Members Only: Ray Harrigill Builds A Successful Membership-Based Business Model

Ray Harrigill believes in diversification. His Sunray Companies has restaurants (Bumpers Drive-In), tanning salons (Palm Beach Tan), fitness centers (Koko FitClub), and hotel properties (Hampton Inn), to name a few. That's because of lessons he's learned along the way.

Harrigill got his start in the restaurant business working in a multi-unit, multi-concept company. When he set out on his own, restaurants were his first choice but he couldn't open new units quickly enough to satisfy his goals. He began opening Blockbuster Video stores in 1999, quickly ramping up to four. But even then it was clear to Harrigill that the Blockbuster model wasn't "a long-term business play." So he began diversifying further.

"I invested some money in comprehensive rehab facilities, which I lost a fortune in, and almost simultaneously got into the tanning business. We did really well with that," says Harrigill, who now has five Palm Beach Tan salons.

That experience led him to another business epiphany: membership-based businesses offer a more predictable, more certain level of cash flow than retail or restaurants can. So he's added Massage Envy and Koko FitClub into his mix.

"We think of it as investing in an annuity of sorts," says Harrigill. "Once you build up a membership base, it continues to pay every month. Most of the time in business you don't get that opportunity."

He knows this firsthand, of course, given his experience in the food business. "In restaurants, you fight for every dime and nickel through the entire month," he says. "With membership-based businesses, you have a set amount of revenue you can count on."

So, these days Harrigill is looking toward growing further through diversification and by expanding his holdings in membership-based businesses. As ambitious as he is, he doesn't intend to grow too far from home. "We want to develop in our core area," he says. "I'm not interested in developing around the country. I used to travel a four-state area, and it's not very conducive to family life."

While the slow economy has tempered Harrigill's expectations for growth, Sunray has managed to build both revenue and profitability. His near-term goal is to continue that trend of profitable growth, within what he calls a "fairly reasonable" footprint. "I don't mind working hard," he says. "But I do like to go home at night."

Name: Ray Harrigill
Title: Managing member
Company: Sunray Companies
No. of units: 2 Bumpers Drive-In, 1 Blockbuster Video, 5 Palm Beach Tan, 2 Massage Envy, 1 Koko FitClub, 3 Hampton Inn