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

0:01 This is Pete Moore on Halo Talks. Your captain speaking. I am the founder and managing partner at Integrity Square and your host of Halo talks. 600 interviews and going. We've been around now for 15 and 1/2 years. We have been helping people like yourselves get capital, do mergers and acquisitions, consulting, strategic advice in the health, active lifestyle and outdoor helo sector, trying to help as many entrepreneurs as possible get to the next level, take that inflection point and be the force behind your growth. We are helping companies that have at. Least $3 million of EBITDA, around $10 million of revenue and we are positioned to help you get institutional growth capital or to negotiate deals with strategic partners. If you go to integritysq.com isq you. Can see our capabilities. Deck. Happy to set up a consultation at any time that is free of charge and we look forward to you helping solve obesity, loneliness and diabetes.

1:07 And go Halo. This is Pete Moore on Halo Talks nyc. I have the pleasure of bringing a friend of mine for 20 plus years in the health club industry straight from Syracuse X Gold's Gym now Elevate Fitness. Tom Muller, good to have you on the show. Great to be with you Pete. It's been a long, long run, hasn't has. I mean I was the junior guy at Bronco and Miranda Partners and started meeting all the Gold's Gym owners and I met you and you and Peter back in the day and we were trying to keep that Gold's Gym flag alive. And then you know, a lot of people de branded or de identified and you guys were one of the culprits of that just say like hey, I'm not sure this brand kind of fits my box anymore.

1:53 And you've come a long way since then, so why don't you give a little background on, on yourself, you know and, and you know that you worked with with Peter and then bought him out and you know what you guys got going on there with Elevate. Yeah. So I've been in the business since 1982. I started with Health and Tennis Corporation down in Houston, Texas. So that's where I really learned the fitness business. Moved up to Syracuse in 1988, started consulting and managing the clubs for Peter and purchased the clubs from him in 2005. So and I was just up there as just to give a shout out to my nephew who's now a Syracuse resident.

2:33 Freshman year at the, at Syracuse University. I was just up there and toured the clubs. From what you when you started out with the Gold's Gyms, you know, one of the things that kind of struck me is like, the size of the location that you have and the amount of amenities and programs that you're running there. Give us a little bit of background on how that evolved and how the facilities kind of morphed over time. Yeah, the cool thing is we were both. The clubs were originally built as an eight indoor tennis court facilities back in the late 70s. And they're just the cool thing about the clubs, the size we've been able to evolve them with the times is always stay current with trends and those kinds of things. So we started taking out tennis courts before my time. Peter put in racquetball. Remember the racquetball phase? Sure.

3:25 And then in the late 80s, I was actually just traveling through town, and Peter was looking to really get into the fitness, so he just expanded the fitness areas. One of the clubs, he added an indoor pool. And he's just really trying to figure out how to compete with Bally's. Bally's was the major competitor at the time, and so I moved in and we really competed with Valleys very successfully, and we just kind of evolved the clubs from there. Yeah. So when you go into the location, you know, it definitely looks like, you know, there's a lot of square footage under, you know, a big rooftop. What are some of the things that you've been most excited about on the morphing of, you know, legacy? Staying with the tennis, but really, like, kind of repurposing the facility? Well, I think that the thing that I'm most excited about is the. Is really the.

4:16 The trend back to strength. Kind of reminds me of the early gold gym days where, you know, people, you know, girls, guys really training hard, lifting weights, a lot of really cool, unique pieces coming into the industry. And it's just really. It's really cool to see everybody strength training, because I think that's the basis of fitness anyway, is really strong and that kind of training. Yeah. So, you know, when I went into the clubs, it seems like you've got a pretty big fitness floor and you're also kind of, you know, tearing down drywall as you kind of repurpose some of the old racquetball courts to the point where it doesn't really feel like, you know, it was an old racquetball, you know, court. But what you said, you got Pilates coming in now, I think on our last visit. And what are some of the other things you're doing to kind of serve the community, but maybe a broader swath of the community? Well, the Strength of the clubs have always been our programming aspects. We have a strong personal training program at both clubs. Our Group X is extremely strong.

5:19 We have really strong classes, Group power bar classes, yoga, Pilates. We have a Plottee studio that we have, so we do a lot of reformer classes with that. We actually just took out spinning, which is a good run for a long time, but that seems to have passed by. So we've purposed that into personal training studio and we've opened up some other areas of turf for the members to use. You know, a lot of. Lot of the clubs that, that around the country, you know, are either trying to expand and, and add more square footage.

