Episode #602: Connecting Family Fitness-Lessons from GreatLIFE'S Integrated Approach with Nick Ovenden

0:01 This is Pete Moore on Halo Talks nyc. I have the pleasure of bringing to his first Halo Talks Nick Overdin. Great life. We're going to talk about what's going on in Dakotas and experiences for the entire family. So welcome to the show. Yeah, thanks for having me. I appreciate it. So we connected finally a couple of months ago after kind of running in concentric circles, I think, around the health club industry. When I looked at your site and saw all the, you know, the golf courses and the fitness centers, I was in awe that I have not visited you guys yet or gotten to know you. So we'll use this as the best excuse to start that relationship. Oh, it sounds like a great plan. Awesome.

0:43 So give us a little background. You know, you guys have kind of been flying a little bit under the radar, I would say, given that, you know, there's a lot of chatter about franchise wars and lifetime at bay clubs, but you guys got quite an operation going. So give us a. Give us a summary. Well, we're about 12 years old. We started out just as a. Well, golf and fitness were basically separate entities and our owner fell into ownership of a golf course by accident. He co signed a note and then decided this. He heard about a golf and fitness concept, wanted to bring it in town. And I was living in Minneapolis at the time and ended up moving back to take over the fitness side of things. And over the last 12 years, we've grown from zero memberships to 40, 000 memberships in the Sioux Falls and surrounding area, about 90 mile radius of Sioux Falls. And we have six golf courses, 19 fitness centers and a bowling alley. So.

1:41 Interesting. Yeah, I used to be, I used to be a good bowler. Saturday mornings at Westbury Bowl. I think that's where I learned how to do most of my, my arithmetic as well. Yeah, I think they didn't have that set up on the. There's no electronics so I had like nice, like carry the one spares those, those good lessons. Unfortunately, kids don't get that opportunity anymore. It all does it for you and it does it in colors for you now. And you know, you're right. You don't get all that pen and paper stuff anymore. Yeah, so. So. So it was an accidental ownership of the, of the golf course. It was like a personal guarantee. When somebody says, ah, yeah, I'll put my name on a personal guarantee. Next thing you know you got to pay, pay up for it. I've done that a couple times too many. Yeah, you're exactly. That's exactly how it buddy who we co signed a note with and realized when the bank called him, he goes, I can either take this thing over or write a big check to the bank for the bank to own it. So we just took it over and ran it for about a year and then ran into this concept of golf and fitness while he was on a flight. And then I was a family friend of ours. So on the fitness side of things, I was back in Sioux Falls and met with them over Christmas break and two months later moved back to Sioux Falls to help start the fitness side of things.

3:00 Nice. What we do. Were you in the fitness industry in Minneapolis? Yep, I've been. Been in Fitness for 21 years now, so. Okay, nice. So how was it coming back home and you know, basically like building this operation and educating the market on, hey, fitness and golf courses, you know, go together now where pre Covid, you'd kind of say, like those are two separate holding companies, you know, historically. But now I think it's. It makes a lot of sense. I mean, I play golf now and it is a great workout. We use Halo Health active lifestyle outdoors. So it's nothing better than golf or pickleball outside. Absolutely. Well, yeah, golf and pickleball are huge right now. So if you go into our facilities right now, literally that's what you have is pickleball. And at the golf courses, it's. We have, we have both as well. But it's been. It's been fun.

3:53 Even before COVID we. We started putting people together in the fitness industry and golf and just saying, look, these are things that people can do together. And we want to create as many opportunities for people to live their great life as possible. Pun intended. Which is actually why bowling got involved as well. Because bowling is one of those sports that you can play multi generational people can spend time together same thing in a golf cart. You spend time together and you get to know each other. And same thing in the gym. When you sweat together, titles kind of go out the window. You. You work hard together and you don't really think about it. It's iron sharpens iron. And it's pretty cool to be able to see that. That dynamic come together not only in the fitness center, but at the. At the gyms and the bowling alley.

4:42 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.

5:46 So how do you, how do you present the company for memberships or how many different membership options are there? Because I could imagine it could be a laundry list of, oh man. A la carte versus like, hey, here's three options to pick from one of these three. So it's, it's kind of fun. I love that you asked that because it, it's it. We've gone back and forth of like, do you tear it? Do you have all these things? Because the traditional golf courses do you have like, you know, weekday memberships, you have senior memberships, you have all these. And really we looked at it from a value proposition and said, how do we make it as simple as possible? So we have basically three tiers of membership. So it's single, couple or family member memberships. And then you can either choose the Fitness plus membership or the golf and Fitness plus membership and that's it.

