Episode #574: Elevate Fitness Evolution-Real Estate, Recovery, and Community Impact With Tom Muller

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This is Pete Moore on Halo Talks. Your captain speaking. I am the

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founder and managing partner at Integrity Square and your host

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of Halo talks. 600 interviews

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and going. We've been around now for 15 and

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helping solve obesity, loneliness and diabetes.

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And go Halo.

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

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a friend of mine for 20 plus years in the health club industry

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straight from Syracuse X Gold's Gym now Elevate Fitness.

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Tom Muller, good to have you on the show. Great to be with you Pete.

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It's been a long, long run, hasn't has. I mean

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I was the junior guy at Bronco and Miranda Partners and started meeting all the

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Gold's Gym owners and I met you and you and Peter back in

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the day and we were trying to keep that Gold's Gym flag

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alive. And then you know, a lot of people de branded or de identified

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and you guys were one of the culprits of that just

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say like hey, I'm not sure this brand kind of fits my box anymore.

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And you've come a long way since then, so why don't you give a little

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background on, on yourself, you know and, and you

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know that you worked with with Peter and then bought him out and you know

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what you guys got going on there with Elevate. Yeah. So I've been in the

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business since 1982. I started with Health and Tennis

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Corporation down in Houston, Texas. So that's where I

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really learned the fitness business. Moved up to Syracuse in

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1988, started consulting and managing the clubs for

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Peter and purchased the clubs from him in 2005.

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So and I was just up there as just to give a shout out to

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my nephew who's now a Syracuse resident.

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Freshman year at the, at Syracuse University.

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I was just up there and toured the clubs. From what you when you started

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out with the Gold's Gyms, you know, one of the things that kind of struck

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me is like, the size of the location that you have and the amount of

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amenities and programs that you're running there. Give us a little bit of

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background on how that evolved and how the

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facilities kind of morphed over time. Yeah, the cool thing is we were

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both. The clubs were originally built as an eight indoor

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tennis court facilities back in the

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late 70s. And they're just the

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cool thing about the clubs, the size we've been able to evolve them with the

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times is always stay current with trends and

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those kinds of things. So we started taking out tennis courts

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before my time. Peter put in racquetball. Remember the racquetball phase? Sure.

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And then in the late 80s, I was actually just traveling through

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town, and Peter was looking to really get into the fitness, so he just expanded

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the fitness areas. One of the clubs, he added an indoor pool.

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And he's just really trying to figure out how to compete with Bally's. Bally's was

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the major competitor at the time, and so I moved in and

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we really competed with Valleys very successfully,

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and we just kind of evolved the clubs from there. Yeah.

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So when you go into the location, you know, it definitely looks like,

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you know, there's a lot of square footage under, you know, a big rooftop.

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What are some of the things that you've been most excited about on the

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morphing of, you know, legacy? Staying with the tennis,

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but really, like, kind of repurposing the facility? Well, I think that

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the thing that I'm most excited about is the. Is really the.

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The trend back to strength. Kind of reminds me of the early gold

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gym days where, you know, people, you know, girls, guys really

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training hard, lifting weights, a lot of really cool,

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unique pieces coming into the industry. And it's

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just really. It's really cool to see everybody strength training, because I think that's the

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basis of fitness anyway, is really strong and

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that kind of training. Yeah. So, you know, when I went

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into the clubs, it seems like you've got a pretty big fitness

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floor and you're also kind of, you know, tearing down

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drywall as you kind of repurpose some of the old

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racquetball courts to the point where it doesn't really feel like, you know, it was

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an old racquetball, you know, court. But what you said, you got

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Pilates coming in now, I think on our last visit. And what

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are some of the other things you're doing to kind of serve the community, but

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maybe a broader swath of the community? Well, the Strength of the

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clubs have always been our programming aspects. We have a strong personal training

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program at both clubs. Our Group X is extremely strong.

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We have really strong classes,

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Group power bar classes, yoga, Pilates.

