Episode #603: Behind UFC Gym's Global Franchise Surge with Adam Sedlack

1
00:00:01,360 --> 00:00:05,080
This is Pete Moore on the Halo Talks nyc. I have the pleasure of

2
00:00:05,080 --> 00:00:08,800
bringing back as a guest. Take two.

3
00:00:09,440 --> 00:00:13,040
Hearkening back to episode 114. Now we're in the six

4
00:00:13,040 --> 00:00:16,640
hundreds. UFC president, good friend of Petey Mo,

5
00:00:16,800 --> 00:00:20,520
Adam Sedlak. Welcome back to the show, Pete. It's good to be back. And I

6
00:00:20,520 --> 00:00:23,840
also want to clarify, I made one of your books.

7
00:00:24,240 --> 00:00:27,920
Let's make one. You are in the Time to Win

8
00:00:27,920 --> 00:00:31,590
Again book version one. I don't know if anybody can see this, but just

9
00:00:31,590 --> 00:00:34,710
as a note to you and to others that are listening to this, this book

10
00:00:34,710 --> 00:00:38,390
actually won seven Halo cup awards and

11
00:00:38,390 --> 00:00:41,990
I gave them to myself. So that's an

12
00:00:41,990 --> 00:00:45,470
award that if you get a Halo cup award, is from Integrity Square. But I

13
00:00:45,470 --> 00:00:49,110
like it, I like it. I'm a recipient of a book, so I'm

14
00:00:49,110 --> 00:00:52,870
excited. And it's a signed copy by you, so I'm even more excited. There you

15
00:00:52,870 --> 00:00:56,110
go. Hopefully that'll be worth something after they get through all the playing cards

16
00:00:56,190 --> 00:00:59,820
hysteria that my book will be worth something with a signature on

17
00:00:59,820 --> 00:01:03,540
it. Hey, so when we spoke last time, many, many years ago,

18
00:01:03,860 --> 00:01:07,620
you know, we, that was back in 2019. Okay. So we were like

19
00:01:07,620 --> 00:01:11,420
pre Covid and you know, we were, we were rocking and rolling and

20
00:01:11,420 --> 00:01:15,220
you had done a financing, I remember, and you kind of like just took the

21
00:01:15,220 --> 00:01:18,980
leadership helm and we're really trying to like reinvigorate the

22
00:01:18,980 --> 00:01:22,340
understanding of what the UFC culture,

23
00:01:22,580 --> 00:01:26,230
what the prototype looks like, what the playbook is. So

24
00:01:26,390 --> 00:01:29,230
go back as far as you want. Not that everyone's going to listen to your

25
00:01:29,230 --> 00:01:32,750
first one and then the sequel, but you know, you kind of came in there

26
00:01:32,750 --> 00:01:35,830
with like, you had a puzzle that you kind of needed to put together.

27
00:01:36,790 --> 00:01:40,070
Yeah, the puzzle was complicated. I mean, listen,

28
00:01:40,470 --> 00:01:44,150
UFC is an amazing brand and we've all seen it

29
00:01:44,150 --> 00:01:47,670
grow, I don't know, 7,000%

30
00:01:47,830 --> 00:01:51,630
over the last 20 years. And we've enjoyed a parallel

31
00:01:51,630 --> 00:01:54,790
growth process with that. When we originally

32
00:01:55,950 --> 00:01:59,350
signed up and did an agreement with UFC as a joint

33
00:01:59,350 --> 00:02:02,670
venture, it was really only to have five gyms

34
00:02:03,150 --> 00:02:06,870
and to test and run five gyms, have a

35
00:02:06,870 --> 00:02:10,350
good company. But man, the results were absolutely

36
00:02:10,350 --> 00:02:14,110
amazing. And so it was very important for us

37
00:02:14,110 --> 00:02:17,750
to understand how to grow, but not just domestically. UFC

38
00:02:17,750 --> 00:02:20,990
is what, a global brand, right? Sure, sure. We had the

39
00:02:21,660 --> 00:02:25,180
figure out how do we create an infrastructure to grow it globally,

40
00:02:25,420 --> 00:02:28,380
to take this train, different combat centric

41
00:02:28,940 --> 00:02:32,620
fitness strategy around planet Earth. So we, we got

42
00:02:32,620 --> 00:02:36,340
into franchising and unfortunately when we, when we

43
00:02:36,340 --> 00:02:40,140
acquired a franchise system, it came with A little bit

44
00:02:40,140 --> 00:02:43,940
of hair, like most transactions probably do. You could probably speak

45
00:02:43,940 --> 00:02:46,300
to that, Pete. Yeah, to the acquire, unfortunately.

46
00:02:47,420 --> 00:02:51,100
And the biggest challenge, though, is we had two

47
00:02:51,100 --> 00:02:54,750
different brand strategies, right? UFC Gems were these

48
00:02:54,750 --> 00:02:58,230
35 to 45,000 square foot locations

49
00:02:58,790 --> 00:03:02,030
that solved everything for the consumer. And the

50
00:03:02,030 --> 00:03:05,030
organization that was acquired was more

51
00:03:05,110 --> 00:03:08,830
2500 to 3000 square feet that, you

52
00:03:08,830 --> 00:03:12,590
know, had some. Some challenges at the base level from a

53
00:03:12,590 --> 00:03:16,430
franchise system perspective. And so that being

54
00:03:16,430 --> 00:03:19,910
said, it was still a huge opportunity because we. It gave us the

55
00:03:19,910 --> 00:03:23,680
keys to start franchising. And franchising

56
00:03:23,680 --> 00:03:27,440
we did. You know, we started to develop franchises around the

57
00:03:27,440 --> 00:03:30,120
domestic us, but more importantly

58
00:03:30,680 --> 00:03:34,480
internationally, started to take off just like parallel to the

59
00:03:34,480 --> 00:03:38,200
ufc, of course. Then Covid hits,

60
00:03:38,280 --> 00:03:41,960
right? And Covid was a major intersection for this

61
00:03:42,360 --> 00:03:46,200
fitness industry. You, You've seen many

62
00:03:46,200 --> 00:03:49,720
of our fitness organizations, brothers and sisters, they went.

