Episode #570: Lessons from Three Decades in Fitness-Rick Dennis's Approach to Member Experience and Club Operations

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0:48 It's easy to use. Go to the prospectwizard.com get a free 30 day trial. Talk to my boy Dave Gallon. He will get you all set up and let the leads flow based on the Wizard. Go get him. This is Pete Moore on Halo Talks nyc. I have the pleasure of bringing to our audience Rick Dennis, straight from Bakersfield Body Exchange, good friend of Integrity Square and a leader in the industry for probably about as long as I've been in the industry. So Rick, give your background and then we're going to talk about Body Exchange Bakersfield. Sure. Thanks Pete for having me on. I appreciate being here.

1:29 Yeah, I was doing a little digging when we started talking and yeah, it's been over three decades. Started and got my first personal training certification back in the early 1990s, 1992 to be exact, shortly after that. Started into the industry with Family Fitness center way back in 1993, in the mid-90s. Worked my way up through the organization. Went through the 24 Hour Fitness acquisition in the late 90s, early 2000s. Learned a lot through that experience. At the time I was still on the fitness side of the business. I was part of the, I was a VP of the Fitness Department in our region and then left 24 Hour Fitness for a short time, went to Knoxville, Tennessee and worked for a startup brand there and helped them start from the ground up. Spent a few years there and then we had the idea of Body Exchange. Didn't start out right at, you know, what it is today, but we, we came to an idea of what we wanted to try to do in the industry and then that brought us back to Bakersfield and here we are. So you and John Ovanesian, you guys been working together since the 24 hour days?

3:02 Yeah, I was in Las Vegas running the fitness side of things. They brought John to Las Vegas from Bakersfield at the time. So there's, you know, I could see the connection why we're in Bakersfield today. And John came up to Bakersfield and he and I partnered together there to run all of the 24 hour fitness clubs. I believe at the time John came up, we had four or five locations there. We grew it to 1224 Hour Fitness locations. It was an area of rapid growth for them. And, and we did a lot of the expansion with them there. And yeah, we worked together for, for a long time. I'd say, you know, many of those 30 years I've been, you know, alongside John.

3:51 And then when you went to, to Knoxville and I used to tour those clubs at the Rush back in the day, that was also another 24 hour, you know, diaspora of, of executives that went and started up a lot of these new concepts. You know, the thing I loved about the Rush is that they really leaned into entertainment and they leaned into other modalities. Remember, you had a rock climbing wall and you had some other interesting things inside of those clubs. You know, so as you kind of like moved from the fitness side of the industry to the operations side to the experience side, you know, what are some of the things that, that you, you'd say like Body Exchange now understands about, you know, what you're delivering and you really being on the pulse of, you know, members wanting more strength. Maybe not as much Group X after Covid, what have you kind of morphed the model because you're running, you know, five clubs that are fully entrenched in the market?

4:44 Yeah. You know, we've tried to learn all along the way, you know, from the early days of us learning from pioneers like Ray Wilson. You know, I mean, there's, there's dialogue in our meetings today with our staff that we, we still, we talk about, you know, things that Ray taught us way, way back in the early 90s. And then when we went to Knoxville, yeah, it was, it was completely different. You know, it was, it was entertaining. You know, there's a wind tunnel and you know, being on the fitness side, you know, you walk into that at first and it's like, why do we have a wind tunnel and a batting cage in our gym?

5:26 You know, but it worked. And you know, what we, what we pulled away from that is that's, I think the time where the industry moved towards it was really about the member experience, you know, what kind of experience. And really fitness is about, you know, endorphins too. Right? So what's the endorphin change that Happens when somebody walks in the door to the time they finish their workout, and how do they feel different? And I think that's what the rush was really pioneering is, hey, it's get them in the building and change their mindset, change their endorphin levels, get them excited, and they'll keep coming back. And so as we've transitioned to what we are today, I think we've pulled pieces of all of those things and try to make it work for our market and our members and create that kind of experience for them from the time they come in to the time they leave.

6:27 The interesting part, I think, about the industry now is that there's more strength equipment on the floor. There's less. These kids really don't resonate into Jones. And to get into a group exercise class, they really want, I want Olympic squat machines. I want pec fly machines. I want dumbbells. I want kettle bells. And it seems like what you guys did from COVID onward is basically said, hey, look, I'm, I'm, I'm going to, you know, pot commit to just saying, like, what do people want here? How can I repurpose my square footage? You know, you took out your kids club, right? You took out your group exercise. You said, look, I'm going to provide you as much strength area, equipment and enough, you know, requisite cardio to, to, to, you know, placate the members that still want to just run on a treadmill or what have you. So, like to talk about how that pivot happened, how, like, much easier it is to operate the business right now and, you know, how you feel about where you guys are positioned. That's a loaded question, Rick. Sure.

