Episode #516:Jill Kinney on Medical Fitness Centers and Active Wellness Innovations

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1:03 This is Pete Morron, Halo Talks NYC. I have the pleasure of bringing one of my oldest friends in the industry back in the early 2000 when none of you attended any trade shows, we were here to start this pioneership. We are on location Los Angeles Convention Center, Ursa now becoming the Health and Fitness Association, which I think is a more appropriate name. And, I'm here with Joe Kinney and we are excited to talk about the future of wellness, the future of partnerships, and bringing our expertise in programming to places that need it the most, but for some reason have been overlooked. So welcome to the show. Thank you, Pete. It's great to be here, and it's great to get some time with you again. Yeah. We do go back. We go back. We go back.

1:47 We worked on several deals together. We've toured in many health clubs. Not sure we worked out in them, but I know Robert Klaus, rest in peace. Yeah. I did a lot of cycling with him. He's getting an award today, by the way. We're doing an innovation award for him at our for our event. So, I'll I'll see you there. So, look, you you've been in in this industry and basically started when there were managed contracts, there were clubs, high end, low end, maybe it didn't matter. I'm in the health club industry. We didn't have to really define it. And now you're on to active wellness. You know, talk about what that business model is and talk about how you've kind of taken all your expertise and said, look. Look. I know what this market needs, and I actually have a model to actually overlay it with. Yeah. Yeah. I we are ActiveWellness is a fitness and wellness management company, but we've kinda take it a different twist.

2:33 Our background is predominantly in developing and owning and operating clubs, where we build our own brand and we build our own model, and we're bringing that to the fitness management business. So, we've got 2 models that we've brought to the market. One of them is an active wellness center, which is a a version of a medical fitness center, but with profitability and a business mind. So a competitive brand, something that's much more consumer facing. You You know, over over time, a lot of hospitals said, hey. It makes sense for me to have a a fitness center on my campus. But one, they didn't run it as a commercial club, and they didn't really have any DNA of, like, here's how you do sales and marketing. And, also, it's probably a part of population says, like, I'm only going near the hospital when I need be there. Right. And I'm not like I'm not trying to, like, get closer to it. I'm trying to get further away from it. So how do you kinda, like, say, hey. Look. You guys have you're onto something, but, like, it's not it's not built properly for success long term because you're not thinking about the things a consumer thinks about. Yeah. No. I you know, I don't think that the health care systems or hospitals per se, really understand marketing. You know, most of the folks that, that we've dealt with felt like their medical fitness center was somehow or another gonna be so unique that it didn't compete. And there's there's nothing further from the truth.

3:51 So, you know, I think the what we've been able to do is go in and right size facilities, oftentimes coming in as the second second group in Right. Right. Right. 2nd 3rd group in. But we bring our business expertise to on the marketing and sales side, and then bringing the consumer facing brand, the ActiveWellness brand, wellness brand, because you're right. I mean, who wants to go join a gym in a hospital? Yeah. So it's, it kind of forces you to scratch your head. What we've done is we've kind of taken our, our branding and our marketing and sales skills and turn these businesses around, so they're profitable. They're generating 18 to 25% EBITDA returns. And, you know, so we run it like a business.

4:35 And then, you know, when we have an opportunity to, design and develop new ones, we start with classic club feasibility marketing analysis. We're not really looking at the benefit of what comes from the healthcare system. We're looking at whether that's a great place for a club. And then all of the sites we have are the best clubs in the market. Yep. So we run them with a level of customer experience that, attracts members. Yeah. One of the interesting parts about, you know, running a hospital, running a nonprofit, you know, they seem to have a fair amount of real estate that's kinda been accumulated over time. Some of it is mission critical, and they probably should have it. And some of it's like, I'm not really sure how you got a hold of this or why you actually own this. So when you have conversations with groups like this and the CEO or the CFO of a hospital, you say, look. I know you might let me let me try to erase what you know about people that have been in front of you before. Like, I could show you I always say this term. You know, experience is what you get when you don't get what you want. I've tried a lot of things. I nailed this. Like, give me, like, a clean sheet of paper, and let me explain how we can actually take this real estate and turn it into, like, income producing real estate. Right.

5:41 And give me a shot at that. What are some of the things that, like, some of the things you hear and and are able to say, look. I I know you understand that that's how it used to be, but let me tell you how it works with active wellness. Yep. Well, you know, what what we've been able to do, Providence, the health care system, is a major investor of ours and got a chance to spend time working on their executive committee for the ambulatory care network. And so really got a chance to work side by side with them in terms of what was needed and where an integration can actually happen and how that can become a profitable clinical operation. And what we've done is we've created a, small footprint, 5 to 10000 square feet, where we can deliver what we call Activate as the brand. Right. And Activate is a high touch personalized wellness and fitness program with every member having their own personal health coach, their own personal trainer. We have a registered dietitian.