63
00:03:50,050 --> 00:03:53,570
They went bankruptcy under the distress of COVID really

64
00:03:53,570 --> 00:03:56,890
driven by rent liability and payroll liability and

65
00:03:56,890 --> 00:04:00,050
outstanding debts. And so as we

66
00:04:00,770 --> 00:04:04,450
were taking on Covid with a lot of our gyms that were corporate

67
00:04:04,450 --> 00:04:07,890
owned were in California and Hawaii. You know, we.

68
00:04:09,010 --> 00:04:12,610
And in my opinion, California and Hawaii both had opportunities.

69
00:04:12,610 --> 00:04:15,730
How they dealt with the COVID complexities.

70
00:04:16,520 --> 00:04:20,120
We were dealt with some cards in front of us that were very challenging.

71
00:04:20,120 --> 00:04:23,880
And quite frankly, we were creating so much rental

72
00:04:23,880 --> 00:04:27,600
liability that we were like, is this a

73
00:04:27,600 --> 00:04:31,320
position where at that time, do we look at a reorganization

74
00:04:31,560 --> 00:04:35,400
in regards to like a chapter 11? One of the things that were

75
00:04:35,400 --> 00:04:38,680
very important to us was our franchise partners.

76
00:04:39,000 --> 00:04:42,840
And so from a corporate perspective, we looked at ourselves and

77
00:04:42,840 --> 00:04:46,480
said, we gotta protect two things. We got to protect the ufc,

78
00:04:46,960 --> 00:04:50,640
who is an amazing organization, and protect

79
00:04:50,640 --> 00:04:54,320
their. The integrity of the brand. And then we got to protect our

80
00:04:54,320 --> 00:04:57,960
franchisees that are in this for the right reason, the

81
00:04:57,960 --> 00:05:01,640
people that believe in the brand, that believe in the

82
00:05:01,640 --> 00:05:05,040
philosophy of what we're trying to do globally.

83
00:05:05,520 --> 00:05:08,960
So we decided to take the high road and not

84
00:05:09,520 --> 00:05:12,560
file chapter 11, but came up with a very.

85
00:05:13,360 --> 00:05:17,000
What I think is a. Was a good strategy, which is take

86
00:05:17,000 --> 00:05:20,840
the assets that we had, the corporate locations, let's have

87
00:05:20,840 --> 00:05:24,080
a transaction with some of those locations to,

88
00:05:24,480 --> 00:05:27,920
well, capitalized franchisees. Take the

89
00:05:28,000 --> 00:05:31,760
revenue from those transactions and just pay off our debt.

90
00:05:32,960 --> 00:05:36,800
Take the proceeds from those. Yeah, yeah, just take care of all the rent

91
00:05:36,800 --> 00:05:40,560
liability, you know, make sure the landlords feel good about us,

92
00:05:41,180 --> 00:05:44,500
take care of all of our vendors, and just to make sure that we were

93
00:05:44,500 --> 00:05:47,180
in a good position because we knew we were going to get through Covid.

94
00:05:48,300 --> 00:05:52,020
We didn't have any concern that on the other

95
00:05:52,020 --> 00:05:55,740
side, that the gyms would not only come back, they would come back better than

96
00:05:55,740 --> 00:05:59,580
ever before, just driven by the variable of health. Right.

97
00:05:59,580 --> 00:06:02,980
We knew health was going to become a major emphasis of the

98
00:06:02,980 --> 00:06:06,620
conversation, so we did that quite successfully. We got through

99
00:06:06,620 --> 00:06:10,200
it. We became very asset light and

100
00:06:10,280 --> 00:06:13,960
100% franchise focused. Gotcha. So now

101
00:06:13,960 --> 00:06:17,800
when you fast forward, Pete, we're now developing in 48 countries.

102
00:06:17,800 --> 00:06:21,240
We're about to announce a new one tomorrow. We're opening about

103
00:06:21,320 --> 00:06:24,840
one gym per week globally. We anticipate

104
00:06:24,920 --> 00:06:28,520
next year we're going to get to about 1.5 gyms per week

105
00:06:29,000 --> 00:06:32,720
and we're seeing record breaking performances, specifically

106
00:06:32,720 --> 00:06:36,450
in our model that's over 30 to 40,000 square

107
00:06:36,450 --> 00:06:39,410
feet. And all while introducing

108
00:06:39,970 --> 00:06:43,370
conceptually a new part of our brand, which is

109
00:06:43,370 --> 00:06:47,210
UFC Gym Jiu Jitsu, which is a studio that's, you know, 2 to

110
00:06:47,210 --> 00:06:50,770
3,000 square feet, owner operator. And

111
00:06:51,570 --> 00:06:55,290
it's set up in a position in regards to the FDD where

112
00:06:55,290 --> 00:06:57,730
you can. It's very low capital

113
00:06:58,850 --> 00:07:02,440
to enter into the space, but the return on investment

114
00:07:02,600 --> 00:07:05,800
should be very strong. So. So is that like a sub

115
00:07:05,800 --> 00:07:09,320
franchise or is it. If I buy the location

116
00:07:09,800 --> 00:07:13,520
in pick a country, I'm going to sublease a space out

117
00:07:13,520 --> 00:07:17,320
to a Jiu Jitsu instructor, I'm going to bring that person onto my team and

118
00:07:17,320 --> 00:07:20,960
run it. It's up to the franchise owner. So it's a. Okay

119
00:07:20,960 --> 00:07:24,560
thinking in terms of us. Right. And if you

120
00:07:24,560 --> 00:07:28,360
think about a city that has 30,000 people, you

121
00:07:28,360 --> 00:07:32,160
would never put a 50,000 square foot UFC gym signature club

122
00:07:32,160 --> 00:07:35,320
there. But if you were a black belt

123
00:07:36,040 --> 00:07:39,640
and you love Jiu Jitsu, which by the way, I'm sure you know the

124
00:07:39,640 --> 00:07:42,680
Jiu Jitsu vertical is growing

125
00:07:42,680 --> 00:07:46,520
significantly. So if you were a black belt that wanted to

126
00:07:46,520 --> 00:07:50,280
be in your own business now, you can rationalize an investment

127
00:07:50,440 --> 00:07:53,640
in a market with a catchment rate of 30,000 people

128
00:07:54,370 --> 00:07:58,010
and still get very good returns based on a low

129
00:07:58,010 --> 00:08:01,650
cost build out, very low rent and an owner operator

