Episode #623: Reinventing Health Clubs-Recovery, Community, and Navigating Private Equity with Joe Cirulli

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

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back a good friend of mine and a legendary operator

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and owner in the industry straight out of Gainesville, Joe

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Cerulli. No additional info needed on your

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bio, you're well known in the space. Thanks for coming back on. I

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appreciate it very much. It's good to be talking to you guys again. I know

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it's been a while since we did it, uh, you years and years ago.

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Yeah, I think you were one of my first podcasts, so, you know, I was

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able to land you on the podcast, and that might have, you know, increased my

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visibility of Halo Talks. Thank you for that. Maybe. Yeah, maybe.

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Yeah, but that was, uh, that was over 7 years ago, um, and

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600 episodes, uh, later, we're back to, uh, to get your

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commentary here on, you know, where you've seen the industry. And,

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you know, you've obviously been a passionate operator,

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and, uh, you industry leader. So maybe just as a

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recap, since COVID how has

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the Gainesville operation kind of morphed into

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the next generation of what you have done here

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as services and programming?

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Well, we're always working on what's next.

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So one of the things I did at our main center

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was I put on an 11,000-square-foot addition

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to be able to offer other services and other

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boutiques inside of the center. At the same time,

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because of COVID I was— when we were closed, I was

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constantly outside trying to figure out how do I put some

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kind of outdoor training facility? And I

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realized I couldn't take away any of the parking lot, which just caused a

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problem. And I knew later. And, but I kept looking

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around And we have a 10,000-square-foot

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retention pond. And I called my contractor. I said,

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hey, could you contact the city to see if I could build over a retention

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pond? And they said I could, I could add

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6,000 square feet. So we had to put all the pilings in and

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everything else to hold the flooring

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just over the level of the water. Oh, wow. And so

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we were able to add a 6,000-square-foot outdoor facility,

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which really has been, been beneficial for all the

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different programs that we offer. And

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it allowed us to put in things like hot yoga that we hadn't had

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before. And when you start looking into what's happening in the

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world, and I'm still trying to grab a better handle

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on it, as part of the addition, I have

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3,000 square feet that I haven't developed yet.

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And I'm really leaning heavily toward

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everything associated with recovery between the hyperbaric chambers and the red light

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and the compression and the cryo. But before I

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spend a couple million dollars putting all that together,

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I want to learn more about what's happening with the people who have

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been doing those kind of things and how successful they've been at

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it, how they've marketed it, how they've designed the

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packages. Sunday, I'm going over to Italy

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to speak. And there's club owners from not only all over

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Europe, but Saudi Arabia and Vietnam. And I

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know some of them have added in recovery in a

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bigger way, not just the hydromassage tables like we have

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right now. So I want to talk with them

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because it's a lot better to learn from their mistakes than

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make my own. Yeah. So that's a critical

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area that we're working on. Some other things.

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Yeah, a couple of things related to recovery.

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So, we do mostly mergers and acquisitions, but we

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made a small investment in a company called HigherDOSE,

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which is an infrared sauna as well as

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red light therapy and electromagnetic field mats and other

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types of products. And, we got involved there back,

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I guess, about 9 years ago. And, we've seen

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that space explode. To your point about where that

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part of the industry is going, some of the success

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stories that we've been tracking and been involved in,

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in some capacity or did a podcast with somebody who's in the space,

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one of the groups is called Othership out of New York, which is

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basically put in a large infrared— Right.

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Put in a sauna that's basically could fit 50 to 100

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people and they basically do group classes in there. Wow.

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And then, there's a group called Remedy Place that has rooms that

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have multiple cold plunge. So, you basically could rent

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out the room. And, we've seen a

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3-person infrared sauna box that

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some groups including HigherDOSE took over hotels

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and set it up and basically rent it out by the hour. So, Yeah, there's

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definitely some interesting things of like the old bathhouse

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concept kind of coming back and making it, you know, not just individual

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use but like group, group community type of programming, which I think is

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super interesting. Yeah, what I'm

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interested in, in those different things, you know, we already have the

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saunas and the steam rooms and the cold plunges and the whirlpools and the

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pools and the warm pools. It's just part of the general membership.