6:02 You know, your clubs are, you know, 70,000 square feet. You know, you've got pools in there as well. If I was to do an analogy and say, like, you know, Elevate's kind of like the lifetime fitness of, of the Syracuse market, is that an accurate depiction of what you guys are kind of, you know, positioned as? No, I think that's exactly it. And yeah, with our strong programming, you know, with tennis, we really own the tennis market. Our only competition is Syracuse University, and we even compete really well with them, even though it's subsidized by the university. So, you know, the key, the key to our longevity has been our, our staff, our programs, and being able to just see where the wind's blowing and kind of navigate to that area. Now let's talk about the software changeover. A lot of people have been on legacy and good software companies, but you kind of said, I gotta do more for the members and I want to track more data. And I think you've been probably one of the leaders in saying I can only manage my business as well as I can measure it. So. So talk about what you did with Zenoti, why you made that change, and how that's the early wins on that. Well, when we left Gold's Gym, I think one of the problems with Gold's Gym is we were really limited in the software, the website, all of the technology. I felt really restrained. So when we left Gold Gym and we created the Elevate brand, I really wanted to be

7:34 tech focused and really focus on the technology to, to service the members and drive the business so that. So with that, we had. Before we moved to Zenoti, we were operating with two different operating platforms, ABC and Club Automation. We had smart health clubs for our app. You know, we had gym sales for our CRM program and like three or four other ones. So I've always been Looking for just a one single platform that would communicate and run efficiently. And I think the Zenoti really fills that bucket.

8:15 And what are some of the things that you've been able to do? You know, you've, obviously you run a pretty sophisticated operation with a lot of different programs. You got a, you know, you got a pro shop, you got a, you know, a cafe overlooking the tennis court. So what are some of the things, not that this is an infomercial for Zenoti, but what are some of the things that, like you said, hey, these are some of the things I can do now and that I could track, that I was maybe it was a little hard pressed to kind of do within my prior tech stack. Well, I think, you know, one of the things is having the app and the platform running as one. One of the things that we try to do, I think, you know, a lot of clubs have kind of followed this trend is having layered memberships.

8:58 So we have a three tiered membership and trying to obviously upsell people, create the value for them to want to be on the higher level. The other software companies would not really allow us to really make sure that we can manage the benefits. So in both clubs we added a recovery center. We have different memberships that have access. So we wanted to make sure that we support that and control that. We also want to give, you know, benefits to promote things. So when somebody joins the club now we can give them a free smoothie and that can be integrated in with the system so we can start driving things. We can say, hey, for the month you haven't, you haven't upgraded to the recovery center.

9:41 We're going to give you a free month of recovery. And now we can track and monitor that and monetize it. We can also, you know, have them buy a class pass. So if they're on a level one membership and they don't have classes, they could buy a package and have class access. That's just a such a robust system. Really kind of in the early stages of really, you know, implementing and driving it. And I always see over the next 90 days really driving it to implement and drive the behaviors of the members and drive the revenue. This is Pete Moore. I want to let you in on a little secret. There's this company called Promotion Vault. And what they do is they give out rewards from retailers that allow you to incentivize your members without having to do zero down and one month free or giving away shakes or giving away T shirts. What you want to do is build a rewards Program that lasts, that people value and that doesn't discount your own products and services. So here's the deal. There's something called Rewards Vault. The Rewards vault is going to allow a member to set up their own profile. They are going to answer questions, you are going to get those answers, you're going to be able to target those members and you're going to reward them inside your club, inside your spa and outside of the club and outside of the spa to get them to become loyal, to get them to pay their monthly dues and to be rewarded properly for the actions. A lot of companies are cutting back on rewards. You shouldn't be promotion vaults. Your answer, trust me, this is real.

11:17 So I've become a. Well, I'm a New York Giants fan, but because the Bills are in New York State, I've also become like a affiliate of the, of the Buffalo Bills mafia for a New York team. The one thing about Northern New York that people don't fully understand is that there's not a lot of people flocking down to, you know, South Carolina and Florida and like, you know, Snowbirds. But it seems like a very, very stable market. You know, over time there's a lot of investment that comes in for big companies. Maybe talk about like, what's Micron's doing in town and just like what you've been able to kind of buffer by being up in Syracuse that maybe other markets don't have, you know, such a volatile swing, whether it's on housing or mortgages or you might be the bigger demographic but you also got to deal with like the ups and downs in those markets. Markets. Yeah, Joe, Joe Whimmy in Buffalo, who owns Catalyst, is a good friend of mine. We're always talking about, you know, Syracuse and Buffalo and you know, we don't have the dynamic markets where you have the big economies. So we've kind of have, we've had to navigate that. So both, you know, both Buffalo and Syracuse are pretty stable at this point. You know, a lot of the manufacturing left in the 80s and 90s and you know, just in one of the clubs like two seconds from Liverpool, Amazon just built a big distribution place.

