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In October 2004, Mark S. Mastrov, CEO of 24 Hour Fitness, reflected on how far his company had come in just over 20 years. From humble beginnings in 1983 in San Leandro, California, 24 Hour Fitness had grown to become the largest privately-owned health-club chain in the world. The company operated 346 clubs in 15 U.S. states and 10 countries, and it employed 16,000, serving 3 million members. Revenues exceeded $1 billion. The challenge ahead for Mastrov was making choices in the face of so many opportunities. Should he focus the business on the domestic market and expand into the many states the company had not entered yet or devote more resources to international expansion? If he decided to expand into the Northeast, how should the company enter against entrenched competitors like Bally Total Fitness? Would a major acquisition make sense, or would it threaten the company's culture? And how should he fund such an acquisition? An IPO had many attractions, but it would expose the company to a whole new set of challenges.

In 2004, the $16.8 billion U.S. health club industry continued its strong record of growth. There were almost 27,000 health clubs in the United States, up from 6,700 two decades earlier, and these clubs claimed 41 million members, over 14% of the U.S. population. Nearly 67 million people used these clubs in 2004. As the industry grew, many large chains began to emerge, opening new outlets and buying up smaller chains and independents. Most industry observers believed the growth and consolidation would continue, providing many opportunities for investors. However, few health club chains were publicly listed, and the leading listed company, Bally Total Fitness, was under U.S. Securities and Exchange Commission investigation for accounting irregularities. Yet this investigation did little to dampen enthusiasm for the new personal health phenomenon, and rumors abounded of private equity deals in the offing. The key question for investors seemed to be how best to take advantage of the opportunity.