Episode #619: Merging Boutique Brands Under One Roof-Inside Drop Fitness' Unique Approach

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

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bringing a friend and an Integrity Square client to his

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first Halo podcast. We are talking with Dan

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at Drop Fitness in Montvale, New Jersey. I

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think you guys might have been on the forefront of

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integrating a club, a gym, and a spa

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and all the other amenities in one. So Welcome to

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the show. Yeah, thanks for having me. Excited to be here.

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So give us the early days of kind

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of constructing this idea. Obviously,

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we had this little blip called COVID that was probably

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during your ideation phase.

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And as the things have played out, you're basically

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in the space where there's a lot of interest and activity. And I

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think LA Fitness with Club Studio has kind of proven that out along with what

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you guys have proven out. So give us some background on how this thing started

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from an ideation. Sure. Yeah. Well, I think like with

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most things, it comes from personal

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frustration. I was in New York

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City, I'd gotten injured at a gym, it

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was a an experience where I couldn't work

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out. And I reached out to the gym looking to pause my

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membership. I'd been a member for over a year. And,

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you know, I reached out to them, they forced me to send a

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medical note from my doctor, which I was on crutches that I had to

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crutch my way over in New York City to drop off that letter.

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And that was a pretty like eye-opening experience where I

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was just like, these gyms really are

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not thinking about things in the right way. Right. So

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the idea of Drop just sort of came from our own personal frustrations,

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both myself and my team. And we all have those types of

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stories and experiences. And as we started

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thinking about Drop Fitness, really what I was looking for

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is what are the biggest issues with

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gym chains, right? My

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personal issue was they made it really hard to leave.

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And, you know, as a millennial, the rest of my life is very

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easy. I can control, you know, what subscriptions I own. I can

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control when to turn them off and things like that. And I always wonder

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myself, why isn't a gym like that? Why do they lock you into these

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long contracts? Why do you, when you walk into a gym, you feel like

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you're being talked to by a used car salesman and they tour you around the

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place and bring you into a tiny little room? and start

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saying what their gym memberships are, but if you join today, it'll be

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this. It just felt like a very predatory consumer experience

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in general, both on the joining and getting you to

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sign a contract just like you would be buying a car.

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So really what the idea was foundational for Drop is,

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can we build something that is more

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flexible to consumers? When we're in a, in a, you

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know, when we're in a market where consumers are demanding more flexibility. The

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idea started as boutique fitness was really blowing up.

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Boutique studios, brands like SoulCycle

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and Barry's Bootcamp, these are all brands that have more

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flexible month-to-month pricing, more flexible packages.

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And, you know, it was also sort of the advent of ClassPass.

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ClassPass was really starting to get popular, especially in the city. So I

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sort of took where the boutique market was going and said, you know,

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what if we had a gym that treated their sort of customers

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like the boutique studios are? And that's sort of where the ideation phase

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really started, was kind of that sort of main

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consumer pain point. And then as I did research on the

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industry, you know, attrition has constantly been the

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Achilles heel of the gym industry. You know, obviously you're gonna

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have uncontrollable attrition, right? People move, things like

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that. But really, the secret sauce, in my opinion,

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is how can you control the controllable attrition?

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Fitness in general is really

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personal for people. I myself go through periods where

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I'm really into fitness, and then I go through periods where I'm really not into

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fitness. Having one contract that you're sort of locked into,

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while some people might use that as motivation, I

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think it can be a little bit daunting, especially when you know yourself being someone

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that isn't consistent at fitness. So I really wanted to build a membership

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that sort of catches me at my peaks when I'm really into fitness,

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but also gives me the flexibility if I'm traveling, or in my

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case, if I'm injured, that I can, you know, not be

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investing in fitness in those periods. So something that grows

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with me and my own motivation was what we were looking to achieve.

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As you take a look at what happened post-COVID, a lot of

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the traditional health clubs couldn't really

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recapture their group exercise programming and

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capacity levels, and they started repurposing a lot of the

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rooms and almost gave up on group exercise. Whereas you

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guys basically said, hey, not to use this term in a

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bad way, but like, hey, I got a food court. inside of here with

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top brand recognition. And, you know, you could

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actually get this quality of boutique without having to leave

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the, you know, the 4 walls of my club. So I felt like you guys

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were almost a benefactor of like the post-COVID,

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you know, I want variety. I've been on a spin bike for like, dude, like

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a year and a half, right? I'm not really coming back and I want to

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spin and I want to do strength and I want to do—

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cardio and Pilates and yoga and

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things as a group. So when you started to look

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at that model originally and you said, hey, I'm going to put this in Montvale,

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New Jersey, what other towns did you look at

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or how did this opportunity fall into place?