6:43 We have sleep specialists. We have people who come to build out the ultimate wellness and fitness program for this individual. And they come we're using eGym equipment. Okay. Yeah. We've got a recovery area. We've got brain training using Dividot and Smart Fitness. So it's a small footprint, but a very robust personalized wellness program. And the you know, what we're bringing to the health care community now and others is that you can do this in a small footprint. We've got, it the this is turnkey, a $2,000,000 drop in place product. We're putting it into, ASCs, ambulatory surgery centers, where the orthopedic surgeons that are are, essentially building these things around the country. They put their, their medical group office in and maybe a 4 suite ASC, and we're dropping an activate in there so they can they can churn more patients through surgery. We prep the patients for surgery.

7:48 They go in and do the surgery. They come out, and they do PT, and then they come back to us for fitness. This is Pete Moore. I wanna let you in on a little secret. There's this company called Promotion Vault, and what they do is they give out rewards from retailers that allow you to incentivize your members without having to do zero down and 1 month free or giving away shakes or giving away t shirts. What you wanna do is build a rewards program that lasts, that people value, and that doesn't discount your own products and services. So here's the deal. There's something called rewards vault. The rewards vault is going to allow a member to set up their own profile.

8:29 They are going to answer questions. You are gonna get those answers. You're gonna be able to target those members, and you're gonna reward them inside your club, inside your spa, and outside of the club and outside of the spa to get them to become loyal, to get them to pay their monthly dues, and to be rewarded properly for the actions. A lot of companies are cutting back on rewards. You shouldn't be. Promotion Vault's your answer. Trust me. This is real. So on the door of the location, it says activate. It says activate. And and that's the brand that you're in the market with, as a a brand of active wellness. Correct? Okay. So we're doing that as a joint venture. We're working with developers. We're working with, we're actually launching sites in senior living and independent living. I mean, I spent so much time in my grandmother's assisted living facility, and I was, like, shocked that they didn't have a fitness component or a stretching area or and I felt like these these locations, the the owners of those businesses are not necessarily thinking about the business the way they should be. Like, assisted living should be the longevity. Right? Because now I have a recurring bed filled. Like, why not try and optimize this person's health and fitness while they're here? So I don't have to note, like, we're talking about death and dying and longevity. So Yep. I'm sorry about that topic, but, you know, why not have somebody there till 95 instead of 88? Yep. I mean Yeah.

9:53 No. The the their margins can go way up. What you know, but the seniors, that are going into independent living or in CCRCs, which are the groups that we're primarily working with, they're high end. People are demanding a different level of experience. Yeah. You know, it's not just a treadmill and a, you know, a a bike in the other room. This is a full blown, robust, personalized wellness program, one that's data driven, one that's, can be connected with your personal physician, on the electronic health record. So it's really techie, and it's also really effective. But we bring in a solution. So we say, hey, up your amenity. Right. We bring in Activate, and we locate it like a retail operation. So all of the residents have access to it as part of their cost their their cost, but we open it up to the public too.

10:43 So it's a a mixed retail amenity. I gotta tell you, in addition to that, just thinking about myself going, like and my grandmother, she passed away, but she went she was at Sunrise. It's just the living all the time. We We just used to say, grandma, just don't get to the 3rd floor. That's when you really, like, say things that people aren't allowed to. Like I say, she was always on the 2nd floor. God love her. Helen Helen Schultz. My mom will like that. I I give her a shout out. If I was able to go see her and I was actually also able to go to a workout for a half hour, then I could go back upstairs and and have lunch with her. It's actually like an amenity for, like, the family. Yeah. Yeah. I never really thought about that as, like, a I gotta pay $20 for a guest pass to go and see my grandmother and stay there for 2 hours instead of, like, 45 minutes or an hour. Yeah. But, you know, I and the people we're dealing with are are generally healthy. You know? Yeah. A 75 year old today is not a 75 year old from 20 years ago. You know? People are coming in and they're working out. We've got, you know, we've got our average age on a couple of the senior facilities that we operate today is, like, 83. You walk in and people are buff. You know? They are not in bad shape. They're in incredible shape. So it's just a you know, it's a new thinking, and and what we've done is we have created these models, and they're we're pushing them out into the market. The thing that I love about Activate is it's it's a $2,000,000 all in turnkey package. Yep. Generates a 28 to 35% ROI on, return on invested capital annual return on invested capital starting in year 2. You know, so it's a really

