Episode #572: Building Hone Fitness-Jim Solomon's Urban Strategy and Lessons from Toronto's Fitness Scene

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This is Pete Moore on Halo Talks. Your captain speaking. I am the

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founder and managing partner at Integrity Square and your host

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of Halo talks. 600 interviews

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and going. We've been around now for 15 and

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1/2 years. We have been helping people like

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yourselves get capital, do mergers and acquisitions,

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consulting, strategic advice in the health, active

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lifestyle and outdoor helo sector. Now

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trying to help as many entrepreneurs as possible get to the next level,

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take that inflection point and be the force behind your growth.

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We are helping companies that have at. Least $3 million of

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EBITDA, around $10 million of revenue

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and we are positioned to help you get institutional growth capital

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or to negotiate deals with strategic partners. If

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you go to integritysq.com

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isq integritysq.com

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isq you can see our capabilities. Deck. Happy to set up a consultation

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at any time that is free of charge and we look forward

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to you helping solve obesity, loneliness and

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diabetes. And go Halo.

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This is Pete Moore on Halo Talks nyc. I have the pleasure of being

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on location in Toronto outside of Isabella.

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We are here with Jim Solomon, founder of Hone Fitness and a good

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friend of Pete Moore and integrity square for 20 years. Jim, welcome

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to the show. Great to be with you, Pete. Awesome. So you've. You and

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I met back in the day when you were CEO of Crunch,

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correct? 98, I think. I think I was a member because I was

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friends with Roger. Roger, yeah, Roger was head of operations. He

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was my camp counselor back at Camp Wakanda. And

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then I joined the gym on 13th street around the corner

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from the Zeckendorf Towers. The real narrow and

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high vertical and like three, four floors

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and vertical. I think they were processing payroll out of there as well at the

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time. I think that's the. Then we moved to Union Square and

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all the offices and then you were a Converse. So you've been a brand guy

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for a while. I had been head of sales and marketing at Converse and had

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been in the athletic shoe business prior to coming in to

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run Crunch. Yeah, yeah. So as they say, once you get into the

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health club industry you never get out. So thanks for being another

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forward indicator of life works. I took a

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three year sabbatical in the

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motorcycle auction business in San Diego. But

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otherwise 98 to now,

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all but three years in the fitness business now. Yeah,

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I'm going on 26 years and four months.

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The same. Yeah. You have seen a lot of different iterations of, of

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getting people healthy. You were more junior when you

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started. Yeah, I'm older than you. Yeah, well, I started as a senior Associate

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at Gold's. Right. And then, and then walked my way through the rest of

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the brands in the industry. Unfortunately I'm part of like the cause of a lot

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of Gold's Gym rebrandings. But if you got to make a living, you know, make

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a living somewhere. Got to, it's, that's a career. That's a

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career. So you and I, you know, met back when you were at Crunch.

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Obviously that deal successfully got done with you with Bally.

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Yep. Then I was able to be helpful in

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getting that back out of Bally with my friends at Angelo Gordon.

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Yep. And you had moved on to work with Falcon Head, which

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for our listeners here was basically one of the first like Halo or

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health and sports funds. So talk about how that you and I were talking about

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them because that was run by a guy named David Morras

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who I had met. You know how small the financial

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world really is in New York is the owner of

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Crunch. Martin Franklin knew David

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just through families and being European and

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whatever. And when we put

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Crunch up, I, we were talking originally

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to Club Met and we were very far

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along with Club Med. I had gone to Paris and

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met with them. It was very far along. And then there was a crash. They

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crashed. Their Japanese business crashed and the

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stock tanked and they went out at the

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11th hour. And Martin was the one

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who kind of generated the interest from Lee Hillman. Do you remember

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that, Hank? Yep. And Lee was

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doggedly loving it. And we did it quickly

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right prior to 9 11. That was like it

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closed right after 911 and

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Bally's took over. So that's the connection. But

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then to get to your thing, David at

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Falconhead was a sports IMG related

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going after that kind of stuff, which was Crunch

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and looked at it. And then after we sold it to

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Bally's, I stayed in touch and then I went with Falcon

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Head out of the business for a while. So. So a little

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known history lesson for some of the people here is that

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David Morose used to have a, a fund. It was called Chase

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Capital Partners. Correct. And that was under Chase and

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Chemical Bank. Correct, Correct. And then kind of spun off to start

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Falcon Head. That's right. And a buddy who used to be in my business school

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class, Brian Crosby. I, I work with Brian.

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We never shared that. Yeah, it was one of my section mates back at

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Harvard Business School back in the day. So when I had started

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Integrity Square, I was looking to try and solidify myself with

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some, some deals. So I'm like, hey, you know, let me see if we can

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be helpful on Extreme. And I knew you. Yeah. To Crunch and that's

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kind of. Yeah. Things kind of evolved. Brian's a good guy

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and with, well, what's his name? That famous financier

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for a while before Falcon had Carl Icon. Carl Icon

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Associates. Yeah. I met that guy one time which was. Yeah, Brian's

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a good classic. Classic. Meeting with a hedge fund

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operator. Yes. So, you know, as, as you kind

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of looked at Crunch originally back in the day, you know, we're selling

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memberships. But you're also creating a brand. Yeah. You know, when you moved up here

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and did the deal with Extreme. Yeah. Xtreme was a very well

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known brand in the downtown, the Toronto DTA

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as they call it. Right. So talk about the growth there

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and talk about your site selection back in the day. Yeah,

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yeah. So I had learned a lot

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about the city of New York, which is where we made a

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lot of money at Crunch. Right. We also had a gym in

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Chicago under the Hard Rock Cafe. We had San

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Francisco Tenderloin. You know, we were mostly

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urban. That's where I kind of got my feet wet on

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urban gyms. Extreme, when we

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bought it was only 4 Pete and they were suburban, more or

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less. And that's. I had this comfort

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level with the. City, which a lot of people don't have. No,

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it's tricky. It's a puzzle. These cities are

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puzzles. Right. But again, weaving

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it to you is Bally's had some gems here

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and they were about to go bankrupt at

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approached the CFO of Bally's and we bought 8, 6,

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7 Bally's, a couple in the city. And that's got

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me going quicker. You know, it's much easier to buy than to go

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Greenfield. And that sped us up because these

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guys, these PE guys, they want to, you know, grow and sell.