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Sure. Yeah. So in addition to offering customers more

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flexibility in their membership options, the other sort of main sort of

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core thread of Drop Fitness is that we bring boutique

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brands primarily from the city. Our location,

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our first location is in Montvale, New Jersey. And we brought

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different boutique fitness brands, Fitting Room, Physique

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57, Humming Puppy, and Mile High Run

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Club. And we actually put them all underneath our studio. Again,

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like as a consumer, I really appreciate luxury amenities that

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you'd find at the Equinoxes and the Lifetime. But I also very

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much appreciate the high level of like

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boutique premium polish that they do in all of their experiences.

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When you walk into a SoulCycle class, it's very—

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that whole class experience feels very elevated than just

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walking into a traditional gym cycling class that you would

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find at Lifetime or something like that. So we really wanted to

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bring those boutique partners out into the suburbs, put it

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all underneath one roof, and also have the luxury

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amenities that you'd— you would find there effectively. You know, in

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New York City, it's very easy. If you're in SoHo,

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you have your Joe and the Juice and your SoulCycle and your

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Equinox all on one block on Bond Street, right? Like, it doesn't

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exist like that in the suburbs. The suburbs, you very much have to drive to

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multiple different places. With these things being sort of

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apart, you're having to buy multiple different memberships if you really like

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boutique. You might be really into Pilates, but you also might

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be really into yoga, right?

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Very often the studios that you go to are mutually exclusive in

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terms of getting that experience. So how cool would it be if you could

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have those premium boutique classes, have that right

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variety all underneath one roof, and then also pair it with the

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luxury amenities that you would find at an Equinox or Lifetime? So that was

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also sort of the secondary feature of Drop Fitness is like

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recreating that ClassPass-like experience that's very easy to achieve in New

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York because everything is so dense and businesses are

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so close together. Can you achieve that in the suburbs where everything

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is a little bit more spaced?

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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 1 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

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

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answer 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

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

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answer. Trust me, this is real.

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I'm gonna make a couple of comments, but I'm gonna, I'm gonna start with the,

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with the, uh, the conclusion and then I'll back, back it back and

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forward or what have you. You guys have succeeded at doing this.

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However, when you started this, to say to someone, either an

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investor or a landlord or a member, hey, I'm basically going to create

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Equinox and I'm also going to put 5 brands that are owned by other people

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inside a studio, and I'm going to have an app that has one membership,

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and, you know, it's all going to be basically— you can figure out how to

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do the rev shares internally with each one of these boutique operators that

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are now putting their brand inside of your location in Montvale

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with their instructors, um, and there's gonna be an app that somehow figures

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out how to sell membership and also get you into these classes and book them

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in there. Like, it's, it kind of sounds like, man, this sounds awesome on

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paper, but the execution sounds ridiculously complicated,

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right? So how did you guys kind of work through and say, okay, I basically

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got to put, you know, these 100 steps in place to make this

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happen, and if I can like unravel that and then put it back

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together, I might have to build my own software to do it because that really

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doesn't exist anywhere. So walk us through like the

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conversations maybe that you had early on, be like, hey man, awesome

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idea in a PowerPoint, probably not easy to actually execute.

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And then where you went from there. Yeah, I mean, that's a great question.

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So, you know, when we were first ideating on this

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idea, uh, not only do you have to find the right location

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and the right real estate deal, and with the right

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demographics for what you're going for, you also have to have the right

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sort of operational layer to control it. Yeah. And, you know,

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we looked at a lot of different fitness softwares on the

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market. I think because our concept was

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very unique where we wanted to have all of these

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different boutique fitness studios which have certain things that

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people are accustomed to, things like booking your own spot,

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seeing what friends you know, are taking the class so you can book the

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spot next to them. Mm-hmm. Those are typically things that, you know, a

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traditional gym doesn't really have. Generally, it's an all-purpose sort of studio.