130
00:08:01,650 --> 00:08:05,410
type. Oh, so you're saying you are franchising a ju zoo,

131
00:08:05,730 --> 00:08:09,490
small box boutique. That's right. Platform. Okay, okay. I thought,

132
00:08:09,490 --> 00:08:13,010
I thought, I misunderstood. I thought you're putting Jiu Jitsu inside

133
00:08:13,330 --> 00:08:17,170
of the current UFC franchises, which they could do on their own. Yeah,

134
00:08:17,170 --> 00:08:20,810
yeah, they do. Yeah, yeah. And we're giving the rights

135
00:08:20,810 --> 00:08:24,290
to all of our international partners because we always believe in

136
00:08:24,880 --> 00:08:28,640
and innovation to our international and domestic partners. So we're giving

137
00:08:28,640 --> 00:08:32,360
them the rights to add those to their MTAs

138
00:08:32,360 --> 00:08:36,000
or master territory agreements. Yeah, Just as a point of

139
00:08:36,000 --> 00:08:39,680
clarification, if we could hit pause for a second here and talk to the

140
00:08:39,680 --> 00:08:43,440
audience about bankruptcy. Because a lot of people think bankruptcy is

141
00:08:43,680 --> 00:08:47,520
like, hey, I'm like, give it out. I'm taking the keys and I'm

142
00:08:47,520 --> 00:08:50,960
shutting down the operation. But just for people to understand, there's different

143
00:08:50,960 --> 00:08:54,640
codes of bankruptcy. So what was deployed by a number of health club

144
00:08:54,640 --> 00:08:58,340
chains during COVID was to go chapter 11. And

145
00:08:58,340 --> 00:09:01,660
chapter 11 basically allows you to freeze

146
00:09:02,060 --> 00:09:05,780
all of your vendor payments, all of your

147
00:09:05,780 --> 00:09:09,020
lease payments, and then you get to cherry pick and select

148
00:09:09,340 --> 00:09:13,060
out which leases you want to continue with. But at the

149
00:09:13,060 --> 00:09:16,860
same time that you have this opportunity to kind of cleanse your liabilities,

150
00:09:17,260 --> 00:09:19,980
it also, your company is then put into play,

151
00:09:20,780 --> 00:09:24,420
technically, where somebody could go to bankruptcy court and try and buy it out

152
00:09:24,420 --> 00:09:28,080
from under you. So your benefit of a bankruptcy

153
00:09:28,080 --> 00:09:31,640
is like, hey, I can get some time to get

154
00:09:31,960 --> 00:09:35,760
my house back in order, restructure, and then hopefully come back out the other

155
00:09:35,760 --> 00:09:38,360
side. And whatever the issue was, whether it's

156
00:09:39,480 --> 00:09:42,880
exogenous or whether it was my own fault of going to

157
00:09:42,880 --> 00:09:46,680
bankruptcy, I have the right to kind of reemerge. But at

158
00:09:46,680 --> 00:09:50,160
the same time, if I have the right to do that, then the quid pro

159
00:09:50,160 --> 00:09:53,440
quo is like, well, if somebody else wants to come and buy your company for

160
00:09:53,440 --> 00:09:56,720
the price of the debt or make an offer to the court that they think

161
00:09:56,720 --> 00:10:00,420
is fair market value as part of a 363 asset sale,

162
00:10:00,900 --> 00:10:04,660
you could lose your company. So there's a lot of risks to what you're doing.

163
00:10:04,820 --> 00:10:08,500
I think the part that's interesting to me that I did not think of

164
00:10:08,900 --> 00:10:12,700
when you were referencing the potential that

165
00:10:12,700 --> 00:10:15,780
you could explore that as a route, is that

166
00:10:16,740 --> 00:10:20,220
the average person or consumer doesn't really know what

167
00:10:20,220 --> 00:10:23,940
bankruptcy means. It's not protection, it's failure

168
00:10:24,240 --> 00:10:27,920
to them. Right? Yeah. I'd say quiz people. The second thing is

169
00:10:28,480 --> 00:10:32,120
the difference between UFC and UFC gyms. Obviously we know

170
00:10:32,120 --> 00:10:35,600
because we're in the industry, but the average consumer might think that everything

171
00:10:35,600 --> 00:10:39,280
is completely interconnected. So they might say, oh, I've

172
00:10:39,280 --> 00:10:43,000
heard ufc. What? What? Bankruptcy? No, no, no. The division,

173
00:10:43,000 --> 00:10:46,560
usc, the joint venture, you know, or the franchisee. So,

174
00:10:46,960 --> 00:10:49,960
you know, kudos are like, hats off to you to say, like, hey, I got

175
00:10:49,960 --> 00:10:53,760
to protect the entire ecosystem of everyone

176
00:10:53,760 --> 00:10:57,600
that's involved in this. And also, you don't want to give away

177
00:10:57,600 --> 00:11:01,440
a reason for your franchisees to try and say, oh, the franchisor is quote,

178
00:11:01,440 --> 00:11:04,960
unquote, insolvent, that I'm going to try and like break my franchise

179
00:11:04,960 --> 00:11:08,480
agreement, which I've seen in some cases as well. And the

180
00:11:08,640 --> 00:11:12,440
crazy thing is we weren't insolvent at all because

181
00:11:12,440 --> 00:11:16,200
as you know, Franchise World works. It's

182
00:11:16,200 --> 00:11:19,800
Asset Light, the corporate division where it owned 30

183
00:11:19,800 --> 00:11:23,230
plus locations, had huge rental liability,

184
00:11:23,870 --> 00:11:27,630
creating the problem. Now, I do want to call out the benefit of having

185
00:11:27,630 --> 00:11:31,190
a partner like UFC and a partner like Mark Masterobe on the other

186
00:11:31,190 --> 00:11:34,670
side is both of those guys were paramount

187
00:11:35,150 --> 00:11:38,830
to helping us with our strategy and really making

188
00:11:38,830 --> 00:11:42,430
sure we were going to have the correct funding to get outside of

189
00:11:42,430 --> 00:11:45,870
COVID So I'm really proud of a the UFC gym

190
00:11:45,870 --> 00:11:49,650
organization and the team members proud of the UFC and I'm proud

191
00:11:49,650 --> 00:11:53,450
of Mr. Mastro for all coming together, helping us chart the