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Yeah, you mean, you mean they don't want to just wait for you to like

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negotiate with landlords over multiple years. To try to get a little bit that, that,

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that, that accelerated as well. And

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then that got me a little

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flavor. And then I added two green fields.

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Think about it. I was there six years. I only got two in the city

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open in six years. But linking it

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all together, I became a good

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aficionado of the city of Toronto, like New York. I tried

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to do a lot of things I had learned at Crunch

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and we then had 13 when we sold. You helped us

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sell it to Good life. City and suburbs. Right. A nice

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mix. Nice mix. I went

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to a management meeting with a company that I won't name

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and dad, their head of real estate, stand up in front of this private

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equity fund. And the guy said, we

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can select clubs just based on the software. Our software is so

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good on site selection that we can just basically look at that. We don't even

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have to visit the site. We know how good it is. And I went up

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to the guy afterwards because he was somewhat of a friend of mine. I said,

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don't ever say that again because this shit is way more complicated.

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You're just looking at. Don't say that to an operator. Yeah, don't say it to

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an operator. You say it to a private equity guy who wants to lose money.

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Yeah, yeah. On the new site. And then they built a couple sites in Dallas

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that had great traffic because it looked like it was on high race highlight,

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but there's no exit. And it was an actual methadone clinic. So

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when you look at sites and you look at what you've curated here

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with honed and the pockets and the puzzles, I love this idea. I'm

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going to call it that. It's a puzzle. How much time does it. How

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much knowledge do you have? How much time do you spend walking the

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neighborhood, understanding what's going on? Just what you said to your

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buddy, you've got to live it, really literally

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live it. And you got to walk. And you gotta

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maybe have friends over the years. Like I have a girlfriend

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who lives right near one of the gyms I chose. I mean,

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these are neighborhoods you and I talked about. This is a neighborhood

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city here. Right? So, you know, we're in the

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gay village with the first one. We're in Koreatown,

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we're in Chinatown. We're in the

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Italian section of one of the gyms. We're in the Greek

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section on another gym. You gotta do this by

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neighborh. And then once you decide on the

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neighborhood, you gotta do some of the things that are logical with the

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subway system, signage, space. But

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you have to own a neighborhood when you're

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in a city like Toronto. Yeah. And then when you take a look

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at a lot of companies that do big box rollouts or

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say, like, hey, my club needs to look a certain way and I need to

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get exact number square feet. I think back in the day with

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Crunch, I kind of learned as looking around and attending the clubs like,

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dude, these things may be all different shapes and sizes. And if you want to

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get into a neighborhood, you have to conform to what's available in that neighborhood.

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So talk about how you kind of lens that.

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That's an important point. Over the years I'd walked New

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York and I saw the planet

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two, three planets in New York City and they didn't look anything

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like a planet in Westchester County.

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And it's impossible. It's impossible. Also with the rents

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you need, you gotta get a good rent. So

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immediately you're talking about needing basement space in a

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city like New York or Toronto. And then you don't want too

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much basement, you still need some sun. Right. So

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now you're combining the basement with some

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open area sun and everything's back to the word

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a puzzle. There are no two buildings alike in New York City or

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Toronto. There's no model

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other than I would say the driving models. The

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neighborhood and the rent. Yeah, right. The neighborhood and the rent.

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So when you to put your hat on of like, hey, I'm a

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CEO and founder and I'm working for a private equity fund.

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And you go to that private equity fund and say, hey, I'm going to bring

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you opportunities. None of these opportunities are going to look the same and

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you're going to have to be comfortable or get comfortable. That what we just

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talked about about neighborhood box traffic

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flows, density, where things are going, what

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might be coming. In a gentrifying neighborhood, you gotta

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get comfortable with being uncomfortable. Yeah, I was really lucky,

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Pete, because my group

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Cornwall is very small and they're hedge fund too.

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So these guys are used to risk and maybe not

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modeling an opportunity. And I'll say it,

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part two is my first one worked

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right. So that's always a good thing. Yeah, I have a

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feeling they would have, they would have closed the tents

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if I hadn't done well. So the first one, which

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you've seen was a big hit and it was really close to

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good lifes. Right. So they gained confidence that I was

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stealing share, doing well and

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I think I got them comfortable. That model is only,

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you know, brand space rent. Yeah,

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yeah. When you take a look at Bailey back,

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you know, 20 years ago, really like rewind the clocks. A lot

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of the Gold's gym operators I used to work with would say like, I'm going

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as close as I can to Bailey because I know that they're a publicly traded

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company. Right. They unfortunately have too much debt. Not, not the fault of

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any of the management team at the time. Yeah, they got too much debt, they

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got too much income deferred capex, they

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got too high interest payments and they just physically and

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financially cannot reinvest in the clubs. Just can't do it.

