Episode #615: Inside Austin Pickle Ranch with Tim Klitch-Growth, Community, and Private Equity in Pickleball

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This is Pete Moore on Halo Talks, coming to you live

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with Tim Klitsch. He's the Chief Fun Officer

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and co-founder of Austin Pickle Ranch. We're going to talk pickleball

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today. We're not going to talk too much about basketball, but I will be wearing

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my Knicks jersey. Oh, you're killing me. You're killing me. And his,

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uh, he's got a prior relative who did, uh, work, uh,

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for the New York Knicks back in the '50s, so We'll take that as a

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benefit and we'll roll with that. So, Tim, welcome to the show. Well, thanks for

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having me. Awesome. So give us a little background. You know,

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we've been following the pickleball industry as part of our O of

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our HALO, Health, Active Lifestyle, Outdoors. We think

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pickleball is the ultimate social engagement

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sport. I'm a pretty avid pickleball player

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and recreationally. But we've also had

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people that have become investors in the space,

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and there aren't many people, I think, that have figured out the business model. It

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seems like you guys have. So look forward to kind of hearing your background, why

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you got involved here, and then how the business works for you.

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Sure. Well, I kind of backed

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into it because I'm a tennis guy. I played D1

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and briefly pro tennis. Played

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adult, highly competitive USTA tennis my whole

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life since college. And I was about

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to develop a piece of land in Austin and I was

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gonna do an urban tennis resort. And I met

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Steve Kuhn who started Major League Pickleball.

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And he was like, well, have you thought about pickleball? And I said, yeah, I

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think about it like every other tennis player. It's for people who aren't athletic enough

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to play tennis. Right. And so kind of looked down my nose

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at it, and then I started digging into it back in

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2019, right before COVID and I realized, you know,

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there's something to this sport. And I, I, you know, I think

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Steve was right, and it, it was poised to take off. And I

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think, you know, since then it's gone from probably 4 million players in

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the US to 40 million in the US. And so, uh,

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I think, um, COVID really set it on fire.

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I mean, I think it was poised to grow at an

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above-average rate without COVID, and then COVID made it just

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take off. Yeah, I went to the— I think it was probably 2018.

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I went to the US Open of Pickleball in Naples.

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And it still felt like somewhat of a cottage industry.

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They were announcing things over the loudspeaker. I thought I was

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at like a, like a summer camp. Yeah. Like,

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Tim Clinch, please report to court 47 for your over

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80 game or you'll be disqualified and

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forfeited. Right. And I was like, this thing's got a lot of legs to it.

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It's definitely not there yet, but you could see the enthusiasm

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and the age spectrum. I think they had like an under

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12 up to like an over 80 or something. It was pretty

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wild. That's crazy. And I think one of the things that pickleball has

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got Right. Is, as a

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lifelong tennis player, I could either, you know,

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as a working stiff in a bank, I had 3, 4 weeks of vacation a

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year. Did I want to use— you know, I gotta take 2 of those weeks

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out and say that's family time. So I got 1 to 2 weeks of

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discretionary vacation time. Do I wanna go play in a

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tennis tournament? 'Cause the men's 60 grass courts in Providence,

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Rhode Island, is a week-long commitment for me at my

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level, and there's no pros there. Or do I want to go to

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Wimbledon or the US Open and watch the pros play? So

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I think tennis, it's been very difficult to merge

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playing with watching. Right. And pickleball, one of the things

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I immediately fell in love with when I went to my first tournament to play

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in was the pros were playing where I was playing. And

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so I remember being on court And, you know,

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the Nets were so close to each other, I ran into Ben Johns. Like, we

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physically bumped into each other. Yeah, we know him. He was on the court behind

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me. Gotcha. And I think that that's part of the appeal of the

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sport, is that the pro and the amateur game are so closely

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linked. Yeah. So, you know, before we got on here, we

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talked about, you know, your Chief Fun Officer, and

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I used to call myself the Chief Dream Architect. You know, when you

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got into deciding how to develop this property,

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you ended up with 16 courts in 50,000 square feet.

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Could you give us any of the analysis or,

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you know, what's the right under-over on number of courts

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that you need to run a successful pickleball operation?

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Sure. Well, and I think that

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if you're going to do— there's a lot of places that

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like municipal parks that can put like pocket parks and do 4

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and 8-court installations. But if you want to do a

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manned, for-profit

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monetized club setting, I think 12 to

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16 courts is the bare minimum that you got to do. I

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mean, we had an event the other day, I had 300

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guests out for it. I got 16 indoor, 2 outdoor.

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That was about half as many courts as I could have used for that group.

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Gotcha. And so I think

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that larger is

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better. It's more economies of scale. You only have to have

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one front desk. And so you just want to be

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more scale and efficient as much as

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possible.

