Before diagnosing, I'd anchor the size of the problem. A 380 bps margin compression on roughly $1.25B in revenue is about $48M in lost annual profit— meaningful enough that recovering even half of it is a real win and worth ranking against the CEO's other priorities.
I'd then split drivers into three buckets: pricing (membership tier mix, discounting depth, ancillary attach), volume (member churn, new-join velocity, freeze rates), and unit cost (labor scheduling, real estate, equipment cycles). For premium fitness, my hypothesis is that pricing mix is the largest contributor — premium clubs typically see margin compression first when discounting deepens or when high-tier members downgrade.
To test that, I'd want to see two cuts: revenue per member by tier over the past eight quarters, and contribution margin by club cohort by vintage year. If the pricing thesis holds, I'd recommend the CEO start with three moves: tighten promotional gating on Tier 1, raise ancillary attach where retention is highest, and only then look at labor optimization— because cutting labor in a churn-sensitive segment usually destroys more value than it saves.