192
00:11:53,450 --> 00:11:57,210
course to become Asset Light, pay off all our debt, and be in

193
00:11:57,210 --> 00:12:00,370
a great position as we got on the outside of

194
00:12:00,850 --> 00:12:01,250
COVID

195
00:12:04,850 --> 00:12:08,450
This is Pete Moore. I want to let you in on a little secret. There's

196
00:12:08,450 --> 00:12:11,730
this company called Promotion Vault. And what they do is they give out rewards

197
00:12:12,130 --> 00:12:15,830
from retailers that allow you to incentivize your

198
00:12:15,830 --> 00:12:19,670
members without having to do zero down and one month free

199
00:12:19,990 --> 00:12:23,830
or giving away shakes or giving away T shirts. What you want to do

200
00:12:23,830 --> 00:12:27,590
is build a rewards program that lasts, that people value,

201
00:12:27,750 --> 00:12:31,550
and that doesn't discount your own products and services. So here's the

202
00:12:31,550 --> 00:12:35,350
deal. There's something called Rewards Vault. The Rewards Vault is going

203
00:12:35,350 --> 00:12:39,150
to allow a member to set up their own profile. They are going

204
00:12:39,150 --> 00:12:42,560
to answer questions, you are going to get those answers. You're going to be able

205
00:12:42,560 --> 00:12:46,120
to target those members, and you're going to reward them inside your

206
00:12:46,120 --> 00:12:49,880
club, inside your spa, and outside of the club and outside

207
00:12:49,880 --> 00:12:53,600
of the spa to get them to become loyal, to get them to

208
00:12:53,600 --> 00:12:57,360
pay their monthly dues and to be rewarded properly

209
00:12:57,360 --> 00:13:01,200
for the actions. A lot of companies are cutting back on rewards. You shouldn't

210
00:13:01,200 --> 00:13:04,440
be Promotion Vault. Your answer, trust me, this is real.

211
00:13:09,410 --> 00:13:12,890
So one thing I want to talk about is, you know, I'm very close friends

212
00:13:12,890 --> 00:13:16,530
and, you know, maybe responsible for getting Brent left into the industry,

213
00:13:16,530 --> 00:13:20,330
which he thanks me or he, he curses me, you know, depending on

214
00:13:20,330 --> 00:13:24,137
how he feels at a specific day. Yeah, I've known mastro since probably 1999,

215
00:13:24,281 --> 00:13:28,090
2000. You had new Evolution Ventures, which, you know,

216
00:13:28,090 --> 00:13:31,770
we were a part of, like helping form that, you know, in

217
00:13:31,770 --> 00:13:35,330
a diligence and, you know, marketing way. And then

218
00:13:35,330 --> 00:13:39,100
Nevada ended up doing deals with UFC 1

219
00:13:39,100 --> 00:13:42,660
Life, you know, crunch a couple other related

220
00:13:43,300 --> 00:13:46,740
companies in and around this narrow halo sector.

221
00:13:47,940 --> 00:13:51,780
When that fund kind of like moved on and completed its mission.

222
00:13:52,900 --> 00:13:56,500
What, what is the current ownership of

223
00:13:56,500 --> 00:14:00,260
UFC and how is that like extreme level of,

224
00:14:00,260 --> 00:14:03,380
you know, independence or not having any kind of

225
00:14:03,720 --> 00:14:07,080
tentacles in of like oh, I've got an affiliate or like sister company

226
00:14:07,640 --> 00:14:11,400
that's crunch. Well, they're like, could be a competitor at the same time like

227
00:14:11,400 --> 00:14:14,760
with friends with them. So how does, how's like the new, the new, new

228
00:14:14,840 --> 00:14:17,640
UFC gyms like, listen,

229
00:14:18,440 --> 00:14:22,280
the new UFC gym is amazing. Number one. First, before

230
00:14:22,280 --> 00:14:26,040
I get to the infrastructure, the new

231
00:14:26,040 --> 00:14:29,320
franchisees and the franchisees that

232
00:14:29,320 --> 00:14:33,060
adapted the operating pricing model strategy

233
00:14:33,060 --> 00:14:36,700
changes are absolutely accelerating. We're seeing

234
00:14:36,700 --> 00:14:40,060
some record breaking performances. So very proud on that side

235
00:14:40,540 --> 00:14:44,380
in regards to the infrastructure and the setup of the organization. As we

236
00:14:44,380 --> 00:14:48,140
looked at kind of the way we're going to restructure

237
00:14:48,620 --> 00:14:52,420
post Covid, right. Taking all the lessons through Covid and having all

238
00:14:52,420 --> 00:14:56,020
that liability, we were able to take the funds of the

239
00:14:56,020 --> 00:14:59,700
sales and primarily keep the organization

240
00:15:00,660 --> 00:15:04,500
somewhat the same setup from a cap

241
00:15:04,500 --> 00:15:07,820
table perspective. With Mr.

242
00:15:07,820 --> 00:15:11,460
Mastro owning a high stake, a high majority

243
00:15:12,100 --> 00:15:15,540
of the organization and then having some other partners

244
00:15:15,540 --> 00:15:19,180
involved, it just put us in a great position to

245
00:15:19,180 --> 00:15:22,180
have no debt and to continue to build

246
00:15:23,140 --> 00:15:26,920
gyms across the globe in a, in a royalty

247
00:15:26,920 --> 00:15:30,720
centric type of business. That puts us in a very, very good position with very

248
00:15:30,720 --> 00:15:34,520
low liabilities. Got it. So, you know, it's one

249
00:15:34,520 --> 00:15:38,200
thing when a franchisor says, you know, I just signed a deal in

250
00:15:38,200 --> 00:15:41,920
Canada, I just signed a deal in Mexico, you know, what is it like

251
00:15:41,920 --> 00:15:45,240
to run a business 24 7, what

252
00:15:45,240 --> 00:15:48,760
software are you deploying and how are you

253
00:15:48,760 --> 00:15:52,120
managing, you know, training, quality control, pre

254
00:15:52,120 --> 00:15:55,570
sales. What does your entity look like these days?

255
00:15:55,890 --> 00:15:59,410
It's a great question because it's a lot of work.

256
00:16:01,330 --> 00:16:05,050
You have to be on 24 7. We are here

257
00:16:05,050 --> 00:16:08,770
to serve the franchisee. Understand what the needs are of

258
00:16:08,770 --> 00:16:12,610
not just the consumer, but the needs from a business owner perspective.