7:31 Yeah, great question. And, you know, we learned a lot about ourselves, as I think many people did during, you know, the pandemic and Covid. We, we came out of that and as many companies did, we had to look inward and look at our identity and, you know, who are we? You know, what. What can we be? What does the community tell us they want? And, you know, the. The average age demographic, you know, of our members is between the ages of 16 and 36. And predominantly their major focus is strength training, free weights. Of course, there wasn't Internet and, you know, infomercials and podcasts to the levels that they are today, back when I started in the early 90s. Right. So they're influenced by, hey, I'm gonna do this quick workout.

8:35 I'm gonna show it to you. And most of that's coming into play because that's that's meeting where people. Meeting those people where they're at, you know. And so what we learned was, hey, we are the place where everybody trains. And right there in 2021, we picked that tagline up and we said, hey, we are where everybody trains. And we're going to put in more squat racks than any other competitor in town. We're going to serve the people in the ways that they want to be served. We're going to repurpose the square footage of our facility, and we'll use, you know, just one group exercise room as an example. You know, you might have, you know, we were doing really well with group fitness, and in the early parts of it, you know, we might have four or five classes a day in that room. And in the rest of the time, you got around 3,000 square foot just sitting there when people go in and stretch or whatever they do. But now you can walk into any one of our gyms today, and that same square footage, that same space, it's got members using every square inch of that area to do their strength training, their Olympic lifts.

9:55 You know, they're, they're deadlifting their everything. You know, anything that they want to do, they're able to. And, and that's, that's really who we are where, where everybody trains. This is Pete Moore. I want to 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 one month free or giving away shakes or giving away T shirts. What you want to 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. They are going to answer questions, you are going to get those answers, you're going to be able to target those members, and you're going to 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, your answer, trust me, this is real foreign. So from.

11:14 From a standpoint of, of the competition that's been in and out of the market, you know, I know you guys backfilled some of the old 24 hour because you knew the market. Really? Well, you kind of have the. The market, you know, I'd say, quote, unquote, like, you know, surrounded with body exchange into. In main areas. Where do you see the growth happening in. In Bakersfield? What's going on in Bakersfield? I know you got a. A pretty good AAA hockey team that's affiliated with the Oilers, which is the Condors. When I traveled through that area that's like on the southwest corridor down by Allen. Looks like there was a lot of rooftops, which obviously everybody loves from a residential health club scenario. And then you've got Planet and you've got in shape. But I'd say the market isn't really over clubbed to the point of some of the other markets that we've seen. How do you feel about competition and how do you feel about the growth of Bakersfield?

12:11 Well, we feel good. You know, we love the market. We've been here for over 20 years. There's a lot of growth here. And, you know, one thing about Bakersfield that's stood the test of time is it's desirable for the fact that it's a very affordable place for people to live. In California, you know, there's over 420,000 people here. The home prices remain, you know, affordable, and it's. It's seeing an increase in people moving here. It's. It's second in the Central Valley, only second to Fresno, which is a major city, I think the third largest city in the state.

12:58 So there's a lot of growth opportunities here. And it's evident because in some of those areas that you described, you know, there's national and regional, you know, brands coming in to support the market. National change, you know, big, big target. You know, shopping centers are coming in, more Costcos and different things like that. And, you know, as the residential grows, then the retail side of it grows. And so when you can see that retail growth, you know, that the residential is. Is supporting it. So, yeah, there, there's definitely, you know, some opportunity here in the market.

13:40 You know, in the northeast part of town, there's some major development planned out there from a retail perspective. In the central area, there's a major retail development, you know, scheduled for Rosedale highway and Coffee Road, which is right in the heart of town. You just already mentioned in the Southwest, there's a lot going on there that's probably the most vibrant, you know, area. You know, there's the major. One of the new major east, west, you know, corridors is on Panama Lane. And there's a lot of opportunity And a lot of growth going on out there and, and those major retailers that we talked about earlier, they're slated to be on that road in a few different areas that we're aware of. So, yeah, there's a great opportunity and we don't see it slowing down again because it is an affordable place for people to come to and live.