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We have a Plottee studio that we have, so we do a lot of

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reformer classes with that. We actually just took

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out spinning, which is

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a good run for a long time, but that seems to have passed by. So

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we've purposed that into personal training studio and we've

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opened up some other areas of turf for the members to use.

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You know, a lot of. Lot of the clubs that, that around the country,

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you know, are either trying to expand and, and add more square footage.

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You know, your clubs are, you know, 70,000 square feet.

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You know, you've got pools in there as well. If I was to do an

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analogy and say, like, you know, Elevate's kind of like the lifetime

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fitness of, of the Syracuse market, is that an accurate

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depiction of what you guys are kind of, you know, positioned as?

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No, I think that's exactly it. And yeah, with our strong programming,

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you know, with tennis, we really own the tennis market. Our only competition

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is Syracuse University, and we even compete really well

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with them, even though it's subsidized by the university. So,

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you know, the key, the key to our longevity has been our, our

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staff, our programs, and being able

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to just see where the wind's blowing and kind of navigate to

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that area. Now let's talk

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about the software changeover. A lot of

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people have been on legacy and

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good software companies, but you kind of said,

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I gotta do more for the members and I want to track more data. And

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I think you've been probably one of the leaders in saying I

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can only manage my business as well as I can measure it. So. So talk

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about what you did with Zenoti, why you made that change, and how

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that's the early wins on that. Well, when we left Gold's Gym, I

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think one of the problems with Gold's Gym is we were really limited

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in the software, the website,

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all of the technology. I felt really restrained. So when

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we left Gold Gym and we created the Elevate brand, I really wanted to be

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tech focused and really focus on the technology

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to, to service the members and drive the business

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so that. So with that, we had.

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Before we moved to Zenoti, we were operating with

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two different operating platforms, ABC and Club Automation.

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We had smart health clubs for our app.

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You know, we had gym sales for our CRM program and

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like three or four other ones. So I've always been Looking for

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just a one single platform that would communicate and run efficiently.

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And I think the Zenoti really fills that bucket.

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And what are some of the things that you've been able to do? You know,

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you've, obviously you run a pretty sophisticated operation with a lot

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of different programs. You got a, you know, you got a pro

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shop, you got a, you know, a cafe overlooking the

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tennis court. So what are some of the things, not that this is an infomercial

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for Zenoti, but what are some of the things that, like you said, hey,

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these are some of the things I can do now and that I could track,

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that I was maybe it was a little hard pressed to kind of do within

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my prior tech stack. Well, I think, you know, one

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of the things is having the app and the platform running as

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one. One of the things that we try to do, I think, you know, a

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lot of clubs have kind of followed this trend is having layered memberships.

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So we have a three tiered membership and

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trying to obviously upsell people, create the value for them to want to

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be on the higher level. The other software companies would

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not really allow us to really make sure that we can manage

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the benefits. So in both clubs we added a recovery center.

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We have different memberships that have access. So we wanted to make sure that

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we support that and control that. We also want to give,

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you know, benefits to promote things. So when somebody joins the club now

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we can give them a free smoothie and that can be integrated in with the

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system so we can start driving things. We can say, hey,

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for the month you haven't, you haven't upgraded to the recovery center.

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We're going to give you a free month of recovery. And now we can track

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and monitor that and monetize it. We can also,

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you know, have them buy a class pass. So if they're on a level one

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membership and they don't have classes, they could buy a package and have class access.

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That's just a such a robust system. Really kind of in the early stages of

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really, you know, implementing and driving it. And I always see over the next 90

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days really driving it to implement and drive the

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behaviors of the members and drive the revenue.

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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 members

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without having to do zero down and one month free or

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giving away shakes or giving away T shirts. What you want to do is

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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

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deal. There's something called Rewards Vault. The Rewards vault is going

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

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to answer questions, you are going to get those answers, you're going to be able

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to target those members and you're going to reward them inside your club,

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

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spa to get them to become loyal, to get them to pay their

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monthly dues and to be rewarded properly for the

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actions. A lot of companies are cutting back on rewards. You shouldn't be

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promotion vaults. Your answer, trust me, this is real.

