July 17, 2025
HALO Talks Fast Break: Navigating Franchise Growth-Greenfields, Acquisitions, and Scaling Fitness Brands with Private Equity
In today's Fast Break we're excited to bring you (a snippet) of our panel discussion at the recent Athletech Innovators Summit held in NYC, July 2025. Integrity Square Founder and HALO Talks host Pete Moore moderated a panel with Mark Federico (CEO of Fitness Holdings/Crunch Fitness) and Terry Blachek (Orange Theory Fitness) for a deep dive into the real-world challenges—and strategies—of scaling fitness franchises.
Mark Federico's Growth Playbook
- Mark walked us through his journey, from running a nine-club independent brand to leading a 50+ club Crunch Fitness operation across 10 states.
- He shed light on the big question: Build new locations (greenfields) or buy existing ones (acquisitions)? He shared the calculus behind each approach, breaking down real cost factors and explaining why "development space" is critical for franchisees.
Franchise Valuation—Not All Clubs Are Created Equal
- Many single-gym owners want "big company" multiples, but Mark explained why scale, growth runway, and strategic value make a huge difference in valuation.
- Pro tip: Buying a single club isn't the same as absorbing a whole region. If you want premium pricing, bring growth potential to the table.
Financing Franchise Expansion
- Terry opened up about the risks and strategies he used to finance Orange Theory locations, including SBA loans, finding investor partners, and personally guaranteeing leases.
- They discussed what it really takes to stand behind a business—sometimes with tens of millions in personal guarantees—long before private equity gets involved.
The Realities (and Rewards) of Entrepreneurship
- Both guests emphasized the massive personal and financial risks entrepreneurs take to build these fitness empires. Pete made an important point: These risks deserve respect and reward, not scorn.
Bonus Insight: The "Microwave vs. Crockpot" Growth Model
- Terry shared Orange Theory's approach to expansion, balancing rapid growth with careful, sustainable development. If you're a franchisor or area developer, this is a must-hear perspective.
Want to learn more? (You should. Otherwise you're playing checkers while the rest of the industry plays chess.)
Give us 10 hours of your time at the next HALO Academy starting Sept 8, 2025. Register at https://www.thehaloacademy.com now for $495 and earn a $100 gift card from our friends at Promotion Vault. Testimonials at https://www.thehaloacademy.com/testimonials
==================================================
Thanks to Promotion Vault and HigherDose for sponsoring. For 15% off products sitewide (excluding bundles, kits, and full saunas) use the code GOHALO at https://www.higherdose.com
Resources
- Athletech News: https://athletechnews.com
- Mark Federico: https://www.linkedin.com/in/mark-federico-163069182
- Terry Blachek: https://www.linkedin.com/in/terry-blachek-78431a174
- Orange Theory Fitness: https://www.orangetheory.com
- Crunch Fitness: https://www.crunchfitness.com
Transcript
1
00:00:00,320 --> 00:00:04,160
So Mark, maybe take a couple of minutes and explain to everybody
2
00:00:04,560 --> 00:00:08,080
when you started with the Crunch what you built and then
3
00:00:08,240 --> 00:00:12,040
how do you think about greenfields versus acquisitions as you build out the platform with
4
00:00:12,040 --> 00:00:15,600
your private equity partner? Sure. So I joined Crunch
5
00:00:15,600 --> 00:00:19,400
fitness back in 2018. Prior to that I owned a small independent
6
00:00:19,400 --> 00:00:23,120
brand. We had about nine clubs, which I had only sold two Fitness
7
00:00:23,120 --> 00:00:26,960
holdings at the time. Fitness holdings had about eight clubs.