259
00:16:12,850 --> 00:16:16,610
If Pete owns a UFC gym, a 40,000 square foot location,

260
00:16:17,010 --> 00:16:20,490
what does Pete need to be successful? And my job is to make sure I

261
00:16:20,490 --> 00:16:24,060
get that to you. So when you intersect that with

262
00:16:24,060 --> 00:16:26,380
the opportunity of growth and development,

263
00:16:28,540 --> 00:16:29,820
there's a lot of

264
00:16:32,060 --> 00:16:35,260
requirements to make sure that not only do you

265
00:16:35,820 --> 00:16:39,100
protect your FDD by making sure you have the

266
00:16:39,100 --> 00:16:42,220
appropriate infrastructure of support around education,

267
00:16:42,780 --> 00:16:46,500
compliance, accountability, understanding how

268
00:16:46,500 --> 00:16:50,300
to have visibility of distressed franchisees

269
00:16:50,300 --> 00:16:54,140
where we can come in and apply additional support to make

270
00:16:54,140 --> 00:16:57,780
sure that the franchisees best served have the highest

271
00:16:57,780 --> 00:17:01,580
chance of success, celebrating and acknowledge those

272
00:17:01,580 --> 00:17:05,420
that are doing extremely well and carrying the flag in A

273
00:17:05,420 --> 00:17:08,620
way that we're all proud, you know, those are all important

274
00:17:08,700 --> 00:17:12,220
characteristics. But you have to, to your point, Pete, you have to have that

275
00:17:12,220 --> 00:17:15,980
infrastructure underneath to become the drive automation

276
00:17:16,700 --> 00:17:20,410
predictability, where they can take an operating manual and

277
00:17:20,410 --> 00:17:23,810
an average team can get good results.

278
00:17:24,770 --> 00:17:28,610
Whereas historically in our industry, you had to have a great team

279
00:17:29,010 --> 00:17:32,330
to get good results. If you build your

280
00:17:32,330 --> 00:17:36,050
franchise system in a way that's too complicated, you're

281
00:17:36,050 --> 00:17:39,850
going to be so people reliant and you just can't scale

282
00:17:39,850 --> 00:17:43,610
that way. Right, right, right. So by bringing in Club Connect

283
00:17:43,610 --> 00:17:47,250
and our university functionality, Fran

284
00:17:47,250 --> 00:17:50,850
Connect, full CRM systems, and of course

285
00:17:50,850 --> 00:17:54,690
using the popular AI that everybody's using today, we

286
00:17:54,690 --> 00:17:58,490
now have those checks and balance of automation. We've

287
00:17:58,490 --> 00:18:02,170
created manuals and operational strategies where average

288
00:18:02,170 --> 00:18:06,010
teams can perform very well. And then it's just about

289
00:18:06,010 --> 00:18:09,730
applying the science of the manual

290
00:18:09,970 --> 00:18:13,740
into the reality of gym operations. Got it.

291
00:18:14,140 --> 00:18:17,860
So a number of listeners of this podcast will inevitably

292
00:18:17,860 --> 00:18:21,700
be franchisors who are, you

293
00:18:21,700 --> 00:18:25,020
know, five or 10 locations, maybe just put out their first or second

294
00:18:25,260 --> 00:18:29,019
FDD and are Jones in the Cell

295
00:18:29,019 --> 00:18:32,620
franchises. Right. And give us a little bit of your

296
00:18:32,940 --> 00:18:36,620
history and, you know, wise man's kind of view

297
00:18:36,780 --> 00:18:40,330
on, you know, how often do you say no? How

298
00:18:40,330 --> 00:18:44,050
excited are you when you do say no, and how

299
00:18:44,050 --> 00:18:47,250
hard is it to say yes? Yeah, again,

300
00:18:47,970 --> 00:18:51,730
it's arguably what I've learned through

301
00:18:51,730 --> 00:18:55,490
both personal failure and personal

302
00:18:55,729 --> 00:18:59,010
success is how to view

303
00:18:59,490 --> 00:19:02,930
franchise opportunities with new partners coming into the system.

304
00:19:04,050 --> 00:19:07,870
When I initially, you know, I was a gym guy that

305
00:19:07,870 --> 00:19:11,710
came up to a 24 hour fitness and working, you know,

306
00:19:11,710 --> 00:19:15,470
my first 16 years of my career at 24 hour before

307
00:19:15,550 --> 00:19:19,310
transitioning to UFC, and then we had just corporate clubs at UFC,

308
00:19:19,310 --> 00:19:23,070
so we weren't even in the franchise space yet. But as I

309
00:19:23,070 --> 00:19:26,910
started to get educated, once we acquired a franchise company, I

310
00:19:26,910 --> 00:19:30,750
had to get very educated very quickly. And I learned a

311
00:19:30,750 --> 00:19:34,520
lot of it's not just about getting franchises in your

312
00:19:34,520 --> 00:19:36,600
system, it's about who you get in your system.

313
00:19:38,120 --> 00:19:41,400
Are they properly capitalized? Do they have the right passion?

314
00:19:41,720 --> 00:19:45,560
Do they actually have not just an empathetic

315
00:19:45,560 --> 00:19:49,080
view of your brand, but are they aligned

316
00:19:49,880 --> 00:19:53,560
from a philosophical point of view

317
00:19:53,960 --> 00:19:57,640
of how to drive performance, and not just drive performance,

318
00:19:58,040 --> 00:20:01,720
but also how to create their own professional legacy

319
00:20:02,720 --> 00:20:06,520
under the UFC gym flag? And so there were people that would come

320
00:20:06,520 --> 00:20:09,600
into our system that were incredibly passionate,

321
00:20:10,000 --> 00:20:13,840
amazing people, but had no capital. You have to say no,

322
00:20:14,320 --> 00:20:18,040
but maybe there's opportunities to bring them and connect them with

323
00:20:18,040 --> 00:20:21,760
other people that do have capital. And then we had very

324
00:20:21,760 --> 00:20:25,280
high capital, you know, rich

325
00:20:25,760 --> 00:20:29,540
entities, organizations, people that wanted to jump

326
00:20:29,540 --> 00:20:33,220
in, but they just were looking at it from a transactional