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So the things I want to do in there would be the things we don't

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offer like the red light therapy beds and

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the PMFF, actually their beamer

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pads, which are the most popular, but all those

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different components. So since it's not a little

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space, I mean, 3,000 square feet is a pretty good-sized space

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for it. I'll have Rudy Fabiano design the space

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and then we'll go in and start learning what's

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really working because I know

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we could add a whole bunch of things. But it doesn't mean that the members

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are interested in those. So that's why I'm taking some more time to learn

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about it too and still working on some other expansions for our

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clubs. So one of the things that's interesting or

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that I find interesting about you is that you're on top of

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trends, but you don't necessarily need to be ahead of the trend. So actually

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seeing what other people are doing and then bringing that into your

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community, I think sometimes people might, you know,

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jump the shark, I think is one of the— Yeah, sure. Back in the day,

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Fonzie, I think, said that, you know, jumping the shark, you know. So

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as you kind of look at something and say, hey, I hear a lot about

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what's going on in Pilates, you know, but I don't have to do that tomorrow.

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I see recovery, but let it like mature a little more. How

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is that kind of framed how you operate and be more

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methodical about growth and CapEx versus saying

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like, Hey, I'm the first guy to have X. Like, maybe I don't need to

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be the first guy to do that. Well, some things

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I do want to be first at. Some things I don't need to be first

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at. I just need to be first in my area to do it. Right, exactly.

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And but like, as far as all the studios,

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you know, back in 2012, I don't know if I brought this back up

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in 2019 when we spoke, but I read this book called The New

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Rules of Retail. And it had to do— this is actually

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2011. It had to do with department stores stores and how they were getting

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killed by the boutiques, how they were taking a lot of the customers away.

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I actually called Rudy Fabiano, said, Rudy, I got to talk to you about this

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book. I said, because what's happening to department stores is going to be the same

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thing that happens to health clubs. I said, and I think if we can get

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this right, it'll change the way you design health clubs all over the world.

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So it just so happened I was asked to speak in London, and one day

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I was walking down the street and I walked into this store called Selfridges.

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which was a department store, has been rated the best in the world multiple times.

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Yeah. And when I went inside of it, I was just blown away

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because in this phenomenal store, they had stores, they had

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Gucci, Prada, they had all these different stores that could have been

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lifted and put on a street corner somewhere and they were complete stores. So

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I saw what I was thinking. And from there on out,

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we did a big expansion here. We built a number of

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boutiques inside of our facilities. And so they

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all have different fronts and everything. Different looks inside, but

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with that whole concept in place. In that area, I wanted to be

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first. And I pretty much think we were because I

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remember reading an article in like 2016 that talked

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about the new fad in health clubs is to add boutiques. And we are

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well ahead of the game. For this one, it's so new to our

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industry. I know there's still a lot to learn. I know how to design

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it. I know what I want it to look like. I know the equipment that

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we'll have, but I still wanna make sure I learn how the tiered

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membership goes for those areas. And what's been selling,

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what's slow, what's not slow. And so that's why I wanna learn

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more about that one before I jump into it.

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Yeah. I mean, there have been a number of workout

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recovery studio

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concepts that have franchised that I thought were going to be more

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successful than they were. I don't think they figured out the

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modalities the pricing, getting the traffic. And

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then, I started seeing some of them open up next door to

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health clubs. Right. Same shopping center and they're charging

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$149 or $199 to use an

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infrared sauna and a cold plunge. And then, the health

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club next door still charging $29 and an extra $10

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or something to use the recovery. I feel like the health clubs

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are should really recapture all that. If you're, if you're an expert at workout, you

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got to be an expert at workout recovery. Yeah, well, this will be designed

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right by our front door. So when they come in the front door, they can

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go to the right to get into the health club, or they'll have— they have

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double doors now, beautiful doors that are designed already in to go

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to the left. So it could even be easy for people who aren't members

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to come in, never have to go into the health club, but be able to

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go into this space also. Yeah. Have you— and I'm not

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familiar with the software you use, but do you have

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access control to certain areas, whether it's on an iPhone or whether it's a

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wristband or something? Or is that something you've looked at?

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Yeah, I don't think right now we do,

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but there's a lot of things we're doing right now with some of the top

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people in the world of technology to bring us up to

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date on all the different things that can be done. So I

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have some of the top people right now working with, with

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my general manager, who's also really good in that world.

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That's not my world, but it's his.