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This is Pete Moore. I want to let you in on a little secret. There's

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this company called Promotion Vault, and what they do is they give out rewards

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from retailers that allow you to incentivize your

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members without having to do zero down and one month free,

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or giving away shakes or giving away t-shirts. What you want to do

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is build a rewards program that lasts, that people value,

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and that doesn't discount your own products and services. So here's the deal.

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There's something called Rewards Vault. The Rewards Vault is going to allow

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a member to set up their own profile. They are going to answer

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questions. You are gonna get those answers. You're gonna be able to target those

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members and you're gonna reward them inside your club,

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

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to get them to become loyal, to get them to pay their monthly dues

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and to be rewarded properly for the actions. A lot of companies

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are cutting back on rewards. You shouldn't be. Promotion Vault's your answer.

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Trust me, this is real.

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And given that you come from tennis, and the reason why I'm going to ask

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this question is we've seen a lot of pickleball investment opportunities.

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I have yet to see the financials on one that I'm

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really excited about. I agree. So the question for you

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is coming from tennis and that pricing

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mindset of what a court time that you know, should

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cost regardless of whether it's, you know, 2 people or 4 people

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playing. Um, looking at a membership, you know, price

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point and looking at the rest of the unit economics, I don't think I've

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ever seen an unprofitable tennis center.

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I, I gotta tell you, I don't think I've ever seen one. You know, that's

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because they've already gone— they've already gone broke. Okay, well, I'm saying

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that like the ones I've seen that are still operating right now, like they, they

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wrote— they know how to run the numbers and You know, right, it's part of

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probably a larger operation, uh, but the tennis center usually makes money

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if it's still in existence. So I'll caveat it with that, right?

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Yeah. So let's just say Austin, Texas, for example. We have

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private country clubs and we have municipal tennis

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centers, right? And we just, um,

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we just got our first place that was

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recently opened, like in the last 2 months, That is not a country club

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and it's not a municipal tennis center. And it'll be interesting to

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see how they do. I think they put in 8, 2 indoors,

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6 outdoor, and 8 pickleball courts.

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And that's the first private investment

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into a for-public-usage

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tennis facility in Austin. And so

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generally speaking, When I look at country clubs,

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and I was on the board of my country club, I was president of the

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board for a couple years, you know, tennis operations lose money.

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And then it's subsidized by the dues that the members pay to

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offset the dining and the swimming and the weight room and all that. So

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it's kind of hard to say, do people join for tennis or fitness?

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And, you know, one could argue about that, but

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The reality is if you go to a municipal tennis center in

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Austin and see what it costs to rent that court

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for 2 hours of prime time, and

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you figure out that that's a 7,200-square-foot piece of

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concrete. Right. And then you go look at pickleball and say,

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hey, I can fit 24 people

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on that court that I can fit 2 or 4 people on a tennis court.

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It doesn't take rocket science to see your revenue

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efficiency that you gain from bowling pickleball versus tennis.

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And I think that's why— I don't know where I've seen this, but I have

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heard a statistic that across the US for the last 3

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consecutive years, 10% of all tennis courts have been

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converted to pickleball. Yeah, it sounds good. Each of those years.

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And I see it at the country clubs. Even my club took one

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of its 20 courts, so that's 5%, and convert it.

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And a lot of places are doing more than one court. So

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how's the pricing that you've set up here with the

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membership model and the court time model? And how did you

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arrive at that? You know, it was

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blind stupidity because 4 years ago when we

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first opened, there really, there weren't there weren't any

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models to copy. We opened on a parking garage rooftop

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downtown. Right. But we were committed

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to not being a member-only facility. I think the

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spirit of pickleball is open play. And

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open play is, for me, guests and

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not just members. And so we kind of set up with the

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2-tiered fee system where, hey,

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you get to do open play once a day if you're a member, and

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that's included in your dues. I don't like the word free. You pay for it

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monthly. Right. Or you can pay by the session if you don't want to

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be a member. And so we

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just did a lot of open play and booked individual

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court reservations. And I would say back in

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'23 when we first opened, it was kind of,

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we put it up and boom, the customers were there. Now fast

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forward 3 years, there's probably 20 indoor

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facilities and some outdoor facilities that have opened

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in Texas, and so in Austin. And so

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the revenues are not just

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flowing in like rainwater.

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We've had a lot of floods here lately. Yeah. And so you gotta go, you

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gotta work for it and you gotta market it. And so

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the less well-located, less well-run,

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less well-marketed things aren't working.

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And we've seen a couple of clubs change

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hands, not in favorable M&A transactions, but

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in more like franchisor taking over

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franchisee's operations or

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original guy just going, man, this is too much work. I'm tired of writing the

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check every month and boom, I'm turning it over. Yeah.