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So they were like a target for knowing that

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the members Were not getting taken care of. When you take a look at

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a city like Toronto and you say, hey, I'm gonna go across the

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street from a good life or somebody who's legacy operator with

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a new product, you're definitely gonna take some share

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from them. But you're also saying like I'm betting on the neighborhood. I'm not betting

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on just like a. Percentage of their members completely. Right.

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First of all, here, good life is not

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ballets. Right. He's pretty well financed, he's got a nice

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brand, he's pretty strong. So

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within the comment of the neighborhood, it is a

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$3.2 million million dollar million

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people city. It's the fourth largest city in North America.

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Yeah. It's huge and it's dense and it's young. It's

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young. So you can get that

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neighborhood. But I've learned

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you don't want to be too. You don't want to share too much. So you

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know, you need 1, 2k in the city away from

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a good life to maximize your business. You don't want

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to be a half a k away and share. Yeah.

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So you started the Hone brand. Maybe just give some background on

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where that name came from and then you know how you kind of grown

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it and you and I just went through the city because I'm up here watching

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some sports games. Yeah, yeah. Time to tour the locations. Yeah.

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You seem to have like, you seem to have it pretty well kind of surrounded.

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Yeah, yeah. I had the benefit of

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back to the extreme experience. Right. So I knew

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which good extremes we had when we sold the good life.

254
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So again, what neighborhoods are good? Right.

255
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And. Well, let's take

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a step back. Hone was to focus, you know, Hone in

257
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focus. Yeah. So that's just something I came up

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with. And I like short, simple names.

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So. But now back to the driving

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force is there are

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neighborhoods here that are better than others. They're

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younger, there's less high rise. I don't like a lot of high

263
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rise because these guys have put better and better gyms in their high rise.

264
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So I like these neighborhoods that are low high rise, that don't have gyms

265
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or homes. And I like busy streets, just like

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101 retail. But then you gotta get the rent.

267
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Right. So now you're back to the basement and all this other

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stuff. But I had the roadmap

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from extreme. So I immediately

270
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looked at subway lines. Very important. Young and Bloor have

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the two big subway lines. So you're gonna do well if you're

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there. Not Too close to a good life. And

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then get the rent right, and then you choose a

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neighborhood, for instance, you haven't seen it, but I'm

275
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east in the Danforth, which is essentially the

276
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Bloor subway line, the Greek area, the Greek

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neighborhood. There is a good life there, but it was my second

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best extreme. That good life is the

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one I sold them. So I was going to that neighborhood as part of

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this gotcha. And I knew it was would be good. I knew it would be

281
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good. This is

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00:17:24,429 --> 00:17:28,109
Pete Moore. I want to let you in on a little secret. There's this company

283
00:17:28,109 --> 00:17:31,669
called Promotion Vault. And what they do is they give. Out rewards from

284
00:17:31,669 --> 00:17:35,349
retailers that allow you to incentivize your members

285
00:17:35,669 --> 00:17:39,429
without having to do zero down and one month free or

286
00:17:39,429 --> 00:17:43,269
giving away shakes or giving away T shirts. What you want to do is

287
00:17:43,269 --> 00:17:46,780
build a rewards program that lasts, that people value

288
00:17:46,940 --> 00:17:50,740
and that doesn't discount your own products and services. So here's the

289
00:17:50,740 --> 00:17:54,540
deal. There's something called Rewards Vault. The Rewards Vault is going

290
00:17:54,540 --> 00:17:58,340
to allow a member to set up their own profile. They are going

291
00:17:58,340 --> 00:18:01,780
to answer questions, you are going to get those answers. You're going to be able

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to target those members, and you're going to reward them inside your club,

293
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inside your spa, and outside of the club and outside of the

294
00:18:09,460 --> 00:18:13,170
spa to get them to become loyal, to get them to pay their

295
00:18:13,170 --> 00:18:16,970
monthly dues and to be rewarded properly for the

296
00:18:16,970 --> 00:18:20,610
actions. A lot of companies are cutting back on rewards. You shouldn't be.

297
00:18:20,690 --> 00:18:23,650
Promotion Vault, your answer? Trust me, this is real.

298
00:18:27,809 --> 00:18:31,570
We are back with my good friend Jim Solomon, and we are talking everything

299
00:18:32,130 --> 00:18:35,570
related to the puzzle of Toronto, which is

300
00:18:35,570 --> 00:18:39,300
growing dense and very young. So, Jim, talk about the team

301
00:18:39,300 --> 00:18:42,020
that you put together here, because I met some of the people at the front

302
00:18:42,020 --> 00:18:45,820
desk and some of your operators and seemed like you. Sometimes you say,

303
00:18:45,820 --> 00:18:48,500
oh, I got lucky with getting a good team. And it's like you realize it's

304
00:18:48,500 --> 00:18:52,180
not luck. No, it isn't. But, you know, we talked about it.

305
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Toronto, I would think is one is not only

306
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big, but it's growing faster than Chicago. I see a lot of cranes

307
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here. That's usually exactly a lot of construction. A lot. It's always.