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They run different types of classes, but a lot of the spaces

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themselves are designed purposefully to

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give a wide variety of classes in that space. You have different types of

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equipment and things like that. In the boutique world, everything is very, very

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precise, and the experience is very,

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elevated, but also way more similar, right? You're not going to run a yoga

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class in a HIIT studio, right? So a lot

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of the technology issues that we ran into is when a

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consumer walks into Drop Fitness, they

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want to— I want to give the sort of impression that

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they're more walking into a collection of brands

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versus just one brand. Each of our different studio partners

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who I'm so grateful, you know, took a chance on us and said, hey, let's—

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Yeah. build a studio out in Montvale, New Jersey, I wanted to

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really make sure that those brands shined. And, you know, when you walk into

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Drop Fitness, obviously you're hit first and foremost with the

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luxury. But as you walk up to the studio and then you go into the

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studio, you are truly transported to their studio

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in Midtown or the Upper West Side or SoHo. We

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very much look to transport people into those

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experiences. And just like you do that in the physical space,

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the technology has to do that as well. Instead of booking

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a HIIT class in our HIIT studio, I

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wanted to convey to customers that you're booking fitting room

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within Drop Fitness, more of a mall approach as opposed to

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it's just another studio. Right. It's a different experience with

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different spot layouts and things like that. So we were looking

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at the different softwares on the market. We really didn't feel like

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Any of the softwares had some of the member features that we really wanted

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from a boutique perspective. Additionally, there were other features

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such as like mobile order ahead. Like how great is it to order a

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smoothie after that's ready for pickup right after class,

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right from your phone? I come from an age where I do everything from

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my phone. Whether that's good or bad, I don't know. But

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you know, I wanted to make the class booking

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experience as easy as booking an Uber. I wanted to

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make every sort of experience, just a couple taps. That way

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it's right on your fingertips. And no member app that we looked

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at, both ones that are targeted towards larger, you know,

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traditional box gyms and traditional boutique studios,

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really hit both angles, 'cause you really need both.

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And, you know, our team, we sort of decided like,

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hey, well, why don't we— we need all of these features, why don't we do

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our own app? And then as we built our own app,

231
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we started to realize that, you know what, no, we need to build our full

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platform. So as we were

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prepping for opening Drop Fitness, we hit the ground running,

234
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first focusing on the member experience. And then before we knew

235
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it, we really had a full stack of platforms and features

236
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that we're still building into today. I think,

237
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it's hard to find a software that fits all the

238
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nuances and uniqueness of your business. I think with

239
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the advent of AI and with, you

240
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know, being closer to the business, you really start to

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understand the needs and the challenges that you're facing

242
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because you're facing them. Right. So that's sort of

243
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how it all sort of started. We couldn't find a

244
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product-market fit for what we were building. We decided to build it

245
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ourselves and we've been extremely happy with the results. Yeah.

246
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So obviously your investors, and I know many of them

247
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helped you greenlight that and said, yeah, look, if we want to do this right,

248
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we have to have the right technology because without the

249
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right technology, the business model just is not able to

250
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be executed upon. There's no way to mesh in

251
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5 different softwares or to have them all talk to each other and

252
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have it under one seamless platform.

253
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Going back to the studio side of being able to

254
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court Physique 57

255
00:15:59,902 --> 00:16:02,170
and Mile High Run Club,

256
00:16:04,352 --> 00:16:07,938
what were those conversations like and

257
00:16:08,517 --> 00:16:12,327
how were you able to get people to not just trust you

258
00:16:12,440 --> 00:16:16,213
but that trusted like, hey, this is good

259
00:16:16,213 --> 00:16:19,519
for your brand. It's going to cost you less money to get into

260
00:16:20,145 --> 00:16:23,756
a suburb and test this type of concept. And

261
00:16:24,221 --> 00:16:27,928
don't worry about the economics because we've basically got that figured

262
00:16:27,928 --> 00:16:31,668
out with the technology that we just talked about. Yeah. I mean,

263
00:16:31,700 --> 00:16:35,199
the conversations with— so a lot of boutique studios,

264
00:16:35,311 --> 00:16:39,115
right, they think the same way as you would with any brick-and-mortar business is how

265
00:16:39,163 --> 00:16:42,857
can we grow and scale? The hardest problem

266
00:16:42,857 --> 00:16:45,385
with scaling a brick and mortar is all of the

267
00:16:47,028 --> 00:16:50,861
operational bandwidth it takes to build a new location, as well

268
00:16:50,925 --> 00:16:54,210
as the initial CapEx and ongoing OpEx

269
00:16:55,562 --> 00:16:59,007
costs, right? So what we offer to these

270
00:16:59,039 --> 00:17:02,472
brands who would love to be in as many

271
00:17:02,504 --> 00:17:05,989
cities and studios as possible is, hey, why don't we

272
00:17:07,425 --> 00:17:10,980
extend your brand in a way that's very easy and attractive to you?

