain multiple of EBITDA, a strategic buyer could immediately increase profitability by eliminating redundancies when integrating the business. This made his company more attractive as an acquisition target.

The infrastructure strategy enabled Peter to leverage his core competencies across multiple concepts. Beyond Snap Fitness, his company expanded to include Nine Round, Fit Stop, Fitness on Demand, and Yoga Fit. Each brand benefited from the shared services model, creating economies of scale and increasing the overall enterprise value.

8. Strategic exits preserve wealth

Peter's approach to business exits highlights the importance of taking money off the table at strategic points. His first exit involved selling 40% of Snap Fitness for $47 million, providing immediate financial security while retaining control of the company. This approach allowed him to continue growing the business while reducing his personal risk.

The timing and structure of exits require careful consideration. Peter cautions that the first capital you sell is "the most expensive" - meaning early investors typically get the best terms. In his case, he sold his first 40% stake when the company was valued at $100 million based on $5 million in EBITDA, then grew it to $22 million in EBITDA over the next five years, dramatically increasing the valuation.

Looking back, Peter wishes he had sold more in his second exit rather than retaining majority control. Once he sold additional equity and lost majority ownership, the dynamics changed as private equity partners made decisions like recapitalizing the company with additional debt that he disagreed with. This experience underscores the importance of understanding how ownership percentages affect control and risk exposure.

9. The 1099 contractor model for lean operations

Peter advocates using independent contractors (1099 workers) instead of employees whenever possible to create a lean operation. At his Nautical Bowls company, they scaled to 73 stores in three years with no corporate office and an entirely remote 1099 workforce. This approach dramatically reduced overhead costs while allowing for rapid scaling.

The key shift with this model is paying for performance rather than hours worked. Peter focused on clear deliverables and outcomes rather than traditional work schedules. By telling contractors, "I don't care if you work from 9 a.m. to 5 p.m. or midnight to 8 a.m.," he gave them flexibility while maintaining accountability for results.

To make this model more attractive, Peter educated his contractors about tax advantages like home office deductions and business expense write-offs. He even provided health insurance as part of their compensation package. This approach helped workers keep more of their earnings while creating an agile, cost-efficient organization that was attractive to potential acquirers.

10. Balance ambition with personal well-being

When asked about lessons he would pass to his children, Peter emphasized not underestimating the value of peace in your life. He acknowledges that entrepreneurship can easily become all-consuming, leaving only "little pockets of peace along the way." Finding and protecting what brings you peace amid business challenges is essential.

Looking back on his career, Peter wishes he had "danced more." His drive for success and fear of being "sloppy" in his work often led him to sacrifice personal time, working seven days a week with 15-hour days. While this dedication contributed to his success, he recognizes the toll it took on his personal life and family relationships.

Peter encourages entrepreneurs to identify what activities bring them peace and to protect that time as "sacred." For him, golf provides this outlet. He advises being intentional about carving out time for these activities, even amid busy schedules and business demands. This balance is crucial for sustainable success and personal fulfillment.