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And hooked up with the right 2, 2 phenomenal

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people in the AI world that can move us into

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getting whatever kind of information we need to get.

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Halo Talks is brought to you by Ice Miller, our proud

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Apparently, some people think downloading a contract counts as a

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legal strategy. Good luck with that. Your legal team is

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Ice Miller, icemiller.com. And thank you from your friends

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at Helo Talks and Integrity Square.

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I just have one question going back to what you said before, not Somewhat sarcastic,

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but did you ever think about doing like a glass-bottom boat over

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the retention pond and maybe like, you know,

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being like— Yeah. Could be an idea.

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Well, they probably wouldn't see anything too pretty when it's not a bunch of

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water in it. Oh, okay. They see everything that was thrown into it.

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So no, no, it's a big wood floor. Okay, good. Okay. Just

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have to cover that because it's gonna be on my mind. So

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how have you seen this whole proliferation of

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GLP-1 affect your business and view it

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as a benefactor to what you're doing and not as,

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you know, people not coming into the club? I know there's been a lot of

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talk about the magic pill. Yeah, first

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of all, I know a number of clubs have kind of brought that into their

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club. I have not brought it into the club. Okay. But we have,

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I have one of my therapists who has his master's in

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therapy, physical therapy, and he's very,

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very knowledgeable in that area. So we give

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seminars on it and the pros and the

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cons. And usually we'll give a seminar,

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there'll be 60 people who will show up for those. So I know

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they want to learn. Most of the people don't come in and

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say, I'm using it. I think most people kind of keep

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it private. Yeah. But I

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think we're— not just me, I think all the health clubs are

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benefactors of it because I look at anything where if a person starts

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improving in one area, they may want to start working on improving in other

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areas. And as far as the, um, as, as

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far as the losing the weight, I think it's

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out there pretty well about how, you know, almost half of it's going to be

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muscle if they don't do strength training. So I'm sure that's driven

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people into the club who are using it. Yeah, it is

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interesting that it's kind of a, um, a lot of people don't want to

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admit that they're on it. Yeah, of course. But it's such a

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noticeable difference. There was a friend of mine, I was— I met him, uh, about

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a year ago, and I hadn't seen him in a couple years, uh, in

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person. And, um, I thought he went to like, uh, Asia and got

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his eyes bigger, but he's actually— his face shrunk, so his eyes look bigger.

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I was like, I was just staring at him like, what is different about you?

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And I couldn't figure it out. It's like his face shrunk so much that I

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thought you had to go to Africa. I thought you had to go to Africa

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to make your head— I don't know. I think, I think if you just try—

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I just think if you take a flight to like Korea, you can get anything

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done with your face or your eyes. So that's right. Yeah, that's funny. He's

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like, no, no, man, I'm taking a GLP. So, uh, yeah, it was

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funny. I mean, first, you know, I think it's great for

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the people who are obese. I really

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do. I really do. But, you know, from what I heard

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statistically was the largest market of

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women, of people on GLP, was women between 35 and

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45 who were 10 pounds overweight. Yeah. So, I mean, that's kind

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of interesting, but that's what I heard. Yeah.

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It's the part that I find, you know, everything moves so

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quickly, you know, that people, you know, if we had this conversation about

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like putting like CoolSculpting, um, or, you know,

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body contouring. Like, I feel like GLP has kind of taken over

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that, you know, that, that modality. And, and,

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you know, body sculpting and, uh, CoolSculpting and

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contouring, um, now like the GLP kind of like takes that—

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is like the first entry point instead of that, uh, modality.

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Yeah, I think the world of plastic surgery has been doing well

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for a number of years now. Yeah, that's not going anywhere, that's for sure.

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Yep. Um, When you take a look at your personal training

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business and shout out to Andrew Levine because I know he got his training

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on the floor of Gainesville Athletic Clubs with you back in the day,

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how has personal training still been a big part of your business?

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And, have you seen that behavior change at all

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whether it's 30 versus 60-minute sessions or on

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EFT versus packs? What have you seen as the

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trends there? Well, I think everything pretty much is a package that

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automatically Renews the way that they're set up.

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You know, obviously right after COVID, boy, personal training

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took a massive hit. I mean, massive.

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And then, you know, it'd stay at that level,

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then go up a little bit, stay at that level, go up a little bit.

