The Plan

Given VRJ’s attractive territory rights, the strength and popularity of the Crunch Fitness concept, and the general rise in health and wellness trends, the management team at VRJ Fitness wanted to execute on a rapid growth plan.  To achieve their goals, the Company’s management team realized the need to seek a financial partner.  The team, led by Vince Julien, Geoff Dyer, and Jeff Dotson, were seeking a capital partner to help them more rapidly approach the number of locations that their territories could support.  Given their excitement about the Company’s momentum and their experience set in the industry, the management team was ideally looking for a partner that could allow them to retain majority ownership in the business.

The Strategy

The management team and an independent sponsor from New York City, NB Group, engaged a leading lower middle market advisor, Frisch Capital, to assist with a capital raise.  Frisch contacted PNC Mezzanine Capital to consider the opportunity and given PNC Mezzanine Capital’s interest and deep experience funding de novo and acquisition based expansions of successful multi-unit concepts, it was a perfect fit.  PNC Mezzanine Capital invested $18.1MM in a custom mix of senior debt, junior debt, and common equity in order to recapitalize the company and to fund its aggressive growth plans.  PNC Mezzanine Capital’s investment and partnership enabled the Company to open seven additional locations in 2018 and to continue to expand location count in 2019 while ensuring best practices from past fitness investments were shared. 

The Result

Unlike other debt investors who couldn’t provide enough capital given leverage limits, or equity investors that wanted a controlling interest in the Company, PNC Mezzanine Capital was able to provide the junior capital needed to help VRJ Fitness grow through a flexible combination of debt and minority equity.  Given the Company’s status as the largest Crunch Franchisee in the country, its rapid growth, and the strength of the management team, VRJ Fitness attracted significant attention from strategic and financial suitors.  In July of 2019, the management team decided to sell a controlling stake in the business to North Castle Partners, a leading private equity firm focused on investing in companies in the Healthy, Active, and Sustainable Living markets.  Given its belief in the management team and in North Castle as a great partner to lead the Company forward, PNC Mezzanine Capital remains invested and is excited about the Company’s future.