273
00:17:11,943 --> 00:17:15,751
We pay for the OpEx and the CapEx, we build the studio in their

274
00:17:15,783 --> 00:17:19,270
vision. It's a collaborative effort. And then we'd use a

275
00:17:19,334 --> 00:17:22,917
profit share on the gross profit of the studio in

276
00:17:23,029 --> 00:17:26,516
order to pay them out. So for the studio's angle,

277
00:17:26,869 --> 00:17:30,308
they get to showcase another location

278
00:17:30,918 --> 00:17:34,678
for— that's typically attacking a market that's traditionally

279
00:17:34,678 --> 00:17:37,859
hard for urban boutiques to expand into, which is the suburbs.

280
00:17:38,597 --> 00:17:42,367
They get a benefit of the unit economics of having all these different

281
00:17:42,367 --> 00:17:45,832
shared costs from the space to the

282
00:17:45,832 --> 00:17:49,442
electric to the plumbing and all of that stuff. Like you have

283
00:17:49,442 --> 00:17:53,276
multiple studios underneath, so you're not worried about those individual things at

284
00:17:53,276 --> 00:17:56,725
all. So for them, it was just a very easy way for them to

285
00:17:56,725 --> 00:18:00,575
expand and grow their brand, both, you know, in terms of locations but

286
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also online presence. And then for us, it was

287
00:18:05,644 --> 00:18:09,108
Rather than us trying to build 4 unique brands

288
00:18:09,108 --> 00:18:12,813
ourselves, we came in already with a playbook that works

289
00:18:13,246 --> 00:18:15,956
and that's popular. And

290
00:18:17,335 --> 00:18:20,992
the suburbs were craving these types of studios

291
00:18:20,992 --> 00:18:24,504
because especially at that point in time, they just didn't exist in the suburbs.

292
00:18:24,969 --> 00:18:28,225
Yeah. When you onboard someone

293
00:18:29,380 --> 00:18:32,558
on the app, Am I able to go online

294
00:18:33,216 --> 00:18:37,005
and book a class directly, or do I first need to be a

295
00:18:37,005 --> 00:18:40,601
member and pay a membership fee to drop? Sure. So

296
00:18:40,762 --> 00:18:43,620
I'm very much a believer in try before you buy.

297
00:18:44,326 --> 00:18:48,115
So all members, when they download the app or create their profile

298
00:18:48,870 --> 00:18:52,531
online, get access to a 7-day free trial. That trial

299
00:18:52,579 --> 00:18:55,870
starts on their first check-in. In that trial, they

300
00:18:55,870 --> 00:18:59,468
get effectively what we call our Studio Unlimited membership. They have

301
00:18:59,468 --> 00:19:03,306
access to book any of the classes to work out. And then

302
00:19:03,338 --> 00:19:06,759
within those 7 days, they sort of decide, is this for me or

303
00:19:06,791 --> 00:19:10,373
not? So basically, the sort of funnel flow

304
00:19:10,630 --> 00:19:14,259
is everyone starts their free 7-day trial. It's very much designed

305
00:19:14,259 --> 00:19:17,760
like a typical SaaS platform. And then

306
00:19:18,017 --> 00:19:21,776
if you like it, you'll convert. And if not, you don't convert

307
00:19:21,888 --> 00:19:25,548
into a member. The great thing is, is because you make it so easy

308
00:19:25,661 --> 00:19:29,481
and signing up literally takes 2 seconds, because

309
00:19:29,497 --> 00:19:33,093
you make it so easy, what we find is, you know, over 80%

310
00:19:33,607 --> 00:19:37,428
of the members that start their trial end up, you know, converting,

311
00:19:37,941 --> 00:19:41,633
whether that's a membership or a package or what have you, they

312
00:19:41,714 --> 00:19:45,406
end up converting 'cause people appreciate that. A lot of gyms obviously

313
00:19:45,406 --> 00:19:49,194
give like free 3-day trials and things like that, but it

314
00:19:49,403 --> 00:19:52,999
really makes it very seamless when you have an app that's sort of designed

315
00:19:53,272 --> 00:19:56,467
to help you funnel into booking your free classes and

316
00:19:57,350 --> 00:20:00,609
booking your free personal training assessments. You really get a lot of features in those

317
00:20:00,609 --> 00:20:04,430
7 days. And 7 days, in my opinion, gives you sort of enough time

318
00:20:04,430 --> 00:20:07,866
to decide if this is what you want or if this is what you want

319
00:20:07,866 --> 00:20:11,382
right now. That's always a question as well. So just making it very

320
00:20:11,478 --> 00:20:14,785
easy for customers to see what Drop is and what we're about.