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So I've become a. Well, I'm a New York Giants fan, but because

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the Bills are in New York State, I've also become like a affiliate

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of the, of the Buffalo Bills mafia

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for a New York team. The one thing about Northern New York that people don't

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fully understand is that there's not a lot of people flocking down to,

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you know, South Carolina and Florida and like, you know, Snowbirds. But it seems like

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a very, very stable market. You

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know, over time there's a lot of investment that comes in for big companies.

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Maybe talk about like, what's Micron's doing in town

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and just like what you've been able to kind of

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buffer by being up in Syracuse that maybe other markets don't have,

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you know, such a volatile swing, whether it's on housing or mortgages

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or you might be the bigger demographic but you also got to deal with like

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the ups and downs in those markets. Markets. Yeah, Joe, Joe Whimmy in Buffalo, who

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owns Catalyst, is a good friend of mine. We're always talking about, you know, Syracuse

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and Buffalo and you know, we don't have the dynamic

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markets where you have the big economies. So we've kind of

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have, we've had to navigate that. So both, you know, both

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Buffalo and Syracuse are pretty stable at this point. You know, a lot of the

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manufacturing left in the 80s and 90s and you know,

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just in one of the clubs like two seconds from Liverpool, Amazon just

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built a big distribution place.

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Micron is the biggest thing to come to New York and I think

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decades. So it's a billion dollar plant that they're building literally eight

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minutes from the Liverpool location. So if they really do a good

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job with Micron, just Micron itself is a

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huge investment and opportunity for Syracuse. But all

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of the suppliers that are going to come in to support that big chip

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manufacturing plant that they're going to be building.

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So you know, when you take a look at the demographics of Syracuse,

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obviously you got an influx of new 18 to

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22 year olds with the university, you know, at your doorstep.

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You also got a pretty vibrant athletics program in and

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around the area that are feeding into some of these D1,

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D2 and D3 schools. How has the demographics either

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changed or how do you feel about, you know, bringing in more strength equipment

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which usually brings in more, you know, younger demos that kind of

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reframes like what Elevate stands for? Yeah, I think, I

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think we're excited about that market. It's like,

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I think it's like 45% or below the age of 40,

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45 in Syracuse. So what we're trying to do with the strength

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equipment is really have a product where you know, the kids that are going

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to crunch now or they're going to plan it, see the value and they're willing

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to, you know, spend an extra 20, $30 a month to have a really

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quality fitness area. So that's so we're really excited about

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and that's where we're going to be investing some money into

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like Real Leader, bringing some really specific high end brands

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of strength equipment in. Yeah. And then from a standpoint,

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Micron, by the way, for the audience here is, is a small $230

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billion business that is, you know,

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made a commitment to Syracuse, you know, demographic market

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area, which you know, is not a. I'm sure they shopped

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around for a lot of different areas before they built that

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plant. I don't know if you know the chronology of that, but how long has

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that been in the works? I think it's been in the works for like

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last five, six years. And the place is

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going to be massive and really high end paying jobs that are going to

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be going to be there. And I think, I think Micron

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is going to go all in. They're already have started working

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with all the like Syracuse for education, trying to

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develop the workforce locally. And that's what

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we want to see when a Micron or these big, these big

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companies move into an area is having them support and kind of

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cultivate the community along with it. You hear these

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projects like that have gone into Buffalo as an example. The billion

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dollars went into Buffalo that didn't go anywhere because they didn't have the community behind

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it. They didn't develop the community support.