12:13 it's a smart model, and, we've got we've got, we've got Square footage on that? Can be as little as 5,000 square feet. The new ones that we're doing are about 75100. Actually, one up into 9,000 square feet where we've added a therapy pool. But, basically, it's a relatively small footprint with a robust program. It's awesome. And it's been historically an amenity that was a cost center. So we come in and say, hey. Up your spending a little bit, and let's turn it into a profit center and a huge mean, think about, like, the Equinox deal with related group. Like, one of their thesis behind it was like, look. I'm gonna build a building. I'm gonna put an Equinox below it. You're gonna pay me more for rent per per apartment because of that, and and it works. Right. Did a couple of questions I had for you. Given this whole, you know, you know, potentially huge opportunity and and windfall of, like, HSA, FSA, and it was, like, $150,000,000,000 supposedly that's gonna get unlocked and you get a letter of medical necessity, and now that can pay for things. Are you seeing that flow into activate location yet, and and how big of it is of a magnitude is it? Right now, it's about 20%, if you don't mind me asking. Yeah.

13:20 No. 20% of our membership is coming up. I love to hear that. And and it's booming. And, you know, and and we're charging a lot. I mean, with the this What what's the average? Did, like, go through, like, this personalized assessment and, like, evaluation and tracking? It's 2.50 a month. That's awesome. Good. That's what it should be, though. Right? Like, I'm so tainted to be like, oh, maybe that's, like, $49 a month. Like No. No, dude. Like, let's actually make some money and actually put the right resources towards it so we could actually deliver the results instead of, like, look at our p and l and say, like, why do we do this again? Yeah. Who's win who wins on this? Nobody. Not me. Yeah. Not me. And the and the member doesn't get results at $49 anyway. So, like, I'm actually doing a disservice to my own business to gen for joint venture partner and the members. Yeah. I'm not kidding. So let's actually put more money into it. HFA, s s FSA, I think, is gonna be very valuable to this industry. So, I just finished 4 years as the chairman of the Buck Institute For Research on Aging, which is a leading the global leading research institute, on purely focused on aging. It's been around for about 25 years. Where is it? It's in, Marin County. Okay. It's called the Buck Institute For Research on Aging. And we've got a rock star CEO, Eric Verdin, who's now, you know, literally changing what's gonna be viewed as fitness and wellness going forward. We just launched the Phenome Health Center, which is being led by Lee Hood, who is the guy that did the human genome project back in the

14:52 eighties. Not not a small, accomplishment. No. And and what we're focused on now is essentially building the science of wellness. Yeah. And when that becomes validated, real science, real research, I think it's gonna change the fitness industry. So we're I'm working with scientists at the Buck who are building out the data that we're collecting on our activate members so that we're gonna be ready when the as more funds become available, we're gonna be ready to get it. How important and and, you know, we're familiar with, with EGM. You know, how how important is is their technology, you know, the relationship with them? Is, you know, hardware, software? Huge. And and, you know, one of the key things for us was to be able to have that data. Right. And, you know, EGIM has been incredible. They're a great partner, and they allow us to to, bring this level of, programming Yes. At a relatively low cost because, you know, it used to be having personal trainers drafting programs and supervising programs. Now we draft it once, got AI driven outcomes and program, and it's, it's written they've been a great partner for us. Yeah.

16:03 That's amazing. So, you know, as you kinda look at a lot of the real estate opportunities out there and you think about presenting this activate model, presenting the $2,000,000 potentially to a new build or to basically say, look. I know you you haven't had success here, but I'm actually overlaying a new business model to this. There aren't that many as as you and I both know. We scour around. Like, there's investors in real estate. There's investors in operating businesses. Now there's more investors who understand, like, hey. I'd like to own the real estate. It gives me the ability to do a lot more. I could actually, like, re retrofit this entire place whenever I want because I own it. I don't have to ask anybody's permission. Do you see that as, like, a big competitive advantage for you on the JV side where Yeah.

16:46 I'm kinda locked in. Not only I'm am I your partner, and we're not gonna do, like, annual RFPs. Right? Let's let's end that nonsense. Right? I'm your partner. I'm not your vendor. I say people like, I'm your adviser. I'm not your vendor. If you're gonna treat me like a customer or yeah. I'm gonna treat you if you treat me like a vendor, I'm gonna treat you like a customer. Treat me like your adviser, I'm gonna treat you as a client or some something to that effect. Right. So how is, like, the narrative changed on your end to to walk in there and say, like, I'm not I'm not coming in here to, like, manage your stuff. I'm not a staffing company. Yep. And and, like, just like, let me, like, re re recalibrate where we're at. So talk talk through that for a minute. Yeah. So, you know, there's we've got skin in the game. We're we're coming in with a solution. We're creating a new co for each one of the sites. We're it's a joint venture partnership. We've got a lease, and the developer's got, a, you know, a commitment, and we've got a commitment. And there's a, you know, our contracts are 20 year management agreements, but we're basically in it for, you know, we're we're there. Yeah. We're partners. And and it's our commitment to deliver on this because this is an amenity. They this has to work, and it also has to be a a bottom line profit. So it's, yeah. We're gonna get we're gonna have 20 of these up and running in the next couple of years. That's true. And I really wanna put my foot down and start, hitting the accelerator. We wanna get 50 to a 100 of them up. And I think, you know, at that point, you have a distribution channel. It's pretty amazing. Mhmm. You also

