Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Paul Lejuez – Credit Suisse.
Paul Lejuez – Credit Suisse
Can you guys maybe talk about, just to use as an example, a club that was performing well that has suddenly turned on you and one that you are disappointed in? You don’t have to name it I just want to try to get an understand about the kind of revenue declines that you’ve seen in that club, how has attrition changed, how are you able to cut the staff, if at all, at this point and what happened to the four wall EBITDA, just so we have an understanding of the types of declines we might be seeing at what might have previously been a strong club.
Michael R. Robinson
I’m not going to point to a specific club but I’ll give you a general idea. We talked about a few of these in the past. A club might be seeing somewhere between 5% and 10% lower revenue coming from a few percent drop in membership levels. As you go from that level down to EBITDA where we expect a mature club to be delivering in the high 30% EBITDA margins, that club is probably now delivering in the lower 30% EBITDA margins.
Key changes include things that we talked about before, we’re seeing an attrition rate that may have been running in the mid 30s up to over 40% and the replacements in new memberships coming in are coming in at a little bit lower average dues so those are the big drivers for that. I do want to stress though that as we look up and down all of our open clubs, the margin rate that we are seeing is still what I would call a very good margin rate. Again, like I mentioned the EBITDA rate that we’re seeing is still above 30% in those clubs and in this environment I think we’re pretty proud of that.
Paul Lejuez – Credit Suisse
That attrition rate that you give is a weighted average so presumably there are some clubs that are above that. I’m just wondering how many of them are at a 50% attrition rate for example.
Bahram Akradi
That’s a great question. Very, very few and those are clubs that the bulk of our membership is a single membership. The single membership clubs have always had a higher attrition, just the nature of the single member has the highest attrition then the couples a little less and then the families is the lowest in terms of attrition. So, the clubs that have had single population at large they were probably in the past in the 40s and now they’re over 50. But, there are very few of our clubs are that way.
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