308
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It's tightened a bit on immigration with the what's

309
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happening in the world. But I think it was growing at a

310
00:19:11,240 --> 00:19:14,840
10% clip every year. And a lot of

311
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these people are young, educated. They get

312
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in because they're educated, looking for

313
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opportunity. And

314
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I was able to capitalize on that. This all goes back 11

315
00:19:30,880 --> 00:19:34,550
years where I Opened that first one you saw, which is sort of the

316
00:19:34,550 --> 00:19:38,190
50 yard line of Toronto, young and Bloor. And there's a

317
00:19:38,190 --> 00:19:41,670
language school right near me. And all these young

318
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kids from a lot of them from South America,

319
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Venezuela actually just come into town,

320
00:19:48,550 --> 00:19:52,270
college educated, looking for work, looking to

321
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make a life here. After language school, were working

322
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out at my gym, you know, 20 somethings. And I

323
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just got to talking to them, friendly. And then a couple of them

324
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seemed bright. Start at the front desk, then I'd

325
00:20:07,090 --> 00:20:10,850
open a second gym. I'd move that front desk guy to the.

326
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And now I'm probably, well, I'm 100%

327
00:20:15,730 --> 00:20:19,410
young immigrants not born here,

328
00:20:19,890 --> 00:20:23,130
they're from Vietnam, they're from

329
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Venezuela. The young lady you saw is

330
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from Colombia. They're all here to make a living

331
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and live a life that they weren't able to get where they're

332
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from. And like I said, I

333
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think I'm 70, 80%, at least

334
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almost 100 on management and front

335
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desks. Maybe some of the trainers are indigenous here.

336
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And these kids, and I say kids because they're the

337
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age of my son Matthew, work like

338
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hell. They want to become general managers,

339
00:21:01,740 --> 00:21:05,260
they want to make money. They, some of them are open

340
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to training people outside of their front

341
00:21:08,940 --> 00:21:12,500
desk hours. Some of the front desk kids, the

342
00:21:12,500 --> 00:21:16,260
managers sometimes train people. I try to

343
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get them, you know, work because they want to

344
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work and they're industrious and I find them to be

345
00:21:23,340 --> 00:21:27,020
fantastic employees. And then, you know, from a

346
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standpoint of getting around the city and moving, you

347
00:21:30,740 --> 00:21:34,460
know, employees or members using the different clubs, how does that

348
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kind of play out here? Well, it's just like crunch. I think 20,

349
00:21:38,290 --> 00:21:41,980
30% of the crunch people did the all access. 10 or 12

350
00:21:42,860 --> 00:21:46,460
New York gyms, we have about the same, maybe 30%

351
00:21:46,620 --> 00:21:50,300
buy a membership where they can take a friend and

352
00:21:50,860 --> 00:21:54,700
use all six. It's very easy to get

353
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around because I'm on the subway lines here. The

354
00:21:58,060 --> 00:22:01,890
subway's by far the most efficient. But I'm also, if I'm not on the subway,

355
00:22:02,120 --> 00:22:05,320
subway Pete, I'm on a streetcar street

356
00:22:06,040 --> 00:22:09,480
and I do the free guests. So

357
00:22:09,560 --> 00:22:13,400
there's a lot of back and forth to the six gyms.

358
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When you kind of look at your business model, I

359
00:22:17,440 --> 00:22:20,640
think if someone wants to say, what's the home business model? I say it's based

360
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on simplicity. It's based on, you know, not trying to like

361
00:22:24,280 --> 00:22:28,120
put any additional fees or fine print in there. You've done that

362
00:22:28,120 --> 00:22:31,960
purposely? I have. You've done bi weekly billing, which you Know, a

363
00:22:31,960 --> 00:22:34,460
lot of people in the US Are starting to do now. Yeah. You know, get

364
00:22:34,460 --> 00:22:37,980
some higher revenue per year, per

365
00:22:37,980 --> 00:22:41,220
member. Yeah. But just give us a little background on

366
00:22:42,100 --> 00:22:45,860
your pricing strategy, the reason why you're

367
00:22:45,860 --> 00:22:49,500
at no fees. Right. And how when you have

368
00:22:49,500 --> 00:22:52,980
no fees and you're not adding processing fees and you're not adding

369
00:22:53,460 --> 00:22:57,140
cancellation fees and things like that, how it might not necessarily

370
00:22:57,140 --> 00:23:00,180
impact your bottom line with like negative

371
00:23:00,860 --> 00:23:04,660
fee options. But at the same time, it's also, you might be able

372
00:23:04,660 --> 00:23:08,220
to hire better people. You might have less conflict at the front desk. Like,

373
00:23:08,300 --> 00:23:11,940
how does it, like, help the business? Yeah, I think it's

374
00:23:11,940 --> 00:23:15,540
important. I like it simple. I've always liked it

375
00:23:15,540 --> 00:23:19,380
simple at crunch extreme and now hone. I

376
00:23:19,380 --> 00:23:23,020
just think it's easier to sell. I had one

377
00:23:23,020 --> 00:23:26,700
membership for a number of years. Then I added

378
00:23:28,090 --> 00:23:31,610
the option of joining for committing for a year.

379
00:23:31,850 --> 00:23:35,330
I never had that. Even that. I just had quit

380
00:23:35,330 --> 00:23:39,090
anytime. And you get all six clubs, you

381
00:23:39,090 --> 00:23:42,410
get a free guest. Here's my price. That simple.

382
00:23:42,810 --> 00:23:46,090
Then I think I'm still simple. But I added

383
00:23:46,250 --> 00:23:49,970
maybe five years ago, commit for

384
00:23:49,970 --> 00:23:53,610
a year and save some money.

385
00:23:53,960 --> 00:23:57,720
And that was a retention device, to be honest with you. And

386
00:23:57,720 --> 00:24:01,440
then a couple years ago, we had a lot of

387
00:24:01,440 --> 00:24:04,920
people coming back from the pandemic, and I was price

388
00:24:05,000 --> 00:24:08,720
sensitive because I'm

389
00:24:08,720 --> 00:24:12,160
a value guy, Pete. But I'm above Planet

390
00:24:12,160 --> 00:24:14,360
Fitness type of pricing. Right.