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And now we're back to where we were pre-COVID.

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So it's a pretty, it's a pretty good part of our, of our

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programming. What's the biggest program unto itself.

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If you look at it revenue-wise, all the other programs—

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Pilates, X-Force Body, CrossFit— all those

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programs combined, and this was my goal, was to get those

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equal to what personal training is. And we've, and we've done

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that. So, um, but I, you know,

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even though I know the— there was a lot of talk about the 30-minute

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sessions in a lot of places, they're very successful.

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We have them. I don't think it's the most

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used component of our personal training program. I

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still think most people go for close to an hour for

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whatever reason they do. And even though

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we'll promote the other programs, what I've seen

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is they still stick with the hour-long program. And I know a

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lot of them, a lot of the members just like being with the instructors

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for that, for that full hour.

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Yep. And then in closing here, I want to appreciate all

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your time and thoughts here. When we had the

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original conversation on the podcast, you

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kind of mentioned there was a story about a private equity

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investor that came in and toured around with you and started saying

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things like, so Joe, how many boxes can you stamp out? And you said

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like, hey, this isn't a box. Like, I live in here. Like, I built this

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thing. Yeah. How— yeah, nothing's

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changed. It's— those actually were the

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Q Clubs back then, which were— Oh, yeah, of course. Good clubs. Great clubs.

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But when they were showing me, because they wanted me to become part of their

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company, and when they were showing me all the

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locations and they just made the comment, we're putting a box here, we're

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putting a box here and putting a box here. I was just thinking, I

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don't work in a box. I mean, we have heavy connections. We

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have heavy connections, you know, with our— with my staff,

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with, with the members in all 3 locations. And

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we— and since then, we've also opened 2 boutique locations

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down in the Tampa area. And I have a girl named Ileana

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Stojlova who runs those, who's incredible. And when you

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talk about standards and connectivity, it's

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humongous with her too. So that's

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That's, that's who I am as a business person, not just

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growing.

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This is Pete Moore, and I've got another secret for you.

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What if your gym's biggest growth opportunity isn't another marketing

312
00:19:28,358 --> 00:19:32,073
campaign, but the relationships you already have happening on

313
00:19:32,073 --> 00:19:35,533
your gym or club floor? That's the new idea

314
00:19:35,614 --> 00:19:39,086
behind Promotion Vault. Their platform, which is called

315
00:19:39,086 --> 00:19:42,677
Playbook, helps fitness operators turn everyday staff and

316
00:19:42,773 --> 00:19:46,588
member interactions into more memberships, referrals, purchases,

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00:19:47,085 --> 00:19:50,852
and repeat visits. How does this work, you may ask? Your staff

318
00:19:50,852 --> 00:19:54,572
invites someone to take an action. Playbook makes it engaging

319
00:19:54,620 --> 00:19:58,371
with games, challenges, and meaningful rewards. When that

320
00:19:58,467 --> 00:20:02,042
action is verified, whether it's a visit, a referral, a

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00:20:02,154 --> 00:20:05,943
purchase, a PT session, the reward is earned and the

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00:20:05,943 --> 00:20:09,202
next opportunity begins. Think of it as Candyland,

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00:20:09,732 --> 00:20:13,473
or think of it as a scavenger hunt. Members can track their

324
00:20:13,473 --> 00:20:17,198
rewards, milestones, and goals in their own branded

325
00:20:17,342 --> 00:20:21,164
rewards vault. And for operators, no setup fees, no

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00:20:21,196 --> 00:20:24,937
monthly platform subscriptions. And with eligible gift card rewards,

327
00:20:24,969 --> 00:20:28,759
you only pay the rewards face value when someone claims it. and a

328
00:20:28,759 --> 00:20:32,449
small service fee to Pivotal. Turn your gym floor into the

329
00:20:32,449 --> 00:20:36,204
CRM that you know it deserves, and let's turn

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00:20:36,398 --> 00:20:39,945
in real life human connections into how you

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00:20:40,043 --> 00:20:43,678
profit and how you create real communities. Go Pivotal,

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00:20:44,210 --> 00:20:45,824
go Playbook, go Halo.