327
00:20:33,220 --> 00:20:37,020
business point of view without having their heart intersecting into what's

328
00:20:37,020 --> 00:20:40,340
so great about the brand. And my experience

329
00:20:41,620 --> 00:20:45,340
has shown me through the years that you really have to check

330
00:20:45,340 --> 00:20:49,100
both boxes. And so sometimes it's about bringing both of

331
00:20:49,100 --> 00:20:52,780
those entities together. If they don't qualify a capital, they don't

332
00:20:52,780 --> 00:20:56,560
qualify a passion. How can I get those two things married

333
00:20:56,560 --> 00:21:00,160
to new franchise candidates coming in? Now, in a

334
00:21:00,160 --> 00:21:03,720
perfect world, you have franchise candidates that come in that can

335
00:21:03,720 --> 00:21:07,480
show their passion for the brand, and they can show that they

336
00:21:07,640 --> 00:21:11,360
have the ability to capitalize it properly without bringing on too

337
00:21:11,360 --> 00:21:15,040
much debt. That is a big trap door that people can fall

338
00:21:15,040 --> 00:21:18,760
into. It's great that you're passionate about

339
00:21:18,760 --> 00:21:22,440
any franchise system. It doesn't matter Planet Fitness,

340
00:21:22,440 --> 00:21:26,200
whatever franchise you're into, so it's

341
00:21:26,200 --> 00:21:29,880
great. But if you go in and you try to structure the deal where

342
00:21:29,880 --> 00:21:33,520
it's 90% debt, I don't care what kind of operator

343
00:21:33,520 --> 00:21:37,040
you are, I don't care what kind of real estate you have, the

344
00:21:37,040 --> 00:21:40,320
debt's going to swallow you up. So you have to make sure you look at

345
00:21:40,320 --> 00:21:44,120
how much is leveraged and how much you can operate via

346
00:21:44,120 --> 00:21:47,520
free cash flow. And we've been able to put a formula together to

347
00:21:47,520 --> 00:21:50,960
identify the most likely successful

348
00:21:51,040 --> 00:21:54,810
franchise candidate, and we definitely

349
00:21:54,810 --> 00:21:58,490
approve them 10 out of 10 times. And unfortunately, there's

350
00:21:58,490 --> 00:22:02,290
people that we can't approve just because of the pitfalls of what could

351
00:22:02,290 --> 00:22:05,530
happen if you don't have the right capital, the right passion for the industry.

352
00:22:06,010 --> 00:22:09,610
Gotcha. Okay, my last question, and I want to go on a little rant

353
00:22:09,610 --> 00:22:13,330
first, because I feel like this could happen and you might be the person to

354
00:22:13,330 --> 00:22:16,650
do it or the brand to do it. I sometimes go around, I do these

355
00:22:16,650 --> 00:22:20,390
seminars, and I say at some point in the near

356
00:22:20,390 --> 00:22:24,150
future, a company like Smart Water is going to

357
00:22:24,150 --> 00:22:27,830
come and say, I want to put my name on your health club.

358
00:22:28,230 --> 00:22:31,950
Just like the T Mobile arena, right? Or the, you know,

359
00:22:31,950 --> 00:22:35,150
or Celsius is going to come and say, I want to be the official sports

360
00:22:35,150 --> 00:22:38,710
drink of UFC gyms. And I want my. But I want my logo,

361
00:22:39,030 --> 00:22:42,750
like, on the building, like, alongside. Given

362
00:22:42,750 --> 00:22:46,110
the power of UFC and what they get for

363
00:22:46,110 --> 00:22:49,680
logos inside the octagon and the amount of marketing

364
00:22:49,680 --> 00:22:53,040
inertia that that entity has from the event standpoint,

365
00:22:53,680 --> 00:22:57,400
how far off are we for somebody coming and saying to you, like, hey,

366
00:22:57,400 --> 00:23:00,960
said like $100,000 per month, you know, Like I want to put my name

367
00:23:00,960 --> 00:23:04,680
on these locations or ten grand, whatever it is, like a billboard or

368
00:23:04,680 --> 00:23:07,840
like a real like how to name the health club because people go in there

369
00:23:07,920 --> 00:23:11,200
more than they're going to watch, you know, the Vegas Knights

370
00:23:11,280 --> 00:23:14,800
hockey game going in there every day. And you got like over a thousand people

371
00:23:14,800 --> 00:23:18,480
a day. Like, what's that worth to me? Yeah, well,

372
00:23:18,480 --> 00:23:22,160
I was at my gym this morning, I drove in the parking lot and

373
00:23:22,160 --> 00:23:25,240
on the building it said UFC Jim Halo

374
00:23:25,640 --> 00:23:29,400
and are you serious? It's already starting. I like that.

375
00:23:29,400 --> 00:23:33,240
I like the. No, I think it's a good call. I

376
00:23:33,240 --> 00:23:36,960
think, I think there's some sensitivity to how you intersect

377
00:23:36,960 --> 00:23:40,200
branding with co branding. And so

378
00:23:40,520 --> 00:23:44,120
I do think it's a true reality though that of where we're going,

379
00:23:44,120 --> 00:23:47,650
especially in the world of improvement depressions and, and as you know,

380
00:23:47,970 --> 00:23:51,450
it's not uncommon for busy gyms to have 2, 000

381
00:23:51,450 --> 00:23:55,130
workouts a day. And, and not only are they workouts, but

382
00:23:55,130 --> 00:23:58,410
they're active users where they're very engaged to the

383
00:23:58,410 --> 00:24:02,130
surroundings. Right. They're working out in. So it's a good

384
00:24:02,130 --> 00:24:05,730
call. And there's already systems out there through

385
00:24:06,450 --> 00:24:10,130
video that do shared advertising and so forth. But

386
00:24:10,450 --> 00:24:14,210
yeah, I mean, I mean with us we'd have to align with

387
00:24:14,210 --> 00:24:17,570
a UFC sponsor, right? So we'd have to inter.