8
00:00:27,200 --> 00:00:31,000
They were one of the early fitness franchise groups within the
9
00:00:31,000 --> 00:00:34,800
Crunch system. And so I kind of looked at it coming
10
00:00:34,800 --> 00:00:38,600
from the northeast, dealing with Planet Fitness. Crunch
11
00:00:38,600 --> 00:00:42,360
started to make their ways blink. Fitness was making their waves and as an independent
12
00:00:42,360 --> 00:00:45,640
operator I just said, you know what, I think I better join them than keep
13
00:00:45,640 --> 00:00:48,560
trying to fight them. And so I ended up ultimately sold
14
00:00:49,680 --> 00:00:53,320
to Fitness holdings and joined Crunch. And at the time I looked at it as
15
00:00:53,320 --> 00:00:56,840
maybe a one or two year old rest invest
16
00:00:57,000 --> 00:01:00,600
period. You know, as we migrated from our
17
00:01:00,600 --> 00:01:04,280
train into the, the Crunch ecosystem. Fast forward
18
00:01:04,600 --> 00:01:08,200
2020 comes along, Covid strikes and our
19
00:01:08,360 --> 00:01:11,480
PE firm decided they wanted to make some changes with the management team
20
00:01:12,040 --> 00:01:15,640
and ultimately I became the CEO and you know, back,
21
00:01:15,640 --> 00:01:19,320
you know, took over probably in 21. And we had probably about
22
00:01:19,320 --> 00:01:23,080
20 to 22 clubs at that time. And obviously since that time you can
23
00:01:23,080 --> 00:01:26,700
see our territory, we've grown. We currently have about 52
24
00:01:26,700 --> 00:01:30,500
locations, we're in 10 states and our
25
00:01:30,500 --> 00:01:33,740
goal is to really grow from the 50 that we're at today to
26
00:01:33,980 --> 00:01:37,780
100, 150 with the development rates that we have growing
27
00:01:37,780 --> 00:01:40,700
from Tennessee all the way up to Maine, Vermont.
28
00:01:41,580 --> 00:01:45,220
So I'm going to go back two slides here and let's take a look at
29
00:01:45,220 --> 00:01:48,620
this. A lot of the Crunch logos that are in the top left hand corner
30
00:01:48,940 --> 00:01:52,640
are all ARI developers. So the way an area developer agreement works
31
00:01:52,640 --> 00:01:55,920
for everyone's knowledge here in Crunch is you get a territory,
32
00:01:56,240 --> 00:02:00,080
you pay a fee to own the exclusive rights to that territory
33
00:02:00,320 --> 00:02:04,160
and you can't sub franchise it. You actually have to build and hit milestones
34
00:02:04,160 --> 00:02:08,000
on your own in order to keep that exclusivity. So
35
00:02:08,080 --> 00:02:11,880
Mark, when you take a look at trying to potentially do acquisitions and
36
00:02:11,880 --> 00:02:15,520
you and I have done a couple and somebody knows, hey, I heard that the
37
00:02:15,520 --> 00:02:19,150
Crunch area developers are trading at 9 to 11
38
00:02:19,150 --> 00:02:22,990
times EBITDA. I've got one club in South Jersey. How about you
39
00:02:22,990 --> 00:02:26,750
pay me 9 to 11 times my club level EBITDA? Yeah, we get that
40
00:02:26,750 --> 00:02:30,230
a lot. Especially when we do like roll ups of other, you know, smaller Crunch
41
00:02:30,230 --> 00:02:34,070
clubs. And, and I think, you know, ultimately it
42
00:02:34,070 --> 00:02:37,910
comes down to having a real conversation. And you know, and I like to
43
00:02:37,910 --> 00:02:41,670
say is that, hey, we're not the same. I know we both have crunches and
44
00:02:41,670 --> 00:02:44,310
you see some of these crunches that are trading at 10x.
45
00:02:45,460 --> 00:02:48,260
But you know, you're a single operator, you have one club, you don't have a
46
00:02:48,260 --> 00:02:51,780
lot of development space. I think development space is key, especially in the
47
00:02:51,780 --> 00:02:55,620
franchise system in terms of how much can you grow. And you
48
00:02:55,620 --> 00:02:59,140
know, ultimately it's a, sometimes a tough conversation to say, hey, look, you know, we're
49
00:02:59,140 --> 00:03:02,980
a hundred million dollar company, $20 million of profit, we have room to grow to
50
00:03:02,980 --> 00:03:06,340
150 locations, you're a single club or two
51
00:03:06,340 --> 00:03:08,900
clubs, you don't really have a lot of Runway.
52
00:03:10,340 --> 00:03:13,860
We're not the same. But again, this is a good return on your investment.
53
00:03:14,020 --> 00:03:17,340
And so when we're looking at, I mean, one of the big discussion points that
54
00:03:17,340 --> 00:03:20,980
we have, obviously when we're looking at an acquisition is strategic.