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Gotcha. You know, you're kind of an

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atypical club owner where you also, you know, have your own

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lease and you own the real estate up there. What was

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the, how did that kind of evolve over time? And

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what kind of flexibility does that give you on thinking about capital

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improvement projects that other people might, you know, kind of look at their lease

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and say, ah, this is my responsibility, it's a landlord's responsibility. How do

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you, how do you kind of look at opportunities that are maybe longer

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term in nature that kind of solidifies, you know, what you're building

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there. I think from my perspective, I think that's, that's

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the only way to really own and operate clubs is if you own the, on

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the real estate, especially in a smaller market like Syracuse. So you

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know, people always ask me, are you going to build another club? Going to build

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another club? And I said, well not really because we kind of support the market

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we have. The other clubs are on opposite ends of the clubs, on

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opposites of town. And I

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think that the biggest thing that

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most people understand about the fitness business is the amount of

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capex it takes to keep the club up and fresh. Always

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competing with the new club coming in the market. Everybody likes the, the bright and

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shiny new club. And I think we've done a decent job of keeping our

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capex up, staying relevant, having the clubs new, I mean

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they're built in the 70s. And I don't think when you walked in you probably

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didn't think you were going back in the 70s. And we're, and we're correct, continue

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to do that and we're, we're going to continue to invest in capex

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to keep the clubs fresh and new. You have to do it. And

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by owning real estate it gives me the opportunity because I know we're raising the

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value of that. So it makes, that's really kind of a game changer.

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So when you take a look at how you price in the memberships you always

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got, you got family memberships, you got a couple memberships, you

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know, what's the price point that a Syracuse market

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can, can, you know, take? And the

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value, the price to value proposition, how do you think about that?

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Well, I think one of the things we're trying to get to an average

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of 50 to $55 per month

280
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per member. We just, when we went to Zenoti, we went to

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bi weekly billing which has gone really well for us. So I think

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that's, that's going to definitely add in the membership

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dues revenue. I think when you're in a small

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market, you're not going to get, you're not going to increase your

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revenue by volume of sales, you're going to increase it by

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revenue per member. And so that's what we're, that's, we're completely focused on

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is revenue per member. And then what about the, the

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annual maintenance fee? How do you think about that? Annual maintenance fee is,

289
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it's a something. It's just everybody, everybody charges. So

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it's not an issue with competition. We're moving from 49

291
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to $59, which is not going to be an issue.

292
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And I think because we do a good job of bringing in new

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programs, investing in the clubs, I think the members see it,

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so they know that I'm not putting in my pocket, I'm reinvesting in the club.

295
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Sure. One thing about having a big club, 70,000 square foot club,

296
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and you have new equipment coming in and you're repurposing

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space, I feel like it gives you a lot more latitude on

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one, what you could charge or substantiate the annual maintenance

299
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fee versus some of these smaller, you know, 15, 20,000

300
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square foot, you know, express gyms or HVLP where

301
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you know, it's basically just a, a way for them not to raise

302
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rates and more of just like an EBITDA grab,

303
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if you will, as a new term. So you

304
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know, when you look at 55amonth for what you get inside of your club,

305
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when competition does come in, like, is it more of, you know,

306
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like good luck type of thing, like trying to outdo what I got under

307
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140,000 square feet in two locations, that kind of buffer,

308
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you know, like, you know, book in the market.

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I think I'm a big proponent of cumulative advantage and

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I think that as long as we have,

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as long as we're first in the market with this kind of, with these kinds

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of products, I don't think people really pay attention to it. So I think, you

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know, part of the capex strategy is that cumulative advantage,

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as long as you keep the members engaged, they're not going

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to really be looking for something else. And I think, I think because of the

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size of our clubs and we've been, we've been a business since the

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70s, as long as you stay, keep your eye on the ball,

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stay focused on what the trends are and what the future is, it's really,

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it's a cumulative advantage and it's a huge advantage

320
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compared to the, you know, the other clubs are coming in. We have the crunches,

321
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we have the planets, we have big whys and you

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just kind of have to do an analysis of what their strengths are,

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figure out what you want your strengths are. And then make

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sure that you focus on your strengths and minimize your weaknesses.

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

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00:20:39,750 --> 00:20:42,710
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327
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328
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329
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330
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331
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332
00:21:00,820 --> 00:21:04,260
recovery train yet, your time and your stop

333
00:21:04,340 --> 00:21:07,940
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334
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recovery and spas end up saturating your market.