18:20 have a profitable individual business. And if we get our way and we've got a connection on the, on the health care side and on the insured payer side, you you've got a you've got a really interesting distribution model there. So I I think that the investors are coming in. We're talking to private equity right now, and we've got a we've got a profile of, being able to get these things up. And because part of the partnership is the developers coming in with TIs and capital contribution, doesn't take much for us to get these things up and going. And so it's a but we're we're different. You know? We're not just a staffing company. Right. We're we're creating models that are appropriate and and successful, and we're we're pushing them out.

19:08 This is Pete Moore. Here's the last tip for you of the podcast. We are partnered up with a company called Higher Dose, higher dose dot com. They are the leader in workout recovery products, infrared technology, LED light masks, neck enhancers, and other products such as PEMF mats and sauna blankets. If you have not gotten on the workout recovery train yet, your time and your stop is now. You gotta get these products in there before these workout recovery and spas end up saturating your market, having your members walk out of the club and going into one of their locations for $200 per month where they're paying 39 to you, let's become an expert in workout recovery if we are already an authority in workouts.

19:58 Higher dose, check it out. There's a wholesale code, and we look forward to helping you augment your products and services to meet the demands of your members. And, hey, let's get people happy, healthy, and sweating, and the recovery should be just as good as the workout. And the last question I have on this is brilliant to, like, open it up to other people. Like, I'm not just captive where, you know, I'm I'm running inside of a assisted living facility, but I'm opening it up to the public. What are some of the things that you've either heard or, like, a story or, hey. We got, like, these kids in here and, like, we didn't think that would happen, but, like, it's happening organically that you're like, wow. Like, something so there's some special sauce moving around here. I'm not sure what it is. I don't know if I need to, like, figure it out. It's just happening on its own. Yeah. Yeah. You know, you know, it's interesting because we're we're really not dealing with assisted living and memory care and that sort of thing. We're dealing with seniors. Right. You know, we're like active. Yeah. Active aging. Yeah. You know, that that audience.

21:01 So, and, you know, the interesting thing is is that we've started, you know, looking at the market assessments and doing some doing a little work there. And the millennials are more interested in longevity than the seniors are. Uh-huh. You know? So when you start talking about a program that's gonna be data driven, that's gonna be, these people are gonna be tested and retested. They're gonna be the most well understood bodies. Yes. And and that doesn't necessarily mean you have be a senior to appreciate that. So so, yeah, actually, with 2 models, we're opening 1 in Sunnyvale and one out, in Cedar Park, Texas. And, both of those are, you know, originally designed for seniors, but all of a sudden now we're kind of shifting because Yeah. The market that we're gonna be selling to is not necessarily senior. Yeah. I mean, I'll go I'll go into a SoulCycle class. You know, I'm not that old, but I'm, like, the oldest person in there. But there's, like, 16, 17 year olds that are, you know, getting their fitness in. They don't care that I'm there. I don't care that they're there. Like, we're all just participating in this program and getting what we want out of it. I heard the same thing, like, you know, Orangetheory. That could go, you know, from, like, 18 to, like, 80 Yeah. In certain locations. So I think it's great that, like, people aren't, like, shoehorned into, like, a a brand. They're shoehorned into, like, an experience and, like, what resonates with them regardless of what age they're at. Because some people might want data at at any age. Right? Some people want to feel, and some people want community and safety. You know? So Yep. I guess it's great what you're doing. Yeah. No. I think this is this is the, you know,

22:32 following the biometrics of individuals is you know, that's that's not an age thing. That's a that's an efficiency and a and a quality of life thing. So, yeah. Activate. We're fired up about it. I love it. Alright. Active wellness, you heard it here first on Halo Talks. If you need a joint venture, erase your brain. Call Jill and team and she will show you what the current state and the future of the bricks and mortar is going to be and the programming to go with it. So thanks for coming on. Great to see you again. I love what you're doing and it's needed. And, you know, it's it's great when, like, you've talked to somebody and, like, you nailed it because, like, you just know at this point. Right? If not, like, maybe maybe we should go do something else, and then we ain't doing anything else. So go Halo and go active ones. Thank you, Pete.