14:37 And it also, the demographics support that because the average age is between the ages of, you know, 28 and 32. And there's a lot of the population at the, under the age of 18. And that's, you know, tells us that, you know, there's a lot of about 30% of the population 18 and under. There's going to be a lot of people here for a long time. Yeah, it seems like you guys are well positioned to, you know, strength, obviously, is where most of these kids are going to. They're on their, their phones and they're doing their own directed workouts. And I think there's like a, a new wave of, you know, what people like, whether it's like bodybuilding or whether it's elite, you know, being an elite athlete. I think high school sports. When I was There, you know, 25, 30 years ago, we knew nothing about nutrition. We knew very little about, you know, periodization schedules and, and reps. I wish I'd go back right now and like, train as a, as a high school athlete. I think you'd have a lot better result. Even though I thought I was pretty good at the time, but not, not as good as I could have been. You know, when you take a look at, you know, 24 hour kind of leaving the market, obviously they had a number of reasons why, you know, they, they didn't have the capital to reinvest into their locations. And that was mostly because of their balance sheet and deals that got done with private equity funds that put a lot of debt on the business that then had to pay interest instead of putting capital back into the business. I know you and John have run a very clean

16:09 operation. I walked around there, I didn't see any, that there was not like one piece of equipment. I'm like, hey, Rick, I think you might want to put some, like, new upholstery on this thing. Like, there was no, you know, there was no equipment out of order, you know, so as you kind of look at and say, hey, we've run this business for over 20 years and we've reinvested into the business where we needed to. What do people say in the market, you know, about body exchange versus Some of the, you know, clubs that maybe don't have as much TLC or local ownership and the fact that you're in the clubs, you know, every week and live there and you know, have, have that kind of like personal touch point that other clubs in national change just don't really have that, that, you know, capability or like the desire to care as much.

17:02 Sure. I'm going to break that into two answers. I think the first thing is when we started out to do this, we had a very clear vision of how we wanted to build the business. We wanted to build our company without debt. And of course, as new entrepreneurs and starting out, we did take on some initial debt. But as fast as we possibly could, we paid off and paid down all of our debt. When we started opening, you know, we opened up roughly 10 locations in a 10 year span, you know, 2003 to 2013.

17:47 And when we were doing this, we were funding all of our own construction, we were paying cash for all of our equipment. We were building our company. So that way for the long haul, we were built to succeed. And now when we need to have a capital call to put some new equipment in or do something, it's readily there and available for us to be able to do that. And so we're definitely not a leveraged company. And I think that's something that's really important to understand because as you mentioned, with 24 hour, once you get leverage, then you're, you know, there's restrictions to that. We've never had those kinds of restrictions because of the foundation and how we built it.

18:37 So with that said, you know, like, you know, back a few years ago when we decided, hey, you know, we're going to kind of rebrand ourselves a little bit, we're going to reinvest into the areas of the club that the market and the, the demographic is telling us that they want, which is the strength, the ability to do, you know, powerlifting and different things within a commercial gym. We were able to easily do that, make those decisions and we stand out for that. You know, we are local. I'm in our gyms every week, every day. At some point we see and hear from our customers. And if it makes business sense and it creates a win for the customer, a win for the, you know, company, then, then we make decisions to make those things happen.

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20:47 There's a two, two points that, you know, came out to me as, as I was touring with you guys on my last trip out to California. One, you guys are on ABC Fitness, right? So a lot of the industry benefits from other clubs being on the, on the same software. One of the things that, that was interesting that you guys made as a strategic move was to say, you know, we did personal training before, but we're not doing it now. Obviously your clubs could potentially do personal training if you wanted to. What's been the, what's been the shift there and thinking and then, you know, if you decided to greenlight that again, you know, what, what kind of success did you have in the past from a number of sessions or you know, revenue per club that, that you could look at if you wanted to kind of plug that back in? Sure.

21:35 Well, you know, as you mentioned, you know, post Covid, there was, you know, a bit of a shift, you know, and we believe that that shift is a lot of people learned how to use technology to do self guided workouts, self guided programming. I won't get too far into it but you know, you talk about today's time and you talk about AI, you know, getting involved in, you know, in workouts and things like that. So what we've decided is that if we're, if we're in a market that a lot of people are using our strength, they're doing self guided workouts. It's not to say that they don't need help with inside the gym and we have our staff go through a training of sorts to understand how to onboard a new member, take them through proper workouts, get them integrated into the facility and always be there as a resource for our members to be able to succeed within Their program. So that's the current.

22:57 That's what we, you know, what we've adopted as of, as of now post Covid prior, we had the full gamut of, you know, personal training going. We had fitness managers within each facility running the department, doing a majority of the, you know, personal training package sales. We had a district fitness manager that was overseeing, you know, the multitude of clubs that we had at whatever time that was. So if we were to be able to find the right mix of talent in terms of, you know, a district fitness manager type person, you know, fitness managers that can hire, recruit and train personal trainers on a regular basis, and we could do it. Well, there's no doubt that I feel like we could go back to, you know, the years before when we were generating about $100,000 a month in personal training revenue and we evaluated our personal training revenue based on actual cash. We didn't do contract value or anything like that. So, you know, there are some companies out there that say, hey, you know, we do X dollars in, in personal training revenue, but they're doing contract value, which, you know, sometimes skews the number just a little bit.