388
00:24:18,690 --> 00:24:21,890
But I agree with you, I, I think there's going to be major

389
00:24:22,690 --> 00:24:26,530
sponsorship opportunity not just on signage

390
00:24:26,530 --> 00:24:29,890
or inside gyms, but also on the verticals of marketing,

391
00:24:30,210 --> 00:24:33,890
on how you communicate with your members, how you

392
00:24:33,890 --> 00:24:37,650
do annual contests for your member base and your

393
00:24:37,650 --> 00:24:41,460
team members. There's going to be all sorts of synergies, I think back

394
00:24:41,460 --> 00:24:45,140
and forth between what you're saying and where the industry

395
00:24:45,140 --> 00:24:48,900
is going. And in my last question, this is a little bit self serving,

396
00:24:49,540 --> 00:24:52,260
but we are in the middle of a lot of

397
00:24:53,140 --> 00:24:56,820
independent operators that have anywhere between 25 to

398
00:24:57,300 --> 00:25:00,900
75,000 square foot health clubs or sports complexes.

399
00:25:01,460 --> 00:25:04,670
They may own the real estate, they may not own the real estate. They have

400
00:25:04,670 --> 00:25:08,430
no succession plan in place. There's no kid that's in the business.

401
00:25:08,830 --> 00:25:12,430
There's no general manager who's kind of like next up

402
00:25:12,430 --> 00:25:15,590
that has the ability to basically buy out the owner. How

403
00:25:15,590 --> 00:25:19,390
prevalent or how much potential

404
00:25:20,430 --> 00:25:24,150
opportunity is there for a UFC gym to

405
00:25:24,150 --> 00:25:27,990
say come back to you and say, hey, instead of building a greenfield, like

406
00:25:27,990 --> 00:25:31,780
I'm going to look at this 50,000 square foot, you know, X Gold's gym

407
00:25:31,780 --> 00:25:35,540
or ex World Gym, and you know, will you guys let me buy this

408
00:25:35,540 --> 00:25:39,300
thing? And and refurbish it, you know, not just like pull the sign

409
00:25:39,300 --> 00:25:42,940
down like an LA Fitness, you know, esport thing that they used to do, but

410
00:25:42,940 --> 00:25:46,619
like, like a real deal. But I'm gonna save six to 12 months and have

411
00:25:46,619 --> 00:25:50,340
like a membership base, you know, started. Is that, do you see

412
00:25:50,340 --> 00:25:53,780
conversions as a, a real growth avenue or is it

413
00:25:53,940 --> 00:25:57,540
something that might be more akin to other brands and UFC's got a little more

414
00:25:57,540 --> 00:26:01,030
specialized, you know, DNA to it. Again, it's a great call.

415
00:26:01,190 --> 00:26:04,550
The great thing about UFC Gym is we're a gym first. So our

416
00:26:04,630 --> 00:26:08,310
average workout floor is 30,000 square feet, right? And then it

417
00:26:08,310 --> 00:26:12,070
gets to the value proposition of MMA and other group

418
00:26:12,070 --> 00:26:15,590
programming. So we can fit into any model and just

419
00:26:15,670 --> 00:26:19,070
increase the average price per consumer because of the MMA

420
00:26:19,070 --> 00:26:22,830
offering. And quite frankly, Pete, we're already seeing some examples of

421
00:26:22,830 --> 00:26:26,480
that type of transaction. I'm now frequently having

422
00:26:26,480 --> 00:26:30,240
landlords call me and I've just opened three of these over

423
00:26:30,240 --> 00:26:34,080
the last six months where they're the landlord and the owner of the,

424
00:26:34,160 --> 00:26:37,960
of the owner of the property, non fitness, and they say,

425
00:26:37,960 --> 00:26:41,000
hey, listen, I want to be your franchisee, but I want you to run and

426
00:26:41,000 --> 00:26:44,320
operate it. I don't want to deal with it. So we, we've created a management

427
00:26:44,480 --> 00:26:48,240
service company and we can operate the gym A to Z

428
00:26:48,240 --> 00:26:51,780
for the landlord. They build it and we're partners with

429
00:26:52,010 --> 00:26:55,850
them. And you know, obviously they get to participate on both sides. They get

430
00:26:55,850 --> 00:26:59,450
the profit of the gym and then they get the rent that's associated

431
00:26:59,450 --> 00:27:03,090
with the, with the rental expense. And so

432
00:27:03,090 --> 00:27:06,010
it works out really well. And then to your point on

433
00:27:06,170 --> 00:27:09,930
rebranding existing facilities

434
00:27:09,930 --> 00:27:13,650
because, you know, as. As facilities start to age, they become more

435
00:27:13,650 --> 00:27:16,890
and more irrelevant. So you always want to take a look at

436
00:27:17,540 --> 00:27:21,300
what the potential is if you bring in additional innovation or a different

437
00:27:21,540 --> 00:27:25,260
strategy into your business. So we offer the same thing, we've done that same

438
00:27:25,260 --> 00:27:28,420
thing where we've gone into existing fitness

439
00:27:28,500 --> 00:27:32,300
organizations, changed the brand, the UFC gym, and they ended

440
00:27:32,300 --> 00:27:36,060
up being very successful. So it's certainly a lane that's going to not

441
00:27:36,060 --> 00:27:39,620
just be for UFC Gym, but I think many fitness operators out there.

442
00:27:42,910 --> 00:27:46,510
This is Pete Moore. Here's the last tip for you of the podcast.

443
00:27:46,750 --> 00:27:49,630
We are partnered up with a company called Higherdose.

444
00:27:49,870 --> 00:27:53,230
Higherdose.com they are the leader in

445
00:27:53,470 --> 00:27:56,430
workout recovery products, infrared technology,

446
00:27:57,150 --> 00:28:00,670
LED light masks, neck enhancers, and

447
00:28:00,830 --> 00:28:04,550
other products such as PEMF mats and sauna

448
00:28:04,550 --> 00:28:07,790
blankets. If you have not gotten on the workout

449
00:28:07,790 --> 00:28:11,270
recovery check train yet, your time and your stop

450
00:28:11,350 --> 00:28:14,910
is now you got to get these products in there before these workout

451
00:28:14,910 --> 00:28:18,150
recovery and spas end up saturating your market.