391
00:24:15,880 --> 00:24:19,400
And I was a little sensitive. So I introduced a one club,

392
00:24:20,000 --> 00:24:23,120
no guest. Okay. So I have three options.

393
00:24:23,520 --> 00:24:26,960
It's really the same membership. Two

394
00:24:26,960 --> 00:24:30,000
memberships, either a guest or not a guest.

395
00:24:30,800 --> 00:24:34,240
Right. And then one is a year commitment. So

396
00:24:34,480 --> 00:24:38,160
we keep it simple there. I want it to be simple to

397
00:24:38,160 --> 00:24:41,920
understand, as you said, simple to explain. Simple.

398
00:24:41,920 --> 00:24:45,120
On the website, I sell a ton of people

399
00:24:46,240 --> 00:24:49,680
because my customers are so young.

400
00:24:49,760 --> 00:24:53,480
They're very comfortable clicking and joining. I think I'm at

401
00:24:53,480 --> 00:24:57,120
80, 90% join online now. That's huge.

402
00:24:57,360 --> 00:25:00,880
Huge. Still, that credit card and ach,

403
00:25:01,680 --> 00:25:05,040
how's it work up in Canada with ACH. Right here, it's a little more

404
00:25:05,040 --> 00:25:08,680
complicated. With the banks on ach, you can sign them

405
00:25:08,680 --> 00:25:12,480
up, but you can't at headquarters tap it

406
00:25:12,480 --> 00:25:16,000
or do it. You cannot get that money unless they

407
00:25:16,750 --> 00:25:20,030
come to the gym. If they owe you money, it has to be done at

408
00:25:20,030 --> 00:25:23,790
the gym, at credit card, you, you know, you can tap it a little later.

409
00:25:23,790 --> 00:25:27,590
They're saying at the beginning of each month they have to authorize. Oh, no,

410
00:25:27,590 --> 00:25:30,830
no, no, no. You can do the payroll. We use Twin Oaks. You can do

411
00:25:30,830 --> 00:25:34,510
that. But if it declines. You have a much more

412
00:25:34,510 --> 00:25:38,110
complication here. You cannot, you know, the

413
00:25:38,110 --> 00:25:41,670
consumer has to take the lead on that if it declines.

414
00:25:41,670 --> 00:25:45,470
So when you started the business up here, post extreme with all this

415
00:25:45,470 --> 00:25:49,070
knowledge, if I was to take Honed and put it in New York, this would

416
00:25:49,070 --> 00:25:52,830
basically be like the equivalent between like a blink meets a crunch. Would

417
00:25:52,830 --> 00:25:56,390
that be the. Yeah, I think. Exactly. I think if it's anything,

418
00:25:56,950 --> 00:26:00,630
it's Blink Manhattan. Right. Where they're

419
00:26:00,630 --> 00:26:03,990
doing something a little different blink in

420
00:26:03,990 --> 00:26:07,750
Manhattan than they do in Queens or the Bronx. Right. A little

421
00:26:07,750 --> 00:26:11,590
more expensive. Right. So I'm pretty close to.

422
00:26:14,480 --> 00:26:18,200
Well, my spaces are a lot like Crunch, you know, the

423
00:26:18,200 --> 00:26:21,880
wood. Wood and beam and the cool areas, Brick

424
00:26:21,880 --> 00:26:25,600
and beam. But my offering is a lot

425
00:26:25,600 --> 00:26:29,400
like Blink Manhattan. Yeah. Yeah. And if you take,

426
00:26:29,400 --> 00:26:33,240
you know, Blink obviously went through some. Some hard times, mostly just related

427
00:26:33,240 --> 00:26:36,160
to debt. Yeah. They had on the balance sheet, and then they sold it to

428
00:26:36,160 --> 00:26:39,860
Pure Gym, which is coming into the US Market, and they're coming

429
00:26:39,860 --> 00:26:43,700
in pretty aggressively. You know, the one thing that's interesting about the model that you

430
00:26:43,700 --> 00:26:47,460
set up originally was there's no. There's no group X going on in there

431
00:26:47,460 --> 00:26:50,980
now. There's no. There's no kids club. Space is too

432
00:26:50,980 --> 00:26:54,740
precious. And it's also. But, like, down, like, 10 years

433
00:26:54,740 --> 00:26:57,620
ago, you kind of like, put this model in the ground, and now, like, the

434
00:26:57,620 --> 00:27:01,260
market's come, like, kind of come on. I think. I think it

435
00:27:01,260 --> 00:27:04,260
has. Well, back to what you said. You saw that one.