321
00:20:15,331 --> 00:20:18,847
And I've always said, if you create something of,

322
00:20:19,826 --> 00:20:23,256
incredible value, the customers will come. And that's what you've achieved.

323
00:20:23,914 --> 00:20:27,665
Yeah. But 2 follow-on questions. One is each

324
00:20:27,761 --> 00:20:29,716
one of the studios, are they

325
00:20:30,406 --> 00:20:34,141
dropping in their own instructors? So

326
00:20:34,189 --> 00:20:37,715
they have basically control over the classes, the

327
00:20:37,715 --> 00:20:41,210
programming, the quality control on that? Or are you taking

328
00:20:41,386 --> 00:20:44,255
any of the training or like in

329
00:20:45,473 --> 00:20:49,067
their studio? operations as part of what you're doing?

330
00:20:49,568 --> 00:20:52,875
Sure. So when we opened up Drop Fitness in 2022,

331
00:20:55,360 --> 00:20:59,032
we actually sent— we got local instructors in the area,

332
00:20:59,161 --> 00:21:02,801
we sent them to New York City to train. Okay. And

333
00:21:02,963 --> 00:21:06,561
they were able to really embrace the brand. A lot of these

334
00:21:06,593 --> 00:21:09,952
brands have their own sort of processes. Some of them are very

335
00:21:10,292 --> 00:21:13,709
online, some of them are very in-person. So We try to,

336
00:21:14,255 --> 00:21:17,466
in order to get the right caliber of instructors that

337
00:21:17,931 --> 00:21:21,238
our brands that we partner with can be proud of, we make them go through

338
00:21:21,238 --> 00:21:25,042
the same onboarding process as any instructor, for example, in

339
00:21:25,090 --> 00:21:28,927
New York City would go through. Now that we've been

340
00:21:28,959 --> 00:21:32,763
around for a couple of years now, all of our studios

341
00:21:32,779 --> 00:21:36,568
have what we call our studio leads. These are basically kind of our

342
00:21:37,033 --> 00:21:40,549
experience liaisons between the brand and ourselves.

343
00:21:41,046 --> 00:21:44,654
And they work closely with the brands making sure that we're

344
00:21:44,654 --> 00:21:48,406
maintaining the sort of standards that the boutique studios

345
00:21:48,422 --> 00:21:52,030
that we're partnering with are maintaining. And then they also

346
00:21:52,030 --> 00:21:55,734
provide the training. So effectively, what kind of happens is you

347
00:21:55,814 --> 00:21:59,502
want to pull from a local pool of instructors. It's

348
00:21:59,502 --> 00:22:02,949
just easier. They're closer to the gym. There's better flexibility for

349
00:22:02,949 --> 00:22:06,541
coverage and things of that nature. And then we have a studio

350
00:22:06,557 --> 00:22:10,229
lead that sort of manages their training That works also with

351
00:22:10,488 --> 00:22:13,388
our partner brand to ensure that they're giving the right training.

352
00:22:16,830 --> 00:22:20,351
This is Pete Moore. Here's the last tip for you of the podcast.

353
00:22:20,820 --> 00:22:22,969
We are partnered up with a company called HigherDOSE,

354
00:22:23,970 --> 00:22:27,109
higherdose.com. They are the leader in

355
00:22:27,527 --> 00:22:30,570
workout recovery products, infrared technology,

356
00:22:31,230 --> 00:22:34,669
LED light masks, neck enhancers, And

357
00:22:34,878 --> 00:22:38,333
other products such as PEMF mats and sauna

358
00:22:38,333 --> 00:22:41,643
blankets. If you have not gotten on the workout

359
00:22:41,643 --> 00:22:45,178
recovery train yet, your time and your stop

360
00:22:45,484 --> 00:22:49,244
is now. You gotta get these products in there before these workout recovery

361
00:22:49,356 --> 00:22:52,924
and spas end up saturating your market, having your

362
00:22:52,924 --> 00:22:56,266
members walk outta the club and going into one of their locations for

363
00:22:56,266 --> 00:22:59,737
$200 per month where they're paying $39 to you.

364
00:23:00,347 --> 00:23:04,152
Let's become an expert in workout recovery if we are already an

365
00:23:04,152 --> 00:23:07,781
authority in workouts. HigherDOSE, check it out.

366
00:23:07,974 --> 00:23:11,763
There's a wholesale code, and we look forward to

367
00:23:11,827 --> 00:23:15,585
helping you augment your products and services to meet the demands

368
00:23:15,761 --> 00:23:19,438
of your members. And hey, let's get people happy, healthy,

369
00:23:19,792 --> 00:23:23,276
and sweating, and the recovery should be just as good as the workout.