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00:20:50,330 --> 00:20:53,950
So as like a, uh, you know, word of advice or,

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00:20:54,386 --> 00:20:57,877
you know, you know, uh, takeaway to, to an independent

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operator, who's got really strong community ties,

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00:21:02,761 --> 00:21:06,438
has got operations that are best in class in

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00:21:06,534 --> 00:21:09,199
their city or in their DMA.

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00:21:10,564 --> 00:21:14,048
What do you say to those groups to say, hey, look, these guys are going

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00:21:14,048 --> 00:21:17,822
to call you every week to try and buy your business. That's just

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00:21:17,950 --> 00:21:21,643
noise. Just keep doing what you're doing. Put your head down. Or what are

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00:21:21,643 --> 00:21:25,061
some of the things that you've kind of taken away from this Like influx of

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00:21:25,077 --> 00:21:28,826
capital, but maybe not influx of attitude or mindset.

343
00:21:29,082 --> 00:21:32,927
Yeah, I think it's up to the individual. Like with me, even as long as

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I've been doing it, I still love doing it. You know, I've never lost my

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00:21:36,051 --> 00:21:39,896
love for it. I still love— I never lost my love for helping build

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the staff or for helping the members. I just never have.

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So, I mean, when I've had people come in who want to buy me, I

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00:21:48,483 --> 00:21:51,414
pretty much tell them the same thing I may have said back in

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2019 is, you know, you can give me as much money as you want.

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But I can only hang out at Starbucks for so long, you

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00:21:59,704 --> 00:22:03,444
know? Yeah. Yeah. I mean, I feel— I mean, I

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00:22:03,556 --> 00:22:07,263
don't feel— I know I have a purpose here. I know I have a purpose

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and all my staff does, you know, in our community. I mean, I

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00:22:11,340 --> 00:22:15,015
hear it from the members, you know, all the

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time. I mean, I walked in the other day and there was a girl and

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a guy on different sides of a table, and I walked in and

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And this girl goes, we love you, Joe. I say, good

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00:22:26,014 --> 00:22:29,420
morning. And the guy on the other side goes, we all love you, Joe.

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And the whole reason I do this,

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if you look at like why we even exist as a company,

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we know the first part of that, of that why

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00:22:42,099 --> 00:22:45,907
statement is to create an environment where people

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want to be. And I think we've done a fairly good

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job that people want to be here because I told my

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staff, if they don't want to be here, if they don't enjoy being here, we

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can never inspire them to become their best, which is the

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00:23:00,539 --> 00:23:04,260
second part of why we exist. So, I mean, I know

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the money is tempting, and if somebody is ready to get out, like a good

369
00:23:07,147 --> 00:23:10,724
friend of mine just sold his clubs up in New

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00:23:10,724 --> 00:23:14,558
York, outside of New York, and it's because his wife had gotten

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sick. And he realized, I need to spend my time with her.

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So it worked with him. But the funny thing is, the new owner's

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00:23:22,144 --> 00:23:25,031
a great guy. They were just down here last week.

374
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And one of the great things about it is,

375
00:23:29,971 --> 00:23:33,692
yeah, Mike's always welcome to come back into the club. And I just,

376
00:23:33,916 --> 00:23:37,477
I looked and talked to Mike. I said, Mike, you're in your club more

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00:23:37,541 --> 00:23:41,118
now than you were when you actually owned it. Right.

378
00:23:41,214 --> 00:23:44,775
So he just wants, he still wants to be part of it. And I

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00:23:45,048 --> 00:23:48,824
understand that. So I think once again, if you still love what

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00:23:48,824 --> 00:23:52,150
you do, you know, you can sell it and you can be part of something

381
00:23:52,198 --> 00:23:55,942
else. But as soon as you own less than 50% of your business,

382
00:23:57,356 --> 00:24:00,714
it ain't gonna be the same for you. Yeah, yeah. And when I look at

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00:24:00,714 --> 00:24:03,863
somebody coming in to buy me, I mean, I look, first of all, what would

384
00:24:03,863 --> 00:24:07,125
they do to my staff? 'Cause I know, I mean, I have, I mean, one

385
00:24:07,173 --> 00:24:10,499
of my salesgirls been with me 49 years and she's phenomenal.

386
00:24:11,297 --> 00:24:14,958
And I have a lot of employees who've been with me 35, 40, 45

387
00:24:14,991 --> 00:24:18,816
years. And I can't imagine what a new company would do coming

388
00:24:18,832 --> 00:24:22,019
in to get rid of them after everything they've done to help build us as

389
00:24:22,019 --> 00:24:25,513
a company. And then what they could do to the membership.