436
00:27:05,040 --> 00:27:08,840
I knew Planet. I knew from a marketing

437
00:27:08,840 --> 00:27:12,680
standpoint, I didn't want to be planet. Right. How am I going to

438
00:27:12,680 --> 00:27:16,520
sell? I can't be planet. Right. So when I did that

439
00:27:16,520 --> 00:27:20,120
first gym, I think I was ahead of the time. I think I

440
00:27:20,120 --> 00:27:23,360
got eight squat racks in there. I had

441
00:27:23,680 --> 00:27:27,520
two areas of AstroTurf with the sleds

442
00:27:27,520 --> 00:27:30,840
and the ropes. And so I was going for the

443
00:27:30,840 --> 00:27:34,480
workout person, not the beginner, so to speak, where they,

444
00:27:34,480 --> 00:27:38,300
you know, 11 years ago, they were advertising. You know,

445
00:27:38,300 --> 00:27:42,020
we're for people that never belong to a gym. Right. Never

446
00:27:42,020 --> 00:27:45,740
have joined a gym. I went, okay, they'll

447
00:27:45,740 --> 00:27:48,860
own that. I'll go get. I'll go after good life

448
00:27:49,260 --> 00:27:53,020
people who use the gym, and I'll be half their price. You know, 11

449
00:27:53,020 --> 00:27:56,540
years ago. And so I think I was

450
00:27:57,260 --> 00:28:00,300
early on the whole squat rack,

451
00:28:00,860 --> 00:28:04,540
dumbbells. It is strength, very strength. Heavy, which is where the market

452
00:28:04,540 --> 00:28:07,200
is today. Especially with. Yes. Kids are not, like,

453
00:28:07,920 --> 00:28:11,760
jonesing to get into, like, a Zumba class or Drupek's class. I haven't

454
00:28:11,840 --> 00:28:15,200
seen that. Nor are they dropping their kids off at the club. I mean

455
00:28:15,680 --> 00:28:18,680
the fact that they had kids care for so long in the health club industry

456
00:28:18,680 --> 00:28:22,480
is a little bit ridiculous when you think about, well, they're not going into like

457
00:28:22,480 --> 00:28:26,320
a time. There are no kids in the city. I was in a club chain

458
00:28:26,320 --> 00:28:30,120
the other day, I'm not going to name who it was, but they, I'm

459
00:28:30,120 --> 00:28:33,240
like, what are you doing with this 3,000 square feet? They're like, oh, it's kids

460
00:28:33,240 --> 00:28:35,620
club. How many, how many kids you got in here? Like, like, well there's like

461
00:28:35,620 --> 00:28:38,820
33 kids that pay like 3, $5 a month.

462
00:28:39,300 --> 00:28:42,980
That's it. It's like 1% of like your demographic. They're

463
00:28:42,980 --> 00:28:46,540
the kids. Was easy to not do. But I'll tell you, I, you, you know

464
00:28:46,540 --> 00:28:50,180
the one you saw, there's a yoga studio across the street,

465
00:28:50,420 --> 00:28:54,180
right? There's seven Pilates studios within

466
00:28:54,260 --> 00:28:57,980
a half a K of me. You know, I'm not

467
00:28:57,980 --> 00:29:01,780
going to outdo that, right? You want authority on something if you're going

468
00:29:01,780 --> 00:29:04,830
to be the, if you're going to open up a standalone business. So I got

469
00:29:04,830 --> 00:29:08,550
the strength for a great price. Yeah, yeah, yeah. You

470
00:29:08,550 --> 00:29:12,350
know if somebody said to you, yeah, I'm going to drop ship you into

471
00:29:12,350 --> 00:29:15,910
like the equivalent of like a new Toronto. Yeah. And he has like 12

472
00:29:15,910 --> 00:29:19,710
million US go get me six locations like that with these

473
00:29:19,710 --> 00:29:22,710
rents. Be fun. Yeah, it'll be fun. But how long would it take you. To

474
00:29:22,710 --> 00:29:26,190
like, oh my gosh, I'm telling what the landlords,

475
00:29:26,990 --> 00:29:30,750
you know, even in a place like Toronto, a

476
00:29:30,750 --> 00:29:34,110
lot of them want demolition clauses. I wasn't going to do that.

477
00:29:34,430 --> 00:29:37,290
Right? I mean not doing, I'm not doing

478
00:29:37,850 --> 00:29:41,610
huge money, but I'm doing enough money. I'm just going to let these guys

479
00:29:41,610 --> 00:29:45,050
have a demo. So it takes a lot longer to get a

480
00:29:45,050 --> 00:29:48,610
landlord who won't do a demo clause. Right? Just for our

481
00:29:48,610 --> 00:29:52,370
listeners, let's just pause and give them like what a landlord

482
00:29:52,370 --> 00:29:56,090
is doing is one, they're going to give you some money for tenant improvement dollars.

483
00:29:56,090 --> 00:29:59,530
Correct. And they're also going to try to basically manage

484
00:29:59,690 --> 00:30:02,940
their opportunity by saying, hey look,

485
00:30:03,500 --> 00:30:06,820
I'll give you this money, I'll give you a 10 year lease. But if I

486
00:30:06,820 --> 00:30:10,580
get approved to put up 500 apartments here, I need a demolition clause

487
00:30:10,580 --> 00:30:14,100
that if I knock this place down, you gotta leave. Right? And maybe I'll compensate

488
00:30:14,100 --> 00:30:17,700
you something or maybe I'll compensate you nothing. Right. But I put the money

489
00:30:17,700 --> 00:30:21,420
in too and now they're demoing It, So I'm not gonna

490
00:30:21,420 --> 00:30:23,980
sign that. Right. So, so for all you, all you

491
00:30:25,020 --> 00:30:28,690
health club operators out there that are listening to this podcast, hopefully one

492
00:30:28,690 --> 00:30:32,530
you're understanding that real estate is a puzzle and

493
00:30:32,530 --> 00:30:35,850
you gotta invest the time and effort into figuring out where you wanna be long

494
00:30:35,850 --> 00:30:39,450
term. Right. But the second thing is like these lease agreements

495
00:30:39,610 --> 00:30:43,170
are extremely important because either an asset or liability. Correct. That's it.