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So from a standpoint of what you built, you obviously

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moved from the 6th Street rooftop to a—

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I guess it's been about 2 years since you moved into the

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50,000-square-foot location. Yeah. Do you feel like

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that's basically enough and you just want to kind of

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focus on that? Or do you have any kind of growth plans that

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either personally you want to try to

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affect or any of your business partners?

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Yeah, so I think we would like to

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open more facilities in Austin. I think

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our geography, we're not New York City

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where we're as dense as you all are, but we're

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a very— like, we got a river running through our city and we're very

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narrow and long north to south. And we have,

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if you gotta cross the river, that's a choke point. And there's

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only, I think, 7 bridges across the river, you know, in the main part of

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Austin. So we're always watching where

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our customers are coming from, how far they're driving. And we

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would love to be back in the downtown area,

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in the south area. And so

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we're always looking for something.

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And then I do think that the one thing that has

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shocked me is how our brand has

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kind of bled out of Austin. 'Cause in the old days

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when you had a local, one-location,

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direct-to-consumer brand that did local marketing,

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nobody outside of town knew who you were. Yep.

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But social media and the

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internet has, allowed our

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brand to feel like a national. And

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frankly, I get people from Germany, Canada,

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Asia stopping by going, oh, I've been following you guys on

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the internet. That's awesome. I wanted to come play here. Is

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it because of some of the competitions or tournaments that you

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have? It's not even the competition, it's more

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of the brand. Just

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what they feel, what vibe they're getting

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over their computer and over their phone. And I

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never thought that was possible 'cause it didn't used to be possible.

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Now, all these influencers and smart young people have figured all that stuff out and

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I'm just smart enough to have some of those on my team helping me

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take advantage of that. Gotcha. And then are you,

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You know, you've got some affiliation with guys that are

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doing professional pickleball as well. Yeah, and I think

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that helped a lot because back in,

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before we even opened in '23, I was one of the original

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8 team owners in Major League Pickleball back in

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'21. And frankly, I did

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it just thinking, hey, the Texas Ranchers would

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be a good way to promote the Austin Pickle Ranch.

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And so I, I talked with the guy that owned the

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local World Team Tennis team,

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and his joke was, hey, it's not the

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buy-in, it's the ongoing negative cash

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flow that kills you on these team sports,

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minor team sports. Right. And so I went into

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it figuring, well, I'm getting in cheap, but I'm gonna have to

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write checks over time. I was

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smart enough in '23 to bring in some partners

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who brought in, you know, Scottie Scheffler, Taylor

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Fritz, Lil Wayne, Morgan Wallen.

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There's no— we got NFL players. And so

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I wisely brought some folks in because I

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realized that the pro side of the sport

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went from a fun little hobby into an actual business.

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Right. I had a business that I needed to focus on and

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I don't have enough bandwidth to do those 2 things

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at that level. Has professional pickleball,

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I mean, I see it on television, to be honest with you, just for the

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audience here, I enjoy playing pickleball. I'm not a huge fan of

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watching it on television. So just

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what's your view

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on that? I just feel like watching a tennis match is like, That's epic and

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classic and always will be. So that's how I feel about

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it. I think there's validity to that. And

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most of us know we can't play

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tennis like Roger Federer or Novak

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Djokovic. We're not athletic enough to do that. But when you watch

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pickleball guys play, you're like, eh, they don't look that good until you go

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out and play 'em and they smack the crap outta you and hit you in

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the face a couple times. And then you're like, okay, this is way harder than

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it looks. That's right. I do think the

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pro side of the game, I think, plays

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better in person than it does on the screen. I agree. Yes.

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But I think what PPA and MLP are doing a really good job

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of— it used to be that the only place in

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person you could go see those events was

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California, Texas, and Florida, where the big

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concentrations of pickleball venues were. And now You know,

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MLP was in Grand Rapids and PPA goes

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up, up the East Coast. And so I think that

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this, the pro side of the sport has a lot of legs

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left and they are picking up. You know, when we get on

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network TV, we're drawing a million viewers. Really? And so we're

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outdrawing sometimes. I don't think we outdraw

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the Daytona 500, but we're outdrawing a smaller

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NASCAR race and we're outdrawing LIV Golf. And

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it, but it's gotta be the right conditions where

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Ben and Anna Leigh are playing or, you know, some of the big names that,

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that are drawing people in.

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This is Pete Moore. Here's the last tip for you of the podcast.

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00:19:31,769 --> 00:19:35,122
And hey, let's Let's get people happy, healthy, and sweating,

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00:19:35,558 --> 00:19:38,093
and the recovery should be just as good as the workout.