335
00:21:11,540 --> 00:21:15,060
Having your members walk out of the club and going into one of their locations

336
00:21:15,060 --> 00:21:18,700
for 200 bucks per month where they're paying 39 to

337
00:21:18,700 --> 00:21:22,460
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341
00:21:33,720 --> 00:21:37,520
to meet the demands of your members. And hey, let's get people

342
00:21:37,520 --> 00:21:41,320
happy, healthy and sweating. And the recovery should be

343
00:21:41,320 --> 00:21:42,600
just as. Good as the workout.

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When you take a look at just the

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tennis program, um, you know, tennis kind

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of has gone through different ebbs and flows, and I feel like tennis is like,

347
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back in fashion now or back, back in vogue. I think that

348
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there's a lot of data that shows that from a cardio

349
00:22:05,060 --> 00:22:07,780
and longevity standpoint, like, tennis is the most.

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Is the most recommended sport for people to play.

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I think people kind of, some people like, tailed off into like,

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Padel and to pickleball, but tennis isn't going anywhere.

353
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So talk about, like, the strength of the tennis, you know, your

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conviction about tennis as a sport. Yeah, I think, I mean, tennis

355
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is here to stay. I mean, when you look at the amount of money that,

356
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I mean, the, the Cleveland Open just put $350

357
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million into their facilities. You look at what they're investing in, the

358
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US Invested in the facilities in New York City

359
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and just the growth of tennis. I think since CO

360
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is up like 30% or something like that, yeah, it's kind of

361
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leveled off a little bit. But the key to tennis and I think the key

362
00:22:53,470 --> 00:22:57,310
to operating the clubs that we have is all about the having the right

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staff and having the right programs. And that's where we're

364
00:23:01,030 --> 00:23:03,990
really the leaders, is we have the best pro staff.

365
00:23:05,030 --> 00:23:08,590
We have kids that we're developing. They're going on to play D1

366
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schools. We have Lemoyne College that plays out of our

367
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facilities. So it's all about taking those

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Members and, you know, giving them good quality lessons, having

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them good quality leagues, usta, all those

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things make a really vibrant tennis program. And tennis has been

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our. Ever since I've been involved. Our most stable

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part of our business. Yeah. And it also

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talk about swim because, you know, every kid needs to learn how to swim

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anywhere across the country. And that seems to be. There's

375
00:23:43,260 --> 00:23:46,620
a lot more focus on that. There's some franchises now that have been

376
00:23:47,200 --> 00:23:50,960
launched, I know, like Big Blue Swim School. And I

377
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think there's even some in New York City that like, took some retail

378
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space that I thought was crazy. But there's clearly a big market

379
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and people will, you know, pay, you know, you

380
00:24:02,200 --> 00:24:05,680
know, to get their kids certified. And also, I think swimming as a,

381
00:24:06,080 --> 00:24:09,360
you know, sport and modality is going to get even more and more,

382
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you know, exposure from whether it's Olympics or whether it's like they

383
00:24:14,120 --> 00:24:17,650
end up setting up some kind of pro swim league. Yeah, let's talk about. Talk

384
00:24:17,650 --> 00:24:21,490
about that as well, since you maintain two pools. Yeah, we have a

385
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really vibrant swim lesson program.

386
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And again, even with the pools, it's really all about

387
00:24:29,770 --> 00:24:32,570
programming. So we certainly have lap swimming available,

388
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but we really focus on swim lessons and classes

389
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and those kinds of things. And

390
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we've been really successful at it. And again, it's having the right, the right person.

391
00:24:45,450 --> 00:24:48,810
We have an excellent aquatics director. We have,

392
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you know, we compete with the wise and people are willing. We have waiting

393
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lists for people to come take some lessons with us when it's almost

394
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for free at the Y. And then from a standpoint of

395
00:25:00,730 --> 00:25:03,530
the elevate, you know, brand name,

396
00:25:04,970 --> 00:25:08,730
you know, you have that. You obviously have that registered in New York State.

397
00:25:08,730 --> 00:25:12,050
Is that something that, that you're able to take outside the state if you ever

398
00:25:12,290 --> 00:25:15,490
came across an opportunity to either buy or

399
00:25:15,650 --> 00:25:19,210
rebrand or, you know, affiliate with another club? Oh, I think. Definitely.