452
00:28:18,550 --> 00:28:22,070
Having your members walk out of the club and going into one of their locations

453
00:28:22,070 --> 00:28:25,710
for 200 bucks per month, where they're paying 39 to

454
00:28:25,710 --> 00:28:29,550
you. Let's become an expert in workout recovery. If we

455
00:28:29,550 --> 00:28:32,950
are already an authority in workouts, higher dose,

456
00:28:33,270 --> 00:28:37,000
check it out. There's a wholesale code and we look

457
00:28:37,000 --> 00:28:40,240
forward to helping you augment your products and services

458
00:28:40,720 --> 00:28:44,520
to meet the demands of your members. And hey, let's get people

459
00:28:44,520 --> 00:28:48,320
happy, healthy and sweating. And the recovery should be

460
00:28:48,320 --> 00:28:49,600
just as good as the workout.

461
00:28:53,840 --> 00:28:57,240
So you got a lot of quotes I also see you doing. You know, sometimes

462
00:28:57,240 --> 00:29:01,040
I'll wake up in the morning, I'll get like a motivational, you know, two minute

463
00:29:01,350 --> 00:29:03,750
riff from you. You know, we might be in your car or you might be

464
00:29:03,750 --> 00:29:07,430
in some foreign country. And so I appreciate that. But

465
00:29:07,430 --> 00:29:11,270
anything you want to leave our audience here with is one of your latest

466
00:29:11,270 --> 00:29:15,110
and greatest quotes or something you live by or, you know, a couple words

467
00:29:15,110 --> 00:29:18,630
that, you know, that's a said lackey, that's a said

468
00:29:18,630 --> 00:29:22,470
blackism or new one. Well, I, I don't know if I have a quote

469
00:29:22,470 --> 00:29:26,190
for you, but I'll just share my opinion. You know, I do have the benefit

470
00:29:26,190 --> 00:29:29,640
of going global and seeing different

471
00:29:29,720 --> 00:29:33,560
cultures and people. And at the end of the day, planet

472
00:29:33,560 --> 00:29:37,160
Earth, all of us are pretty much in the same place, right?

473
00:29:37,160 --> 00:29:40,400
We want to live a good life, we want to get fit, we want to

474
00:29:40,400 --> 00:29:44,120
stay healthy. There's a lot of division out there, whether it's political

475
00:29:44,200 --> 00:29:47,880
division, business division, whatever it might be. But

476
00:29:47,880 --> 00:29:51,640
for clarity purposes, the consumer is looking to go to a

477
00:29:51,640 --> 00:29:55,240
place to have a good experience, to be in a good

478
00:29:55,240 --> 00:29:57,830
community, to be somewhere they trust

479
00:29:58,790 --> 00:30:02,510
and they want to be able to be in a position where

480
00:30:02,510 --> 00:30:06,190
they can be a little bit vulnerable, to become the best

481
00:30:06,190 --> 00:30:09,750
version of who they can become after their workouts

482
00:30:09,910 --> 00:30:13,110
and so forth. So I think the importance of just

483
00:30:13,670 --> 00:30:17,190
the global community continuing to have conversation,

484
00:30:17,510 --> 00:30:21,310
continuing to be able to talk to one another, to close the

485
00:30:21,310 --> 00:30:24,390
gap on our differences. So we can not only provide great

486
00:30:24,660 --> 00:30:28,500
businesses, but listen, as a globe, we can get along because I think we're

487
00:30:28,500 --> 00:30:32,220
all getting tired of these, these, these conflicts,

488
00:30:32,220 --> 00:30:35,980
these military conflicts and these pointing fingers and,

489
00:30:35,980 --> 00:30:39,820
and so forth. At the end of the day, we're one human race trying to

490
00:30:39,820 --> 00:30:43,500
find our fullest potential. We all have that in our DNA. It's just

491
00:30:43,500 --> 00:30:47,300
about the ability to communicate across the board. Well,

492
00:30:47,300 --> 00:30:50,900
I think a lot of that starts on on the gym floor and realizing that

493
00:30:51,120 --> 00:30:54,760
people just want to be the best version of themselves and want to surround

494
00:30:54,760 --> 00:30:58,560
themselves with the same type of people to get them there. So we're doing

495
00:30:59,520 --> 00:31:03,200
vigorous agreement with you on that. So to the health, active

496
00:31:03,200 --> 00:31:06,160
lifestyle and outdoors segment. You are a

497
00:31:06,960 --> 00:31:10,800
shining light in making that happen globally. We appreciate what you've done,

498
00:31:10,800 --> 00:31:14,280
our friendship for a long time and from episode May

499
00:31:14,280 --> 00:31:17,530
14 to 600, we'll check in with you around a thousand

500
00:31:18,250 --> 00:31:22,090
and let's see what your global count is up to and maybe world

501
00:31:22,090 --> 00:31:25,850
peace at the same time. So good to see you. Good to see you.

502
00:31:25,850 --> 00:31:27,930
Awesome. Go Halo. Thanks for coming on.

503
00:31:37,370 --> 00:31:41,090
This is Pete Moore on Halo Talks. Your captain speaking. I am

504
00:31:41,090 --> 00:31:44,700
the founder and manager, managing partner at Integrity Square. We've been around

505
00:31:44,700 --> 00:31:48,500
now for 15 and 1/2 years. We have been helping

506
00:31:48,500 --> 00:31:51,980
people like yourselves get capital, do mergers and

507
00:31:51,980 --> 00:31:55,540
acquisitions, consulting, strategic advice in the health,

508
00:31:55,620 --> 00:31:59,460
active lifestyle and outdoor halo sector, trying to help

509
00:31:59,460 --> 00:32:02,660
as many entrepreneurs as possible get to the next level,

510
00:32:03,220 --> 00:32:06,660
take that inflection point and be the force behind your growth.

511
00:32:07,220 --> 00:32:10,820
We are helping companies that have at least $3 million of

512
00:32:10,820 --> 00:32:14,300
EBITDA, around $10 million of revenue and

513
00:32:14,380 --> 00:32:17,740
we are positioned to help you get institutional growth capital

514
00:32:18,460 --> 00:32:22,260
or to negotiate deals with strategic partners. If

515
00:32:22,260 --> 00:32:26,020
you go to integritysq.com isq

516
00:32:26,020 --> 00:32:29,620
you can see our capabilities Deck Happy to set up a consultation at any

517
00:32:29,620 --> 00:32:33,140
time that is free of charge and we look forward to

518
00:32:33,140 --> 00:32:36,860
helping solve obesity, loneliness and diabetes.

519
00:32:37,020 --> 00:32:37,980
Go Halo.

520
00:32:59,910 --> 00:33:00,150
It.