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And then from a standpoint of your professional tennis

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background, have you had to give up playing

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tennis, or are you someone that still could toggle between tennis and

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pickleball? Because I feel like once people make the break, like they say, I used

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to play tennis, now I play pickleball. You rarely see people say that like they

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still play both sports. It's funny, I go, if you look my

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UTR up, Universal Tennis Rating, right now, and it's probably

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00:20:07,076 --> 00:20:10,588
changed since I looked at it last week, I'm a 9.0 rated

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tennis player. Oh, wow. And, I never practice. I

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don't have time to practice. I just play matches. Okay. And,

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I play pickleball almost every day. And, the one thing I have

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found is that I didn't realize that my style of playing tennis

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was actually large-scale pickleball. Now that doesn't

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apply to everybody. You're a net guy, you're a net guy. I went

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through D1 college tennis. I never hit a groundstroke.

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I was a chip and charge and a serve and volley guy. Gotcha. So if

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I got in a baseline rally, I was done. Okay. And I'm

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still kind of that way, even though I'm too slow to effectively serve and volley.

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And so my particular game, I find that

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my doubles game was slipping in tennis until I realized, you

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know, the one thing I've learned in pickleball is that you set

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your paddle up in pickleball where you think the ball's gonna go

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00:21:06,503 --> 00:21:10,053
before the guy hits it, 'cause you don't have enough time to react. And so

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now in tennis, my hands have gotten so much quicker from pickleball. Wow.

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That I just get right on top of the net and I dare that guy

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with that big forehand to just drive it at me. And I just get right

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up on the net and go, hey, you wanna lob me, you can lob me.

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So I'm probably an anomaly in that I'm an

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almost 5.0 rated pickleball player, which is about a

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point lower than the pros, which is not bad for

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being an old fart. And I'm also, you know, a low

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D2 or D3 ranked tennis player still. That's

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great. All right, well, you'll go down as one of the

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hybrids. Yeah, I think I am an outlier. I

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feel like people are very, vocal about, you know,

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if they've— if you still play tennis, you know, they kind of, you know, they

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don't have great things to say about pickleball. But I do think pickleball— I

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think pickleball is a great off-ramp for— Oh yeah, definitely.

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For anybody who's like, tennis is

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rewarding, but it's work. Pickleball

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is fun and it's play. And it gets to be a little worky

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if you want to get really good at it, but I go out and play,

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I have fun, and it just doesn't tear up my body. And I, I feel

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like it's just more communal and social. So just one

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question before we part ways here, um, and then hopefully I'll visit you guys

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when I'm in Austin, is what is the average amount of

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hours somebody spends at Austin Pickle Ranch

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when they come as a member? Uh, I would say

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it's 2.5 hours. That's great. Yep.

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And we do our open play sessions for

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2 hours, but we intentionally

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overfill the open play sessions so that you get to

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play 2, sit 1. And that's our goal

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is to give everybody a break. And then also we want to

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have enough population filled into an

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open play session that you get to play with different people and cycle with different

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partners against different opponents. 'Cause that's part of the magic of pickleball is

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short games with changing partners and opponents. Yeah, that's

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great. Well, I'm glad you, uh, you took the leap and developed this

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project into, uh, a pickleball sanctuary that,

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uh, seems to resonate with everybody globally, which is pretty

374
00:23:29,072 --> 00:23:32,569
awesome. Well, if you'd asked me if I thought we'd had

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00:23:32,682 --> 00:23:36,340
240,000 customer visits last year, I would have said

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00:23:36,693 --> 00:23:40,110
no way. And that's what we did. And so it's,

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00:23:40,383 --> 00:23:44,167
it's amazing how the people of Austin have embraced us. Great.

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00:23:44,363 --> 00:23:47,869
All right, well, uh, go Halo and, uh, keep up the good work. Thank you

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00:23:47,869 --> 00:23:51,116
very much. I hope I'll meet you in person soon. Appreciate it. And, uh, your

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00:23:51,116 --> 00:23:54,458
activities here to help, uh, people get fit. Well,

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00:23:55,518 --> 00:23:58,539
uh, if, if you're on the couch and you're trying to think of a way

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00:23:58,539 --> 00:24:02,086
to get off the couch, come play pickleball. I love it. All right, awesome. Good

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00:24:02,086 --> 00:24:02,626
to see you.

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00:24:09,283 --> 00:24:13,040
This is Pete Moore on Halo Talks, your captain speaking. I am the

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00:24:13,040 --> 00:24:16,765
founder and managing partner at Integrity Square. We've been around now

386
00:24:16,765 --> 00:24:20,330
for 15 and a half years. We have been helping

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our capabilities deck. Happy to see You can set up a consultation at any time

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00:25:01,554 --> 00:25:05,393
that is free of charge, and we look forward to helping

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solve obesity, loneliness, and diabetes. Go ahead.