6:34 We do have some additional add ons with some recovery at, at a few of our locations and things. But the goal is to make it all encompassing so when you come in, you're just part of the great life community. We also have community partners where we have 75 member benefits that people have when they go to local establishments around the town. So really the goal is to make it as inclusive as possible and make it as simple as possible for marketing so that people know that they, once you're a member, you're just a member of the whole community. Got it? What has this done? If you're, if you're at liberty to say, but what has this done to independent fitness operators and independent golf courses? Our golf courses around here are, I mean we're, we're not fighting each other, we're not fighting each other for the, for our members. We're Fighting for more tee times.

7:25 Okay. There's just not enough tea time to have. It's a, it's a great problem to have. And to be honest with you, where we're at, we, we're friends. We, we play in the same sandbox with a lot of, a lot of different community members. And we, we, we actually partner with some of the, like the crossfits and stuff in town because we don't have CrossFit within our facilities. And our goal is to educate our team members as much as possible to know what's all out there so that people walk into our facilities, say, hey, my name's Pete, I'm coming in. I, I really want a membership. And our goal is to slow it down and say, well, what are you looking for in a membership? Cause if we don't have it, we want to be able to have people in the community. Because the worst thing we can do is say we're going to sign you up. And then you come in here and you're like, I'm looking for a boxing gym. Well, we don't have boxing in our community. In our, in our gym. Let's get you down the street and hook you up with that person.

8:18 So we have partners with several people. Is that like a referral or is that just kind of like a cross marketing and not really barter changing hands? It's, it's more of a, hey, let me call the person down the street and get a hold of them and get you connected to them. Because we know eventually you'll probably be in our community at some point within the great life community. And if we can do what's right at the beginning, we think long term, it's, it's the best fit. So that's smart. So when you, when you combine the golf courses and the bowling alley with the fitness centers, did you see a material drop in attrition? Because you've got so many things that people could do that's like, hey, you know, I'll find something here. I'm not going to just like drop out. Yeah, 100%. And it's, that's why we, we've done something that's a little unique in that we don't do online signups and that's purposeful. And every time that I go someplace national, they're like, what are you talking about? Like, yeah, we don't do any of that because we want to make sure that we can tell you what our buffet of options look like in person so that your journey is going to change.

9:27 Throughout time. And we want to make sure that we can walk with you through that journey. So it's. It has helped to be able to have so many different options because people's life change, their circumstances change. But if we can keep them connected to something that we offer, the membership rates are going to stay or the memberships will stay there. So we're. We're roughly about a 30% annual attrition rate, which is, which is a pretty good number that we obviously like to get that lower as much as possible. But we're roughly at 30%. And then from a team member perspective. Perspective, we have a lot of team members that have been around for a long time as well. So our annual team member attrition's at 24 and a half percent. So that's great.

10:07 Yeah, good stuff. So it sounds like you got a great culture, you got activities for, you know, anybody who wants to. To stay active or be entertained. You guys pulled off a ESOP transaction which has not been the. Not been like the structure of choice for. For many operators in our industry and in the industrial side. I've seen it done several times. But it's an employee stock option program. You want to, you know, give. Give our audience a little bit of like how that may have, you know, evolved or how that came to be a good idea and how, know, we can talk a little bit to give people a little taste of what this structure equates to. Yeah.

10:58 Succession planning is something that I've always been very interested in because if you look at the history of time, succession planning is usually when things fall apart. So we, we come from our. Our owner is. And founder. He. He's a strong, visionary guy. So if we relied 100% upon him from a seeding money and from a vision standpoint, we'd be in trouble. And as he's aging, he's in his late 70s now. We've talked about succession planning for five or six years and there's a couple of different options. It was going through venture capitalists, it was going through another. Some other places. We have some bigger outfits in Sioux Falls that we have, or it's this employee stock option purchase plan or an esop. So we went down this path for the last six years to see if it made sense or not. And really what, what the determining factor was is that long term, he wanted to make sure that the legacy was remained of what we're trying to do. So it was important to make sure that we had the employees were taken care of because he had. Had Franchises and not fitness, but in food and beverage in the past and has had sold them off in the past. And they lost culture, their culture and the people didn't benefit from what they'd worked on for 35 years. So this was the next option that said, look, it makes sense because not only from an owner, he was able to get

12:28 paid right away, but he's also being able to stay connected. He actually is officing two doors down from me right now. And so he's still very much a part of what we do and in the culture and then we can maintain that for many years to come. So anybody. The way we have it set up is it you only have to be 18 years old, been an employee for one year and then every time, every year that you work a thousand hours, you'll get stock option, you'll get stocks or shares that following year. Gotcha. So just so the audience understands, basically the owner is borrowing money against the business that they're going to take out on a tax advantaged structure.