55
00:03:21,620 --> 00:03:25,020
What does this mean and do we want to go into this market and what
56
00:03:25,020 --> 00:03:28,780
does that open up to us? Right. Obviously the ability to take a
57
00:03:28,780 --> 00:03:32,500
competitor out of our space is huge. Right. I mean, at the end of the
58
00:03:32,500 --> 00:03:35,980
day, we all think we're going to open this brand new shiny club and everyone's
59
00:03:35,980 --> 00:03:39,660
going to migrate from this gym to our gym. But the reality is that's not
60
00:03:39,660 --> 00:03:43,100
always the case. And so, you know, the ability to take a
61
00:03:43,100 --> 00:03:46,340
competitor out is definitely something that goes into the equation.
62
00:03:47,300 --> 00:03:51,020
But yeah, you also have kind of the build versus buy, you know,
63
00:03:51,020 --> 00:03:53,380
so you have to do that math and say, all right, if I'm going to
64
00:03:53,380 --> 00:03:56,580
buy this club and it's going to cost me 2 million to buy the club.
65
00:03:57,460 --> 00:04:00,940
And then you know, obviously as a, as a franchise, we have
66
00:04:00,940 --> 00:04:03,940
branding that we need to do. We have to, you know, certain things that we'll
67
00:04:03,940 --> 00:04:07,440
have to rebrand. New signage, new equipment, new amenities,
68
00:04:07,760 --> 00:04:10,800
all of that stuff. So if I look at that and I say, well, it's
69
00:04:10,800 --> 00:04:14,400
going to cost me another 2 million to rebrand it. Now I'm at 4 million.
70
00:04:15,840 --> 00:04:18,520
Well, heck, I could go build a brand new club for two and a half
71
00:04:18,520 --> 00:04:22,360
million. And so, you know, that definitely becomes that calculus of
72
00:04:22,360 --> 00:04:25,120
build versus buy that you have to take into effect. So one of the things
73
00:04:25,120 --> 00:04:28,920
I did was how do you finance a deal, right? So if you
74
00:04:28,920 --> 00:04:32,120
take a look, it's a million dollars, say it's a million dollars to open up
75
00:04:32,120 --> 00:04:35,720
a store for Orange Theory Fitness. How do you finance that
76
00:04:35,720 --> 00:04:39,560
if you don't have a million dollars? Right. So certainly SBA loans were
77
00:04:39,560 --> 00:04:43,080
a piece of that if I didn't have the rest of the cash, I would
78
00:04:43,080 --> 00:04:46,400
go out and find a partner or two partners to put some cash in.
79
00:04:46,640 --> 00:04:50,360
And remember that what I brought to the table was the expertise. So I had
80
00:04:50,360 --> 00:04:52,960
to put a little bit of cash in. They had to put more cash in.
81
00:04:53,040 --> 00:04:56,840
But I brought the expertise to the table. And then I would typically sign
82
00:04:56,840 --> 00:05:00,560
a guarantee for the lease and I personally then would
83
00:05:00,560 --> 00:05:04,400
guarantee the equipment lease. Right. And so that's how I would
84
00:05:04,400 --> 00:05:07,760
finance. Then we would get some ti money back of course from the landlord, but
85
00:05:07,760 --> 00:05:11,360
that's how I would finance. But I, I mean I was on the line until
86
00:05:11,360 --> 00:05:15,000
we did the private equity deal. Pete. I personally was on the line for,
87
00:05:15,080 --> 00:05:18,920
you know, 15, 20 locations with 10 year leases. I mean it was a lot.
88
00:05:18,920 --> 00:05:22,760
Do the math. So people know $20 million? Yeah, I mean it's,
89
00:05:22,760 --> 00:05:26,600
it was every bit of that. I mean I, yeah, I mean, yeah,
90
00:05:26,760 --> 00:05:29,930
our leases will be anywhere from, you know, 30, 30 to
91
00:05:29,930 --> 00:05:33,330
50,000amonth and you have a 10 year loan. So each new
92
00:05:33,410 --> 00:05:36,530
location might be, you know, 3 to 5 million dollars.