24:28 Yeah, yeah, you just writing, you should just writing packages for the future that hopefully you collect. And hopefully they did the sessions. Actually. It was always, yeah, yeah. And then John owns for the five pieces of the real estate. So you, you got a lot of flexibility in what you could do inside of the locations as well, which is, you know, not common in this, in this space where you're, you're kicking up against a landlord or demolition clause or something. You know, if somebody's going in. I just had a situation where a competitor came into a shopping center and they like, notified the tenant after construction started. Like, hold on a second. I got an exclusive on this property. Like, what do you, what are you doing putting this other fitness guy in there? Like, it's not allowed as part of lease. Oh, like, what will you pay us to let us do that? So how having. Having the ability to have this, like, affiliated real estate entity, you know, I think has been highly beneficial. It looks like you got some room to expand if you want to do some things in the outdoor area as well. I saw some expansion and parking, obviously, is not an issue at all.

25:37 So just the last question for you, you know, if you were to say, hey, Pete, I'm going to go build another five locations over the next five years, you know, if that was a desire for you and your management team, you know, we talked about probably filling in a couple locations in, in Bakersfield where, you know, you can follow the work of a, of a Target in Costco. I used to say that back in the day. I'm like, do we really need to do a research report here and pay like a lot of money to figure out where the real estate development is or can we just go like across street or next door to the Target? Like they obviously did the work and figured out like, hey, I could do $100 million, you know, merchandising store here, maybe my health club might work if I can get a, you know, if I get an out parcel next to them. And then when we met, you talked to us about at some point you were in Ventura. But what are some of the cities if you want to just like tag for us here as you know, potentially where body exchange could and should go within like a 90 mile radius of like maintaining the culture and maintaining the DNA of the business.

26:38 Sure. So outside of our immediate area, like you alluded to there, there are some, some key positional pieces that you could look at here locally for, you know, you know, maybe two or three, you know, opportunities outside of Bakersfield. There's, there's areas south of here, you know, Palmdale, Lancaster area is a very similar type area, similar type demographic landscape to Bakersfield in terms of affordability, in demographics and things of that nature. So there's definitely opportunity there.

27:23 If you look north of us, there's a lot of little areas, key, you know, mid sized cities, opportunities between here and Fresno. And then, you know, you could also look, you know, to the west as you start going to what they call out here the central coast. Again, there's, there's cities that would support, you know, a mid sized gym, you know, the 15,000 to 25,000 square foot type, you know, facility.

28:05 And yeah, there's, there's definitely some opportunity as you go to the central coast, some smaller areas as you go up towards Fresno and within that 90 mile range, for sure, Palmdale, Lancaster, which is south of us, that's great. So I see all the baseballs behind you. So the people on the, who are listening to the audio here and not on the video, there's a, there's a nice baseball collage behind Rick and some glass casing. I went to the Giant game last night against the Eagles and Doc Gooden, Dwight Gooden sat in front of me who is an all time Mets pitcher back in the day, Cy Young award winner and I had the pleasure of like high fiving him on every Giants touchdown and score and big hit interception.

28:53 So it was a pretty wild, like, bucket list event. One to beat the Eagles after five years, but also to have Doc good. And I felt like I was like, I like, invited him to come, like, hang out and watch the game together. So it seems like. I know you're a big baseball fan, so this is probably a good time of year for you. Yeah, it's exciting that, you know, playoffs are here and it's a fun time to watch the game. And, you know, it's funny, you alluded to, you know, the athletes that we thought we were back when we were young and working out and all of that, and then you look at the common day athlete and, you know, they just have all these advantages because there's a lot more research going into the type of training they need to do, the periodization of the training that they do, the nutritional side of what they do, and, you know, all the methods that they have today to. To access, you know, the best of the best type of training. And then you watch and perform on the field and it's. It's obvious that they're. They're just. They're built different than. Than in, you know, many, many years ago. So, yeah, I mean, I think the. The athlete of today gets to be like an iPhone, like, 17 and yeah, we're playing with like a iPhone 3, you know, skeletal structure right now that has its wounds from. From not recovering properly so. Well, look, man, it was great to have you on the show.

30:21 Thanks again for all your contributions to the. To the HALO sector at large. Look forward to seeing how you guys progress, and congrats to you and John and Laurie and crew for what you guys have built. It's a. It's a great story, and it's also bringing a lot of value to, you know, thousands of people in Bakersfield that if you guys weren't there, you know, they might not be. They might not be doing what they're doing, you know, get results. So that starts at the city level and it kind of grows up from there. So thanks for coming on and good to see you again and go Halo. I appreciate it. Thank you, Pete.

31:15 Sam, sa.