13:13 So they're going to minimize their taxes. And then the employees basically own the common stock of the business that has a debt security above it. And as that debt security gets paid down, then the employees own more and more of the company has that kind of payment plan kind of winds down. Yeah, so. So it could be either an outside debt security or it could just be the owner is getting paid off of that seller. Note I believe is typically how it's structured. And when that happened, how much of that is in like the public domain? How much is it that you want your members and employees to know about this? That you know, not only are we homegrown but also, you know, know now employee owned. It's. We, we basically shot it from the mountaintops because there's.

14:05 Yeah. I mean to be honest with you. So we put team member owned on all of our vehicles, on all of our doors just to make sure that people know that not only from a team member standpoint, all of our team members are taking. We always talk about an ownership attitude and making sure that you're stepping in like you own the place. And now we go, you actually own the place. You have shares in this, you have, you have an vested interest in this business. How do you make sure that we're making the right decisions going forward? Although they don't have a say in it. So they don't sit there and say I want to spend money this way. They at least have some. They feel like they're making a difference because they are Making a difference to the bottom line with what they, they do each and every day. So it's that interactions and from a membership standpoint, the more members that we can drive and the more members we can save and keep connected, that's our bread and butter. And that's been a huge benefit for that too. Yeah. Just one question, because I have not been part of an ESOP post transaction. I've helped structure some of them. Do all the employees get a copy of the financial statements at the end of the year?

15:16 Not the actual financials. We, we've always been very transparent with ours, so we, we show all of our leaders all of our, basically everything in the backside of all of our dollars and cents, but they'll get a valuation at the end of every year and then they'll get a number of shares that they get as well. So. Gotcha. Yeah, I'm shocked sometimes when I a meeting with someone and they're like, no, we don't, we don't share the P L. They just know what the member number is and the, and the revenue. It's like if you're gonna hire someone and pay them to be responsible for a P L statement, you got to give them the whole P L statement or else it's kind of like not really worth your incentives aligned with, you know, almost like masked information. So I'm glad to hear that you guys are open with it and everyone knows what.

16:09 They probably learned a lot about business by, by actually understanding how the, you know, the engine works. Right. Well, the, one of the things that we talked about too is in the, at least in the fitness industry, in the 20 some years that I've been in it, a lot of my friends have gone into and said, well, I want to go on my own gym. And they go to it and they don't realize all the different components of owning your own gym. So because you're a good trainer doesn't necessarily mean that you're going to be training. If you own your own facility, a lot of times you're gonna have to do the back end work and you're gonna have to pay all the other things and take care of the business. All the other things that go along with being a business owner, which is great, but our goal is to make sure that they're educated before they make that decision and not afterwards and go, oh man, I didn't realize what I got myself into. Yeah, well, I've seen too many, you know, CrossFit trainers that, that open up their own locations on SBA. Loan or F45 or Fitness Together. There's people need to do their research and understand, you know, you're going from training and generating revenue to actually like operate a business and you only have a certain amount of hours in a day. Yeah. So yeah, I hear you.

17:20 From a standpoint of, you know, personal training, is that, is that a big component of your business and is it also sports specific? We do a little bit of everything. We don't really do a golf specific, but we have sports performance and we have trainers. We have about 40 trainers on our, on our team. But we, we really trade our trainers as people that are there to provide an experience for our members and to connect. So as we, as we have people that are in the facilities that are one on one training or group training, one of their main things is to, is to make sure that they're creating the community and interacting with all the members so they're not making it look like an inconvenience to, to a member for being there. So to answer your question, we do have some specific things, but it's really for kids training and then we have the one on one or the small group training for, for the adults. But we also have 100 and almost 200 group fitness classes of all sorts that are in our facilities as well every week that are the attendance on those things. I think we averaged like 26 or 27 different or 27 people in each class on all those. So it's, they're, they're very well attended and people just like to be connected.

18:40 This is Pete Moore. Here's the last tip for you of the podcast. We are partnered up with a company called higher dose higherdose.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 got to 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 bucks 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, 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.