400
00:25:19,210 --> 00:25:22,610
Absolutely. Yeah. Yep. I think that'd be extremely easy to do. Yep.

401
00:25:22,690 --> 00:25:26,410
Yep. And then how do you feel about Syracuse

402
00:25:26,410 --> 00:25:29,810
sports? It seemed like there was a good football season that started.

403
00:25:29,970 --> 00:25:33,490
Maybe that might not go as well according to plan, but I think the

404
00:25:33,570 --> 00:25:37,100
basketball program's got Carmelo Anthony's son

405
00:25:37,100 --> 00:25:40,940
playing, so it should be a good year up at the Carrier Dome. Yeah,

406
00:25:40,940 --> 00:25:44,500
Very, very excited about basketball. Unfortunately, our quarterback got hurt, who's a

407
00:25:44,500 --> 00:25:47,620
dynamic player. So that's. That's what

408
00:25:47,860 --> 00:25:51,460
unfortunately happened this year with football. But, yeah, basketball is going to be

409
00:25:51,460 --> 00:25:55,100
interesting. It's. They have some tough shoes to

410
00:25:55,100 --> 00:25:58,900
fill with Boeheim. I mean, living here since 1988. I've seen some great

411
00:25:58,900 --> 00:26:02,700
basketball, some great football, and hopefully be back to that this year

412
00:26:02,700 --> 00:26:06,350
with basketball. Yeah. So you've dedicated your life to the

413
00:26:06,350 --> 00:26:10,150
halo sector, so thank you for that. Yeah. You know, over the

414
00:26:10,150 --> 00:26:13,510
next couple of years, as you, you know, get involved in other,

415
00:26:13,910 --> 00:26:17,670
you know, Rex roundtables and you kind of share the learnings that you had, do

416
00:26:17,670 --> 00:26:20,990
you have any. Do you have any quote that you live by or, you know,

417
00:26:20,990 --> 00:26:24,550
like, words of wisdom for those people that are in the industry that may be

418
00:26:24,870 --> 00:26:28,550
maybe much younger than you and me to say,

419
00:26:28,550 --> 00:26:31,500
like, you know, this is why you should dedicate your life to this

420
00:26:31,980 --> 00:26:35,780
profession? Yeah. My quote is, I learned

421
00:26:35,780 --> 00:26:39,580
a long time ago from a guy, Carl Sivani, in the fitness business,

422
00:26:41,100 --> 00:26:44,940
grow where you've been planted. I think a lot of times people are looking

423
00:26:45,020 --> 00:26:48,740
for. The grass is always greener on the other side. And I think if

424
00:26:48,740 --> 00:26:52,100
you take the approach of growing where you're planted, become a

425
00:26:52,100 --> 00:26:55,890
master at what you're doing. I think there's so

426
00:26:55,890 --> 00:26:59,490
many. There's so many opportunities that come your way, and if you really are a

427
00:26:59,490 --> 00:27:03,330
true expert at what you're doing, you'll see those opportunities. They might be

428
00:27:03,330 --> 00:27:07,090
small, but they can turn into something big if you really kind of just

429
00:27:07,090 --> 00:27:09,850
grow where you're being planted and like that.

430
00:27:10,730 --> 00:27:13,530
So that's. That's what I've lived by in this way, to kind of coach kids

431
00:27:13,530 --> 00:27:17,290
by. Awesome. All right, man, well, thanks for coming on the show.

432
00:27:17,290 --> 00:27:21,090
Good to see you. Look forward to seeing you. And I'll be up

433
00:27:21,090 --> 00:27:24,530
there if there's any uncle there, days up at. Up at Syracuse. I will.

434
00:27:24,690 --> 00:27:28,530
I'll swing by and get a workout and wear my elevate white T shirt.

435
00:27:28,610 --> 00:27:32,410
All right, sounds good. Look forward to it. All right, awesome. Thanks, buddy. Thanks so

436
00:27:32,410 --> 00:27:32,690
much.