93
00:05:37,010 --> 00:05:40,730
Yeah, so. So as you add up and being an entrepreneur and then
94
00:05:40,730 --> 00:05:44,450
when, you know, I hear certain people saying like we should tax more, you know,
95
00:05:44,450 --> 00:05:48,090
small businesses or we should go after people that make money. The amount of risk
96
00:05:48,090 --> 00:05:51,850
that's taken to build a business is so extreme to create the jobs that
97
00:05:51,850 --> 00:05:55,490
are being created that it should be rewarded at the end and not
98
00:05:56,100 --> 00:05:59,700
vilified. The one thing I want to talk about related to
99
00:05:59,860 --> 00:06:03,620
Orange Theory, when you, I used to ask you on your, when we
100
00:06:03,620 --> 00:06:07,300
did a deal with, with Clearlight, you had a saying of, they said,
101
00:06:07,300 --> 00:06:10,820
hey, how fast can you grow? And you gave your, your, your, your
102
00:06:10,820 --> 00:06:14,340
microwave crock pot. If you could kind of talk about that quote, which I love.
103
00:06:14,420 --> 00:06:17,340
Yes, I, I think, you know, when you talk about. One of the things we
104
00:06:17,340 --> 00:06:20,900
were talking about also is, and I think there was a earlier conversation of
105
00:06:20,980 --> 00:06:24,830
how many stores do you own versus in our model, the franchise model is the
106
00:06:24,830 --> 00:06:28,510
franchisor, an area developer and a franchisee. As an area developer,
107
00:06:28,510 --> 00:06:32,270
we have the option to sell or sell additional.
108
00:06:32,270 --> 00:06:35,550
We call them sub Zs or sub franchises within a given market
109
00:06:35,550 --> 00:06:39,309
territory. So what's the ratio? If you look at that up there,
110
00:06:39,309 --> 00:06:43,150
you probably see about 133 locations that were under my
111
00:06:43,150 --> 00:06:46,750
umbrella. I owned about 50% of those. But that wasn't originally the
112
00:06:46,750 --> 00:06:50,380
goal. Their goal was to actually own about 2/3 of them. And then all of
113
00:06:50,380 --> 00:06:54,100
a sudden what happened is from 2015 through 2019, there was
114
00:06:54,100 --> 00:06:57,460
this frenzy going on around Orange Theory Fitness, and everybody was
115
00:06:57,460 --> 00:06:58,380
bombarding me.
00:00:00,320 --> 00:00:04,160
So Mark, maybe take a couple of minutes and explain to everybody
2
00:00:04,560 --> 00:00:08,080
when you started with the Crunch what you built and then
3
00:00:08,240 --> 00:00:12,040
how do you think about greenfields versus acquisitions as you build out the platform with
4
00:00:12,040 --> 00:00:15,600
your private equity partner? Sure. So I joined Crunch
5
00:00:15,600 --> 00:00:19,400
fitness back in 2018. Prior to that I owned a small independent
6
00:00:19,400 --> 00:00:23,120
brand. We had about nine clubs, which I had only sold two Fitness
7
00:00:23,120 --> 00:00:26,960
holdings at the time. Fitness holdings had about eight clubs.
8
00:00:27,200 --> 00:00:31,000
They were one of the early fitness franchise groups within the
9
00:00:31,000 --> 00:00:34,800
Crunch system. And so I kind of looked at it coming
10
00:00:34,800 --> 00:00:38,600
from the northeast, dealing with Planet Fitness. Crunch
11
00:00:38,600 --> 00:00:42,360
started to make their ways blink. Fitness was making their waves and as an independent
12
00:00:42,360 --> 00:00:45,640
operator I just said, you know what, I think I better join them than keep
13
00:00:45,640 --> 00:00:48,560
trying to fight them. And so I ended up ultimately sold
14
00:00:49,680 --> 00:00:53,320
to Fitness holdings and joined Crunch. And at the time I looked at it as
15
00:00:53,320 --> 00:00:56,840
maybe a one or two year old rest invest
16
00:00:57,000 --> 00:01:00,600
period. You know, as we migrated from our
17
00:01:00,600 --> 00:01:04,280
train into the, the Crunch ecosystem. Fast forward
18
00:01:04,600 --> 00:01:08,200
2020 comes along, Covid strikes and our
19
00:01:08,360 --> 00:01:11,480
PE firm decided they wanted to make some changes with the management team
20
00:01:12,040 --> 00:01:15,640
and ultimately I became the CEO and you know, back,
21
00:01:15,640 --> 00:01:19,320
you know, took over probably in 21. And we had probably about
22
00:01:19,320 --> 00:01:23,080
20 to 22 clubs at that time. And obviously since that time you can
23
00:01:23,080 --> 00:01:26,700
see our territory, we've grown. We currently have about 52
24
00:01:26,700 --> 00:01:30,500
locations, we're in 10 states and our
25
00:01:30,500 --> 00:01:33,740
goal is to really grow from the 50 that we're at today to
26
00:01:33,980 --> 00:01:37,780
100, 150 with the development rates that we have growing
27
00:01:37,780 --> 00:01:40,700
from Tennessee all the way up to Maine, Vermont.