496
00:30:43,170 --> 00:30:46,810
It's a big time asset. One other thing, weaving

497
00:30:46,810 --> 00:30:50,650
back earlier neighborhoods in Toronto, those

498
00:30:50,650 --> 00:30:53,730
are individual landlords, they're not doing a lot of

499
00:30:53,730 --> 00:30:57,200
tips. So now I gotta do the ti.

500
00:30:57,920 --> 00:31:01,440
Definitely no demo clause, but also takes a long

501
00:31:01,520 --> 00:31:05,160
time. This is not a big time strip

502
00:31:05,160 --> 00:31:08,800
mall where they got, you know, we'll give you 30 bucks a square

503
00:31:08,800 --> 00:31:12,440
foot, etc. There's no real estate investment groups out here. These are

504
00:31:12,440 --> 00:31:16,200
individual guys that own a few buildings in the neighborhood. They're

505
00:31:16,200 --> 00:31:19,960
not gonna spend. I got no, got no TI on the

506
00:31:19,960 --> 00:31:20,730
first, first one.

507
00:31:23,930 --> 00:31:27,690
This is Pete Moore. Here's the last tip for you of the podcast.

508
00:31:28,010 --> 00:31:30,890
We are partnered up with a company called higher dose.

509
00:31:31,130 --> 00:31:34,490
Higherdose.com they are the leader in

510
00:31:34,730 --> 00:31:37,690
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511
00:31:38,330 --> 00:31:41,930
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512
00:31:42,090 --> 00:31:45,770
other products such as PEMF mats and sauna

513
00:31:45,770 --> 00:31:49,020
blankets. If you have not gotten on the workout

514
00:31:49,020 --> 00:31:52,460
recovery train yet, your time and your stop

515
00:31:52,620 --> 00:31:56,180
is now. You got to get these products in there before these workout

516
00:31:56,180 --> 00:31:59,420
recovery and spas end up saturating your market.

517
00:31:59,740 --> 00:32:03,340
Having your members walk out of the club and going into one of their locations

518
00:32:03,340 --> 00:32:06,980
for 200 bucks per month where they're paying 39 to

519
00:32:06,980 --> 00:32:10,820
you. Let's become an expert in workout recovery. If we

520
00:32:10,820 --> 00:32:14,160
are already an authority in workouts, Higher Dose,

521
00:32:14,560 --> 00:32:18,240
check it out. There's a wholesale code and we look.

522
00:32:18,240 --> 00:32:21,520
Forward to helping you augment your products. And services

523
00:32:21,920 --> 00:32:25,720
to meet the demands of your members. And hey, let's get people

524
00:32:25,720 --> 00:32:29,560
happy, healthy and sweating. And the recovery should be

525
00:32:29,560 --> 00:32:30,800
just as good as the workout.

526
00:32:34,880 --> 00:32:38,520
So, you know, as you think about going into other markets around

527
00:32:38,520 --> 00:32:42,230
here, obviously the urban slant to what

528
00:32:42,230 --> 00:32:45,870
you're doing is really what hone's good at. That's what we're good at.

529
00:32:45,870 --> 00:32:49,670
Finding these new neighborhoods and then continuing down that path. Is

530
00:32:49,670 --> 00:32:53,430
there anything else? Like, are you looking at personal training is something that you

531
00:32:53,430 --> 00:32:56,990
maybe want to spend some more time thinking about? Yeah, that

532
00:32:57,230 --> 00:32:59,150
I think is a great opportunity

533
00:33:00,990 --> 00:33:04,230
being an individual operator. Jim

534
00:33:04,230 --> 00:33:07,760
Solomon. I think with

535
00:33:07,760 --> 00:33:11,360
six gyms, it's been a challenge for me in the

536
00:33:11,360 --> 00:33:15,080
pt. Right. I think if you're a bigger

537
00:33:15,240 --> 00:33:18,840
group and you have a big legion of

538
00:33:18,840 --> 00:33:22,520
people and you got processes and you got people

539
00:33:23,560 --> 00:33:27,400
back at extreme, we had a real process with a lot of

540
00:33:27,400 --> 00:33:30,600
people doing the thing. It takes a big investment,

541
00:33:31,640 --> 00:33:35,320
takes some upfront money. I just wasn't

542
00:33:35,320 --> 00:33:38,740
willing to do that. Back to your simplicity, I didn't do

543
00:33:39,140 --> 00:33:42,980
separate people selling training or anything because

544
00:33:42,980 --> 00:33:46,060
I didn't want to add a lot of expense. The one thing is that in

545
00:33:46,060 --> 00:33:49,780
Toronto. You know, if we roll back to. Extreme, there's a significant

546
00:33:50,020 --> 00:33:53,820
amount of revenue, like 30, 40%, 30% of the business. And

547
00:33:53,820 --> 00:33:57,300
I think we did 80 mil. So that's a $25 million

548
00:33:57,860 --> 00:34:01,420
PT divided. By, you know, that's almost like, you know, it could be like

549
00:34:01,420 --> 00:34:04,340
70, 80 grand per month per club. Yeah. You make

550
00:34:05,310 --> 00:34:09,150
40 margin. 30, 40, 35 margin on 25

551
00:34:09,150 --> 00:34:12,910
million bucks. That's a lot of money for a wall. So ideally,

552
00:34:13,070 --> 00:34:16,830
if you wanted to put that lever on and try

553
00:34:16,830 --> 00:34:20,430
that out again, that could be something at home. Big opportunity. I

554
00:34:20,510 --> 00:34:23,950
just have Learned over the 11 years,

555
00:34:24,910 --> 00:34:28,670
I'm personally keeping it simple because you gotta

556
00:34:28,670 --> 00:34:32,470
really be devoted personal training to get that kind of

557
00:34:32,470 --> 00:34:36,250
business. And what's going on in the, in the Toronto market before we close

558
00:34:36,250 --> 00:34:39,850
here on corporations, like, obviously there's people

559
00:34:39,850 --> 00:34:43,250
working from home, which from the neighborhood club. Probably benefits you because

560
00:34:43,890 --> 00:34:47,410
living clubs are good. You're living. I like touring clubs now.