370
00:23:27,497 --> 00:23:30,706
Now, from— without disclosing the unit

371
00:23:30,706 --> 00:23:34,236
economics, I will just say that from looking at the

372
00:23:34,236 --> 00:23:37,846
financials, your AUV or average unit

373
00:23:37,846 --> 00:23:41,344
volume of the Montvale location is materially

374
00:23:41,457 --> 00:23:45,259
higher than any other gym chain that's in the middle

375
00:23:45,372 --> 00:23:49,062
to relatively higher-end market on a

376
00:23:49,078 --> 00:23:52,737
revenue per square foot, on a revenue per 4-wall.

377
00:23:53,394 --> 00:23:56,670
Yeah. You've also got the software company

378
00:23:57,007 --> 00:24:00,250
that's on the side that now has gotten interest from

379
00:24:00,860 --> 00:24:04,634
other operators that have said, hey, we think the

380
00:24:04,634 --> 00:24:08,423
future is what you guys are doing right now. Could we license

381
00:24:08,423 --> 00:24:11,490
your technology and could you become

382
00:24:12,582 --> 00:24:16,307
your owner-operator and you're running your own in-house and you're also

383
00:24:16,371 --> 00:24:19,887
now potentially a vendor or a software

384
00:24:19,887 --> 00:24:23,194
partner or technology partner to other groups.

385
00:24:23,595 --> 00:24:27,143
So for those people that are listening to this podcast who might

386
00:24:27,143 --> 00:24:30,947
say, hey, I believe that this could either be replicated

387
00:24:31,364 --> 00:24:34,527
by more Drop Fitnesses in different suburbs

388
00:24:35,233 --> 00:24:37,897
across the country or up and down the East Coast, let's say, to

389
00:24:37,897 --> 00:24:41,621
start, but also say like, hey, I get the whole technology

390
00:24:42,119 --> 00:24:45,747
play and there's no reason to outsource that to someone else

391
00:24:45,747 --> 00:24:49,372
because you basically It's part of the DNA and competitive

392
00:24:49,372 --> 00:24:53,136
advantage of the entity. As

393
00:24:53,169 --> 00:24:56,302
potential investors come across or listen to this podcast,

394
00:24:57,529 --> 00:25:01,291
what's the pitch on where you see the next 3 to 5 years

395
00:25:01,340 --> 00:25:05,116
of what Drop could become, either as a combined

396
00:25:05,116 --> 00:25:08,304
business or maybe 2 separate entities, but sister companies?

397
00:25:08,804 --> 00:25:12,572
Sure. Yeah. So I think both

398
00:25:12,604 --> 00:25:16,060
businesses are very unique in their own way, but they have so much

399
00:25:16,092 --> 00:25:19,697
synergy together. For example, because

400
00:25:19,810 --> 00:25:23,358
we designed great software, we started licensing out that software

401
00:25:24,145 --> 00:25:27,726
to multiple different clients. I think there's huge, huge opportunity

402
00:25:28,320 --> 00:25:31,900
in providing that Shopify-like experience for the gym industry.

403
00:25:32,495 --> 00:25:36,059
In my opinion, the gym industry typically lags behind larger

404
00:25:36,589 --> 00:25:39,961
industries like e-commerce just by virtue of

405
00:25:40,667 --> 00:25:44,103
the amount of revenue that they're generating. As someone that's very

406
00:25:44,120 --> 00:25:47,829
experienced with Shopify and understands that platform inside and out, I

407
00:25:47,829 --> 00:25:51,377
feel like we've only really scratched the surface on what these

408
00:25:51,377 --> 00:25:54,797
service, these gym platforms can be doing for

409
00:25:54,797 --> 00:25:58,554
customers. And I think also with the advent of AI, the ability

410
00:25:58,667 --> 00:26:02,280
to develop very, very quickly has been tremendously

411
00:26:02,280 --> 00:26:05,346
helpful just to my own engineering team. So I view

412
00:26:05,491 --> 00:26:09,231
software as sort of a great growth

413
00:26:09,247 --> 00:26:13,016
catalyst for our company in general. We've built

414
00:26:13,016 --> 00:26:16,353
great technology. We leverage Drop Fitness, the actual physical

415
00:26:16,385 --> 00:26:20,186
location, as sort of a sandbox for rolling out new features

416
00:26:20,715 --> 00:26:24,565
and seeing live data. It's incredibly valuable tool that