19:52 I'm seeing a trend where people are taking out more of their group X than, than putting it in and I don't know if I can find a cycling studio inside of a health club where I live anymore. They're chant those are cycling discycled out man. That was still a soul cycle evangelist. But I'm like one of the few remaining I think unfortunately. And one question about when you're owned by as an ESOP now and the founders not actually going out there anymore and say like hey let's go buy a golf club, let's go buy a bowling alley, let's go buy another fitness center. How does the. How do decisions get made based on like creating shareholder value versus like you know I guess what I'm thinking is like I've never heard of like an E Gunpad and I wonder if you could like you know, go on hyper growth and kind of like you know, turn it into something that it wasn't supposed to be. Yeah.

20:54 There we have a board. So everybody answers to a board. So any, any major decisions we decided on, okay there's five of us on the board. We sit there and anything over X amount of dollars we, we go there and say any major changes or going different market, building a large facility, whatever that might look like, we go to the board to talk through it with them. But we haven't had like from a day to day standpoint that's not really a, that's not really a thing. Our, our org chart still stayed relatively the same. So we're still out there innovating and there is a fine line of like how do you figure out what's going to drive valuation? But our goal is not the valuation portion of it. It's the experience. And we know that the experience and the behaviors are going to drive a better valuation and a better long term dollar amount at the end. So I don't know if there's a right fit or if I answered your question but it's, it's really. Yeah, no, it's just an interesting like different set of guiding principles or like maximizing value for not XYZ private equity firm that wants to you know, get this thing, increase revenue, decrease cost and then let's sell to the next guy. You know, it's actually any, any decisions you make that are short sighted you will pay for in the long term. Right. Because you're going to always be sitting in that same seat. And I don't think you could unwind it esau for like seven years or maybe Even more.

22:25 I don't even know if you could protected, period. Right? Yeah. The interesting thing is every, every esop. So my, my whole thing is when I, when we started looking into it, I'm like, I want to go find ESOP companies that have, that don't like it, that are trying to unwind it or some that are that, that like it because obviously you get the ones who love it. But I'm like, there's people who don't like it. So I talked to some of those people and the ones who are trying to unwind it said, well, I didn't do what we had hoped to do. And I said, well, what did you hope to it to do? Well, I hope that people would appreciate it. I said, okay, well how are you explaining it to people? They go, I don't know, we don't really get it. I'm like, okay, there might be an educational component to it, but really, really we want to just make sure that we're, we're providing for me as we're making decisions. I'm like the day to day decisions that we're making, I know affects the guy that's right next to me, that affects the person working the front desk.

23:20 And we're all kind of in it together to make sure that we're making decisions that are the best for all of us. And to be honest with you, I tell our team all the time, like, I'm not going to make every perfect decision and I will apologize but, and I'll own it, but I'm going to make decisions the best that we possibly can for the company and for you. So yeah, no, that's great, that's great. It's unique opportunity. So yeah, I think you're the only person in the fitness industry or the golf industry that I've talked to that that affected this ESOP structure. So yeah, maybe you're the, the poster child for it and then you can tell people, I've educated everyone. It's perfect. Well, you know, we're only a year into this thing, so I could let you know in the next few years, do a follow up. But all right, you can put, you can put it on, you can wrap it on the back of your trucks like Timo, this is what an ESOP means. You could get it for like chat, GBT or something. Yeah, pop it up there. All right, well look, it's great to connect with you here. Appreciate getting the, the background on what you guys are building. It's exciting and you look forward to, to stopping by getting around to golfing up there and see what you guys have built. So it sounds like a special place. So thanks for coming on the show.

24:42 This is Pete Moore on Halo Talks, your captain speaking. I am the founder and managing partner at Integrity Square. We've been around now for 15 and 1/2 years. We have been helping people like yourselves get capital, do mergers and acquisitions, consulting, strategic advice in the health, active lifestyle and outdoor halo sector, trying to help as many entrepreneurs as possible get to the next level, take that inflection point and be the force behind your growth. We are helping companies that have at least $3 million of EBITDA, around $10 million of revenue and we are positioned to help you get institutional growth capital or to negotiate deals with strategic partners. If you go to integritysq.com isq q you can see our capabilities. Deck Happy to set up a consultation at any time that is free of charge and we look forward to you helping solve obesity, loneliness and diabetes.

25:41 Go Halo. Sam.