561
00:34:47,490 --> 00:34:51,330
The best part of my job is when I'm going around and I'm touring clubs,

562
00:34:51,650 --> 00:34:55,410
either whether I'm on, on assignment or whether I'm just going around, the clubs

563
00:34:55,410 --> 00:34:58,370
are usually full pretty much at all times. At least there's some people there.

564
00:34:59,010 --> 00:35:01,730
But people show up at 5, like at 2 o' clock in the afternoon, there's

565
00:35:01,730 --> 00:35:05,520
like 100 people. These people unemployed. I'm like, no, dude, they're

566
00:35:05,520 --> 00:35:07,040
just taking a work. They're taking it.

567
00:35:09,360 --> 00:35:13,200
But if you take a look at like the corporate market. Yeah. In Toronto,

568
00:35:13,200 --> 00:35:16,840
like, obviously there's a lot of guys that haven't returned to work. I think,

569
00:35:16,840 --> 00:35:20,560
yes, Ontario as a pension funds and

570
00:35:20,560 --> 00:35:24,080
like groups that are, that. Have backing for the government or saying they're coming back.

571
00:35:24,160 --> 00:35:27,440
Just like New York, they're coming back. Those

572
00:35:27,520 --> 00:35:31,320
businesses, those gyms that are near, in commercial

573
00:35:31,320 --> 00:35:34,980
areas have not come back as well as

574
00:35:34,980 --> 00:35:38,660
the living locations. But they are coming back.

575
00:35:38,820 --> 00:35:42,420
They are coming back, but not to the extent I have one

576
00:35:42,420 --> 00:35:46,100
that's a little more commercial. It has not come back as well as the

577
00:35:46,100 --> 00:35:49,620
other five. Yeah, right, gotcha. Yeah. And then from a

578
00:35:49,620 --> 00:35:53,460
standpoint of, you know, living in the city, you Know one.

579
00:35:53,460 --> 00:35:57,300
You know, the subway seems to be key and I haven't

580
00:35:57,300 --> 00:36:00,740
been down there yet, but it seems like that's clean. Good subway.

581
00:36:01,620 --> 00:36:04,730
There's two lines. Right now they're building a third. Big.

582
00:36:05,440 --> 00:36:09,080
A big change to the city there. The one I mentioned to you,

583
00:36:09,080 --> 00:36:12,720
east west is Bloor Street. That's the street East

584
00:36:12,720 --> 00:36:16,240
West. Big subway line, used a lot. So

585
00:36:16,320 --> 00:36:20,160
if you're on Bloor as an operator, you have a

586
00:36:20,160 --> 00:36:23,960
good chance. If you can get the right rent and the right stuff, you're

587
00:36:23,960 --> 00:36:27,120
gonna do well because a lot of people are getting on that

588
00:36:27,680 --> 00:36:31,160
to the big vertical north south one called

589
00:36:31,160 --> 00:36:34,880
Yonge street, sort of like Broadway in our. Yeah.

590
00:36:35,200 --> 00:36:39,010
And. And so they're connecting. One of

591
00:36:39,010 --> 00:36:42,770
the gyms is really close to that t there, the one we're near

592
00:36:43,010 --> 00:36:46,690
right now, and that's Yonge Street.

593
00:36:46,850 --> 00:36:50,490
And again, you're good if you get the

594
00:36:50,490 --> 00:36:53,890
right deal on one of those two lines,

595
00:36:54,050 --> 00:36:57,650
the young spokes, north,

596
00:36:57,730 --> 00:37:01,570
south also. And that's good. I have a gym off that subway

597
00:37:01,570 --> 00:37:05,330
line. And then Eglinton is a street up north

598
00:37:05,490 --> 00:37:08,110
of Bloor. And there's a. A new

599
00:37:08,990 --> 00:37:12,830
subway line being built east west, like the Bloor one.

600
00:37:13,390 --> 00:37:16,990
And that's supposed to be done in the next year or two. It's delayed.

601
00:37:17,070 --> 00:37:20,830
But that will change the city because now Eglinton

602
00:37:20,830 --> 00:37:24,590
will become like Bloor, right? Yeah. That's where the growth. Yeah.

603
00:37:24,590 --> 00:37:27,550
Next phase, growth comes in. All right, man. Well, it's great to catch up with

604
00:37:27,550 --> 00:37:31,350
you. Thanks for the club tour yesterday. Pleasure. Good seeing you

605
00:37:31,350 --> 00:37:34,530
up here. Gotta work out in at one of them, so. Good. I did some

606
00:37:34,530 --> 00:37:38,250
peck flies and caught a Ranger game. Loss against the.

607
00:37:38,410 --> 00:37:41,370
Against the Maple Leafs. But it was good to see be in Toronto for Maple

608
00:37:41,370 --> 00:37:45,130
Leaf and Blue Jay win on the same night. Very good. Good to see you.

609
00:37:45,130 --> 00:37:47,850
Good to see you. Keep going, Halo, brother. Thanks. Let's see.