390
00:24:27,710 --> 00:24:31,157
There's just so many members who come here because

391
00:24:31,416 --> 00:24:35,203
it's a huge part of their life. Yeah. It's not just coming

392
00:24:35,235 --> 00:24:38,933
to the gym. It's a huge part of their life. So that scares me.

393
00:24:39,180 --> 00:24:42,667
You know, more than anything of what they could do to it. So since I

394
00:24:42,667 --> 00:24:45,351
still have the passion for it, I still want to make it better. There's still

395
00:24:45,399 --> 00:24:49,143
things I need— I'm, I'm working on getting done. We'll

396
00:24:49,255 --> 00:24:52,887
keep doing— we'll keep doing what we're doing. Yeah, I tell people when

397
00:24:52,935 --> 00:24:56,711
they, uh, when they ask me how the— how a sale process

398
00:24:56,711 --> 00:25:00,182
goes, I try and give them the, uh, the full scope of what the

399
00:25:00,182 --> 00:25:03,765
potential outcomes are. And, um, you know, you got to go in

400
00:25:03,942 --> 00:25:07,316
eyes wide open. And when someone's trying to buy your

401
00:25:07,333 --> 00:25:11,012
business, they are also marketing to you and

402
00:25:11,028 --> 00:25:14,740
not necessarily obligating themselves to,

403
00:25:15,351 --> 00:25:19,030
you know, the way that they'll operate the business. So, well, appreciate everything

404
00:25:19,046 --> 00:25:22,678
you've done in the industry. Good to see you again. It's good to

405
00:25:22,678 --> 00:25:25,811
see you guys too. Yeah, look forward to seeing how you

406
00:25:26,357 --> 00:25:30,085
put your recovery platform in place and appreciate

407
00:25:30,085 --> 00:25:33,880
everything. that you do for everyone, being a leader in the industry, not

408
00:25:33,880 --> 00:25:37,100
just, you know, as an operator

409
00:25:37,100 --> 00:25:40,880
of high-end clubs, but also, you know, the integrity

410
00:25:40,880 --> 00:25:44,460
you work with. So appreciate that. Well, thank you very much. Just gimme a call

411
00:25:44,460 --> 00:25:47,105
back in 7 years and we can do it again. Yeah, no problem. We can

412
00:25:47,105 --> 00:25:50,520
stay right on screen. Happy to do it. All right, take care. See you, buddy.

413
00:25:50,620 --> 00:25:52,940
Hey, you guys. Thanks. Bye-bye. Talk to you soon.

414
00:25:59,132 --> 00:26:02,664
This is Pete Moore on Halo Talks, your captain speaking. I am the

415
00:26:02,664 --> 00:26:06,470
founder and managing partner at Integrity Square. We've been around now

416
00:26:06,598 --> 00:26:10,018
for 15 and a half years. We have been helping

417
00:26:10,131 --> 00:26:13,486
people like yourselves get capital, do mergers and

418
00:26:13,486 --> 00:26:17,163
acquisitions, consulting, strategic advice in the health,

419
00:26:17,340 --> 00:26:21,161
active lifestyle, and outdoor halo sector, trying to help as

420
00:26:21,274 --> 00:26:25,041
many entrepreneurs as possible get to the next level, take

421
00:26:25,041 --> 00:26:28,147
that inflection point and be the force behind your growth.

422
00:26:29,040 --> 00:26:32,872
We are helping companies that have at least $3 million of EBITDA,

423
00:26:33,454 --> 00:26:37,109
around $10 million of revenue, and we are positioned to

424
00:26:37,125 --> 00:26:40,811
help you get institutional growth capital or to

425
00:26:40,811 --> 00:26:44,431
negotiate deals with strategic partners. If you go to integritysq.com/ISV,

426
00:26:47,418 --> 00:26:51,039
Here you can see our capabilities deck. Happy to set up a consultation at any

427
00:26:51,119 --> 00:26:54,732
time. That is free of charge, and we look forward to

428
00:26:54,732 --> 00:26:58,425
helping solve obesity, loneliness, and diabetes.

429
00:26:58,762 --> 00:27:00,737
Go Halo!