28
00:01:41,580 --> 00:01:45,220
So I'm going to go back two slides here and let's take a look at
29
00:01:45,220 --> 00:01:48,620
this. A lot of the Crunch logos that are in the top left hand corner
30
00:01:48,940 --> 00:01:52,640
are all ARI developers. So the way an area developer agreement works
31
00:01:52,640 --> 00:01:55,920
for everyone's knowledge here in Crunch is you get a territory,
32
00:01:56,240 --> 00:02:00,080
you pay a fee to own the exclusive rights to that territory
33
00:02:00,320 --> 00:02:04,160
and you can't sub franchise it. You actually have to build and hit milestones
34
00:02:04,160 --> 00:02:08,000
on your own in order to keep that exclusivity. So
35
00:02:08,080 --> 00:02:11,880
Mark, when you take a look at trying to potentially do acquisitions and
36
00:02:11,880 --> 00:02:15,520
you and I have done a couple and somebody knows, hey, I heard that the
37
00:02:15,520 --> 00:02:19,150
Crunch area developers are trading at 9 to 11
38
00:02:19,150 --> 00:02:22,990
times EBITDA. I've got one club in South Jersey. How about you
39
00:02:22,990 --> 00:02:26,750
pay me 9 to 11 times my club level EBITDA? Yeah, we get that
40
00:02:26,750 --> 00:02:30,230
a lot. Especially when we do like roll ups of other, you know, smaller Crunch
41
00:02:30,230 --> 00:02:34,070
clubs. And, and I think, you know, ultimately it
42
00:02:34,070 --> 00:02:37,910
comes down to having a real conversation. And you know, and I like to
43
00:02:37,910 --> 00:02:41,670
say is that, hey, we're not the same. I know we both have crunches and
44
00:02:41,670 --> 00:02:44,310
you see some of these crunches that are trading at 10x.
45
00:02:45,460 --> 00:02:48,260
But you know, you're a single operator, you have one club, you don't have a
46
00:02:48,260 --> 00:02:51,780
lot of development space. I think development space is key, especially in the
47
00:02:51,780 --> 00:02:55,620
franchise system in terms of how much can you grow. And you
48
00:02:55,620 --> 00:02:59,140
know, ultimately it's a, sometimes a tough conversation to say, hey, look, you know, we're
49
00:02:59,140 --> 00:03:02,980
a hundred million dollar company, $20 million of profit, we have room to grow to
50
00:03:02,980 --> 00:03:06,340
150 locations, you're a single club or two
51
00:03:06,340 --> 00:03:08,900
clubs, you don't really have a lot of Runway.
52
00:03:10,340 --> 00:03:13,860
We're not the same. But again, this is a good return on your investment.
53
00:03:14,020 --> 00:03:17,340
And so when we're looking at, I mean, one of the big discussion points that
54
00:03:17,340 --> 00:03:20,980
we have, obviously when we're looking at an acquisition is strategic.
55
00:03:21,620 --> 00:03:25,020
What does this mean and do we want to go into this market and what
56
00:03:25,020 --> 00:03:28,780
does that open up to us? Right. Obviously the ability to take a
57
00:03:28,780 --> 00:03:32,500
competitor out of our space is huge. Right. I mean, at the end of the
58
00:03:32,500 --> 00:03:35,980
day, we all think we're going to open this brand new shiny club and everyone's
59
00:03:35,980 --> 00:03:39,660
going to migrate from this gym to our gym. But the reality is that's not
60
00:03:39,660 --> 00:03:43,100
always the case. And so, you know, the ability to take a
61
00:03:43,100 --> 00:03:46,340
competitor out is definitely something that goes into the equation.