417
00:26:24,645 --> 00:26:27,789
a lot of software operators don't necessarily have. Like,

418
00:26:27,869 --> 00:26:30,563
we have our own sort of gym

419
00:26:31,782 --> 00:26:35,616
that we can test different features and roll out new features

420
00:26:35,664 --> 00:26:39,339
to make sure they're bug-free. And that goes a long way, actually

421
00:26:39,339 --> 00:26:42,904
having your own location and using— there's a

422
00:26:43,016 --> 00:26:46,613
term in Silicon Valley called eating dog food. We eat dog food every

423
00:26:46,645 --> 00:26:50,402
day because we're using our system every day with real consumers and

424
00:26:50,482 --> 00:26:54,127
stuff like that. I think that gives us a tremendous competitive advantage.

425
00:26:54,737 --> 00:26:58,238
And I also believe that it's much easier to scale

426
00:26:58,848 --> 00:27:02,300
software than it is to scale the physical. Now, on the operational

427
00:27:02,300 --> 00:27:06,088
front, From a revenue per square foot standpoint, we are right

428
00:27:06,088 --> 00:27:09,828
in line with all the standard luxury gyms that you've

429
00:27:09,828 --> 00:27:13,664
heard about. Mm-hmm. We're much higher revenue per square foot than what you would

430
00:27:13,680 --> 00:27:17,404
find in the mid-market or, you know, low-market

431
00:27:17,452 --> 00:27:21,257
gym. Part of that is obviously cost, but the other part

432
00:27:21,257 --> 00:27:24,435
of that and where I think our secret sauce is, is only around

433
00:27:24,435 --> 00:27:27,902
65% of our revenue comes from memberships.

434
00:27:28,303 --> 00:27:31,304
Most gyms, that number is over 90%. We sell

435
00:27:31,432 --> 00:27:35,071
huge amounts of packages. We sell huge amounts

436
00:27:35,200 --> 00:27:38,053
of products in our cafe and retail.

437
00:27:39,111 --> 00:27:42,830
All of these things are all sort of governed by the app and by

438
00:27:42,830 --> 00:27:46,164
making it really easy for people to do, to buy what they want.

439
00:27:46,725 --> 00:27:50,492
And it's, you know, let's say you live 10 miles away from

440
00:27:50,508 --> 00:27:53,987
the location. You don't necessarily want to commit to a monthly membership,

441
00:27:54,436 --> 00:27:58,267
but you really want to purchase a class pack because maybe you

442
00:27:58,267 --> 00:28:01,970
won't come multiple times per week, but you'll come multiple times per month and then

443
00:28:01,970 --> 00:28:05,226
you find value. Mm-hmm. By giving people those options and sort of

444
00:28:05,258 --> 00:28:08,915
bifurcating the business between memberships and packages

445
00:28:09,028 --> 00:28:12,846
and all the different services that go under, you also cater to a wider

446
00:28:13,022 --> 00:28:16,792
audience as well. Most people don't join gyms if they're

447
00:28:16,792 --> 00:28:20,417
not within 3 to 5 miles because gyms typically only offer

448
00:28:20,417 --> 00:28:24,219
memberships. Boutiques is totally different. You will travel 10 miles for

449
00:28:24,219 --> 00:28:27,893
the right boutique and you're not locked into that pricing to where you're

450
00:28:27,893 --> 00:28:31,328
making yourself feel like if I don't use it, I'm losing it

451
00:28:31,649 --> 00:28:34,828
type deal. So I think both businesses are incredibly

452
00:28:35,117 --> 00:28:38,200
scalable. The technology business, obviously,

453
00:28:38,392 --> 00:28:41,973
especially with, you know, all the advancements in AI, has

454
00:28:42,391 --> 00:28:46,164
potential to scale much faster. That's why, you

455
00:28:46,164 --> 00:28:49,857
know, we're focused on the clients that we have. Once we're sort of

456
00:28:49,857 --> 00:28:53,582
ready, we're going to, you know, announce ourselves to the world, so to speak, and

457
00:28:53,582 --> 00:28:57,387
start really signing clients. Just like Drop had their own nuances,

458
00:28:57,483 --> 00:29:01,159
our clients have their own nuances as well. We have traditional

459
00:29:01,818 --> 00:29:05,365
gym box gyms, which you know they do still want to do contracts. They

460
00:29:05,446 --> 00:29:08,929
still want to do some of the things that I

461
00:29:09,218 --> 00:29:12,477
might view as more classic, and then the boutiques have their own sort of

462
00:29:13,135 --> 00:29:16,185
you know depending on the style have their own sort of nuances as well. So

463
00:29:16,522 --> 00:29:20,022
trying to develop a platform that's really that one size fits all solution,

464
00:29:20,600 --> 00:29:24,156
and you know we're learning because. Every business is a little bit

465
00:29:24,156 --> 00:29:27,995
different. So making sure that you're building that platform flexibly in a way that can

466
00:29:28,027 --> 00:29:31,527
cater to all types of businesses is really important. And

467
00:29:31,527 --> 00:29:35,207
that's why Shopify's, I think, in my opinion, done such a great job.

