15.1Private Fitness, LLC Repeat
This case is primarily about securing key assets, and to a lesser extent, about good management
practices. There are no complex financials to analyze, but there is a complex relationship on which
you can focus your case response.
Abstract
CASE 15.1 PRIVATE FITNESS, LLC REPORT
This paper seeks to explain all the ways of securing critical assets in an organisation
to even a lesser extent and talks on sound management practices. Rosemary had experienced
in the fitness industry and decided to open a business of the same kind with the aim of
making her life better as compared with the times she had not opened her own business. She
hired Kate her long best friend to manage the company, but did not have the best managerial
skill; since, she proved to be dishonest in her duties. It was this time that Rosemary
wondered what to do with Kate, and she was faced with an operational issue that she had to
deal with before her business was affected negatively.
Introduction
CASE 15.1 PRIVATE FITNESS, LLC REPORT
In this case, Rosemary was the employer of Cate and had two major problems, which
included the decision she was required to make regarding what she would have done with
Kate and secondly she had an operational problem. This paper seeks to explain all the ways
of securing critical assets in an organisation to even a lesser extent and talks on sound
management practices.
Case Analysis
Rosemary employed her friend Kate as a manager, and yet she did not have good
management practices; hence, the reason she faced a significant problem in operating the
business she owned named Private Fitness LLC. Rosemary complained that theft had
occurred in her club that offered personal fitness training classes of various types. Classes
that were provided in the club included; aerobic, spinning, body sculpting, kickboxing, air
boxing, hip hop games, Pilates and yoga among other training (Drury, 2013). Personal
training clients used the club during prime time after paying a fee of $50 per hour while they
paid $35 per hour during the slower times. All these indicated that Rosemary had planned
well for operations that were to take part in her business from time to time. However, the
Private Fitness LLC did not offer its members the opportunity to access the fitness
equipment’s and classes the way other large health clubs did. It was clear to her that she had
first-hand experience in the fitness field, but Kate on the other side was not ready and willing
to be honest in her managerial duties until when the truth was manifested. Rosemary had
been a former finalist in the USA fitness competition after winning many awards in local
fitness. Her main reason for opening the business was to capitalise on her reputation and
knowledge to improve her standards of living using the Private Fitness LLC. Through
dedicating managerial duties to Kate, Rosemary would have enough time to spend with her
two young children whom she had not given attention due to her commitment to her job.
CASE 15.1 PRIVATE FITNESS, LLC REPORT
Rosemary had to rent a building that formerly had operated as an open air market to
start her fitness business, and all was supported by her personal savings and a bank loan that
she had acquired. Rosemary had to buy fitness facilities and renovate her new premises an
activity that cost her $150,000 to be fully complete. Rosemary was forced to contract five
instructors who could help her run the fitness classes and all the training sessions as required.
The club was divided into five sections; a room with the free weights and weight machines as
well, an exercise room, a room containing the aerobics, an office room and the men’s and
ladies locker room. They were all well operated in making sure that they give back the
required services to the club customers (Atkinson, Kaplan, Matsumura & Young, 2011).
However, it was very expensive to operate such a business under a loan; since, this act was
hazardous to Rosemary who had used all her savings and a manager like Kate was risking the
business more and more. Rosemary operated most of the spinning classes together with the
aerobics classes, and she made sure that she paid her instructors on a commission basis for
them to work extra hard. The commission that was given to various instructors varied
according to the experience that each of them had in the fitness industry. The commission
ranged between 20 and 50 percent of the revenue attained in the club and was to be given to
workers after doing reputable job. Whenever an instructor brought a particular client to the
fitness club, his pay could also be increased to a larger extent.
Rosemary had decided to hire Kate Hoffman, who had been her long term friend to
take part as an instructor in the club hoping that she would be honest and give the best in
return. Kate as a manager had various duties like; record keeping, facility upkeep, marketing
of the club, the scheduling of all appointments in the club and making sure that all activities
were run as programmed . Kate received a good salary and a commission on top based on
gross revenue of the club and used to teach various classes in average hours. Classes were
scheduled when the club was open, and Rosemary was working hard to start making profits
CASE 15.1 PRIVATE FITNESS, LLC REPORT
from her business. She made sure that the club opened from 5.30am to 9.00pm from Monday
to Friday, noon to 3 pm on Sunday and from 6 am to noon on Saturdays to get real returns
from its operations. Some classes were very popular while others had to be cancelled due to
lack of clients and this was a big loss to the club. In the morning hours, one could easily find
some two fitness clients undertaking their classes during prime hours as well as in the
evening.
It did not take long for Rosemary to realise that Kate her best friend had proven to be
dishonest in her duties and had to look for a way to fix the problem immediatelly. Kate had
acquired a client who used to come for fitness in 1.00-2.00p.m on Mondays, Wednesdays and
Fridays, but the client used to write checkouts to Kate directly in exchange for a small
discount; hence, the club did not get revenues in return. It was too bad for Kate to betray her
friend and she had to confess her mistakes of being dishonest in her work with an immediate
effect (Atrill & McLaney, 2009). Rosemary wondered deeply how she could have dealt with
Kate for her lying, and it became a big problem; since, she was unable to come up with a
good decision regarding what to do (Davis Polk Law Firm, 2009). Rosemary had family
issues to attend to, thus, she never wanted to step in the managerial part because; she
perceived an act like this could have interfered with her plans.
Recommendation
I would recommend that Rosemary was supposed to appoint another non-instructor to
become the manager because; what Kate had done could still happen again with her.
Rosemary was supposed to have procedures and controls to protect her business revenues
from dishonest people like Kate. Avoiding such problems in future Rosemary could employ a
manager with good managerial skills to operate her business not just a friend who is not
competent enough for the work (Drury, 2009).
CASE 15.1 PRIVATE FITNESS, LLC REPORT
Conclusion
If anything bad were to happen, Rosemary could suffer a lot for the loan she had
secured because; she had nothing left on her side only to file for bankruptcy. The enormous
risk that Rosemary had taken showed that she had high operating problems in her business
and that she had to employ a good manager not Kate again. Operating problems and how to
handle a dishonest manager were the issues faced by Rosemary in her business.
CASE 15.1 PRIVATE FITNESS, LLC REPORT
References
Drury, C. (2013). Management Accounting For Business. Cengage Learning EMEA; 5th
Revised edition edition
Drury, C. (2009). Management Accounting for Business. Cengage Learning EMEA; 4th
Revised edition edition
Atrill, P.& McLaney, E. (2009). Management Accounting for Decision Makers. Financial
Times/ Prentice Hall; 6 edition
Atkinson, A., Kaplan, R., Matsumura, M., & Young, M. (2011). Management Accounting:
Information for Decision-making and Strategy Execution with MyAccountingLab.
Davis Polk Law Firm. (2009). Crisis Manual: A guide to the laws, regulations, and contracts
of the financial crisis. New York: Davis Polk Law Firm.