62
00:03:47,300 --> 00:03:51,020
But yeah, you also have kind of the build versus buy, you know,
63
00:03:51,020 --> 00:03:53,380
so you have to do that math and say, all right, if I'm going to
64
00:03:53,380 --> 00:03:56,580
buy this club and it's going to cost me 2 million to buy the club.
65
00:03:57,460 --> 00:04:00,940
And then you know, obviously as a, as a franchise, we have
66
00:04:00,940 --> 00:04:03,940
branding that we need to do. We have to, you know, certain things that we'll
67
00:04:03,940 --> 00:04:07,440
have to rebrand. New signage, new equipment, new amenities,
68
00:04:07,760 --> 00:04:10,800
all of that stuff. So if I look at that and I say, well, it's
69
00:04:10,800 --> 00:04:14,400
going to cost me another 2 million to rebrand it. Now I'm at 4 million.
70
00:04:15,840 --> 00:04:18,520
Well, heck, I could go build a brand new club for two and a half
71
00:04:18,520 --> 00:04:22,360
million. And so, you know, that definitely becomes that calculus of
72
00:04:22,360 --> 00:04:25,120
build versus buy that you have to take into effect. So one of the things
73
00:04:25,120 --> 00:04:28,920
I did was how do you finance a deal, right? So if you
74
00:04:28,920 --> 00:04:32,120
take a look, it's a million dollars, say it's a million dollars to open up
75
00:04:32,120 --> 00:04:35,720
a store for Orange Theory Fitness. How do you finance that
76
00:04:35,720 --> 00:04:39,560
if you don't have a million dollars? Right. So certainly SBA loans were
77
00:04:39,560 --> 00:04:43,080
a piece of that if I didn't have the rest of the cash, I would
78
00:04:43,080 --> 00:04:46,400
go out and find a partner or two partners to put some cash in.
79
00:04:46,640 --> 00:04:50,360
And remember that what I brought to the table was the expertise. So I had
80
00:04:50,360 --> 00:04:52,960
to put a little bit of cash in. They had to put more cash in.
81
00:04:53,040 --> 00:04:56,840
But I brought the expertise to the table. And then I would typically sign
82
00:04:56,840 --> 00:05:00,560
a guarantee for the lease and I personally then would
83
00:05:00,560 --> 00:05:04,400
guarantee the equipment lease. Right. And so that's how I would
84
00:05:04,400 --> 00:05:07,760
finance. Then we would get some ti money back of course from the landlord, but
85
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that's how I would finance. But I, I mean I was on the line until
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we did the private equity deal. Pete. I personally was on the line for,
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you know, 15, 20 locations with 10 year leases. I mean it was a lot.
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Do the math. So people know $20 million? Yeah, I mean it's,
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it was every bit of that. I mean I, yeah, I mean, yeah,
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our leases will be anywhere from, you know, 30, 30 to
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50,000amonth and you have a 10 year loan. So each new
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location might be, you know, 3 to 5 million dollars.
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Yeah, so. So as you add up and being an entrepreneur and then
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when, you know, I hear certain people saying like we should tax more, you know,
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small businesses or we should go after people that make money. The amount of risk
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that's taken to build a business is so extreme to create the jobs that
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are being created that it should be rewarded at the end and not
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vilified. The one thing I want to talk about related to
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Orange Theory, when you, I used to ask you on your, when we
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did a deal with, with Clearlight, you had a saying of, they said,
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hey, how fast can you grow? And you gave your, your, your, your
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microwave crock pot. If you could kind of talk about that quote, which I love.
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Yes, I, I think, you know, when you talk about. One of the things we
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were talking about also is, and I think there was a earlier conversation of
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how many stores do you own versus in our model, the franchise model is the
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franchisor, an area developer and a franchisee. As an area developer,
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we have the option to sell or sell additional.
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We call them sub Zs or sub franchises within a given market
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territory. So what's the ratio? If you look at that up there,
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you probably see about 133 locations that were under my
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umbrella. I owned about 50% of those. But that wasn't originally the
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goal. Their goal was to actually own about 2/3 of them. And then all of
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a sudden what happened is from 2015 through 2019, there was
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this frenzy going on around Orange Theory Fitness, and everybody was
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bombarding me.