468
00:29:35,288 --> 00:29:38,882
And a lot of what we do has been modeled off of Shopify. It

469
00:29:38,948 --> 00:29:39,870
works, right?

470
00:29:42,749 --> 00:29:45,988
And brick-and-mortar businesses are not very different from e-commerce,

471
00:29:46,135 --> 00:29:49,869
especially when all your touchpoints More and more are all

472
00:29:49,869 --> 00:29:53,548
digital. Yeah, great. Well, that's a

473
00:29:53,548 --> 00:29:57,307
great recap for anyone that's interested. Please

474
00:29:57,725 --> 00:30:01,484
drop into Drop Fitness in Montvale, check out their website,

475
00:30:01,901 --> 00:30:05,612
download their app. It's definitely where we think

476
00:30:06,335 --> 00:30:10,094
the future is, but also where the market is today on the higher end

477
00:30:10,094 --> 00:30:13,853
and more progressive and technology-driven businesses.

478
00:30:13,965 --> 00:30:17,466
And I would echo Dan's comment when we started here that

479
00:30:17,900 --> 00:30:21,127
the best businesses are ones that are started out of

480
00:30:21,175 --> 00:30:24,933
frustration in solving problems, and then scaling

481
00:30:24,965 --> 00:30:28,481
those to solve other people's problems is, you know, the best

482
00:30:28,481 --> 00:30:31,949
business models that are out there, regardless of whether it's AI or you write your

483
00:30:31,949 --> 00:30:35,385
own code or what have you. Like, solve the problem on the ground, put it

484
00:30:35,385 --> 00:30:39,111
into a technology system that can operate in a complex

485
00:30:39,111 --> 00:30:42,932
environment, and you guys have pulled that off so Congrats, and look forward to, uh,

486
00:30:42,948 --> 00:30:46,555
hopefully putting out some press releases with you in 2027.

487
00:30:47,057 --> 00:30:50,874
Yeah, thanks so much for having me. It's been great. Uh, and,

488
00:30:50,973 --> 00:30:52,634
uh, yeah, look forward to talking again soon.

489
00:30:57,683 --> 00:30:59,635
Awesome.

490
00:31:03,692 --> 00:31:07,394
This is Pete Moore on Halo Talks, your captain speaking. I am the

491
00:31:07,426 --> 00:31:11,081
founder and managing partner at Integrity Square. We've been around now

492
00:31:11,210 --> 00:31:14,624
for 15 and a half years. We have been helping

493
00:31:14,801 --> 00:31:18,103
people like yourselves get capital, do mergers and

494
00:31:18,103 --> 00:31:21,806
acquisitions, consulting, strategic advice in the health,

495
00:31:21,934 --> 00:31:25,653
active lifestyle, and outdoor halo sector, trying to help

496
00:31:25,653 --> 00:31:28,795
as many entrepreneurs as possible get to the next level,

497
00:31:29,549 --> 00:31:32,819
take that inflection point and be the force behind your growth.

498
00:31:33,643 --> 00:31:36,997
We are helping companies that have at least $3 million of

499
00:31:37,062 --> 00:31:40,887
EBITDA, around $10 million of revenue, and we

500
00:31:41,016 --> 00:31:44,137
are positioned to help you get institutional growth capital

501
00:31:44,881 --> 00:31:48,552
or to negotiate deals with strategic partners. If you go to

502
00:31:48,552 --> 00:31:52,388
integritysq.com/ISQ, you

503
00:31:52,388 --> 00:31:56,123
can see our capabilities deck. Happy to set up a consultation at any time

504
00:31:56,594 --> 00:31:59,757
that is free of charge, and we look forward to Thank you for helping

505
00:32:00,049 --> 00:32:03,586
solve obesity, loneliness, and diabetes. Go

506
00:32:03,602 --> 00:32:04,948
Halo!

507
00:32:07,878 --> 00:32:09,815
Thank you.