12:38 Micron is the biggest thing to come to New York and I think decades. So it's a billion dollar plant that they're building literally eight minutes from the Liverpool location. So if they really do a good job with Micron, just Micron itself is a huge investment and opportunity for Syracuse. But all of the suppliers that are going to come in to support that big chip manufacturing plant that they're going to be building. So you know, when you take a look at the demographics of Syracuse, obviously you got an influx of new 18 to 22 year olds with the university, you know, at your doorstep. You also got a pretty vibrant athletics program in and around the area that are feeding into some of these D1, D2 and D3 schools. How has the demographics either changed or how do you feel about, you know, bringing in more strength equipment which usually brings in more, you know, younger demos that kind of reframes like what Elevate stands for? Yeah, I think, I think we're excited about that market. It's like, I think it's like 45% or below the age of 40, 45 in Syracuse. So what we're trying to do with the strength equipment is really have a product where you know, the kids that are going to crunch now or they're going to plan it, see the value and they're willing to, you know, spend an extra 20, $30 a month to have a really quality fitness area. So that's so we're really excited about and that's where we're going to be investing some money into

14:08 like Real Leader, bringing some really specific high end brands of strength equipment in. Yeah. And then from a standpoint, Micron, by the way, for the audience here is, is a small $230 billion business that is, you know, made a commitment to Syracuse, you know, demographic market area, which you know, is not a. I'm sure they shopped around for a lot of different areas before they built that plant. I don't know if you know the chronology of that, but how long has that been in the works? I think it's been in the works for like last five, six years. And the place is going to be massive and really high end paying jobs that are going to be going to be there. And I think, I think Micron is going to go all in. They're already have started working with all the like Syracuse for education, trying to develop the workforce locally. And that's what we want to see when a Micron or these big, these big companies move into an area is having them support and kind of cultivate the community along with it. You hear these projects like that have gone into Buffalo as an example. The billion dollars went into Buffalo that didn't go anywhere because they didn't have the community behind it. They didn't develop the community support.

15:27 Gotcha. You know, you're kind of an atypical club owner where you also, you know, have your own lease and you own the real estate up there. What was the, how did that kind of evolve over time? And what kind of flexibility does that give you on thinking about capital improvement projects that other people might, you know, kind of look at their lease and say, ah, this is my responsibility, it's a landlord's responsibility. How do you, how do you kind of look at opportunities that are maybe longer term in nature that kind of solidifies, you know, what you're building there. I think from my perspective, I think that's, that's the only way to really own and operate clubs is if you own the, on the real estate, especially in a smaller market like Syracuse. So you know, people always ask me, are you going to build another club? Going to build another club? And I said, well not really because we kind of support the market we have. The other clubs are on opposite ends of the clubs, on opposites of town. And I think that the biggest thing that most people understand about the fitness business is the amount of capex it takes to keep the club up and fresh. Always competing with the new club coming in the market. Everybody likes the, the bright and shiny new club. And I think we've done a decent job of keeping our capex up, staying relevant, having the clubs new, I mean they're built in the 70s. And I don't think when you walked in you probably didn't think you were going back in the 70s. And we're, and we're correct, continue to do that and we're, we're going to continue to invest in capex

16:59 to keep the clubs fresh and new. You have to do it. And by owning real estate it gives me the opportunity because I know we're raising the value of that. So it makes, that's really kind of a game changer. So when you take a look at how you price in the memberships you always got, you got family memberships, you got a couple memberships, you know, what's the price point that a Syracuse market can, can, you know, take? And the value, the price to value proposition, how do you think about that? Well, I think one of the things we're trying to get to an average of 50 to $55 per month per member. We just, when we went to Zenoti, we went to bi weekly billing which has gone really well for us. So I think that's, that's going to definitely add in the membership dues revenue. I think when you're in a small market, you're not going to get, you're not going to increase your revenue by volume of sales, you're going to increase it by revenue per member. And so that's what we're, that's, we're completely focused on is revenue per member. And then what about the, the annual maintenance fee? How do you think about that? Annual maintenance fee is, it's a something. It's just everybody, everybody charges. So it's not an issue with competition. We're moving from 49 to $59, which is not going to be an issue.

18:23 And I think because we do a good job of bringing in new programs, investing in the clubs, I think the members see it, so they know that I'm not putting in my pocket, I'm reinvesting in the club. Sure. One thing about having a big club, 70,000 square foot club, and you have new equipment coming in and you're repurposing space, I feel like it gives you a lot more latitude on one, what you could charge or substantiate the annual maintenance fee versus some of these smaller, you know, 15, 20,000 square foot, you know, express gyms or HVLP where you know, it's basically just a, a way for them not to raise rates and more of just like an EBITDA grab, if you will, as a new term. So you know, when you look at 55amonth for what you get inside of your club, when competition does come in, like, is it more of, you know, like good luck type of thing, like trying to outdo what I got under 140,000 square feet in two locations, that kind of buffer, you know, like, you know, book in the market.

19:31 I think I'm a big proponent of cumulative advantage and I think that as long as we have, as long as we're first in the market with this kind of, with these kinds of products, I don't think people really pay attention to it. So I think, you know, part of the capex strategy is that cumulative advantage, as long as you keep the members engaged, they're not going to really be looking for something else. And I think, I think because of the size of our clubs and we've been, we've been a business since the 70s, as long as you stay, keep your eye on the ball, stay focused on what the trends are and what the future is, it's really, it's a cumulative advantage and it's a huge advantage compared to the, you know, the other clubs are coming in. We have the crunches, we have the planets, we have big whys and you just kind of have to do an analysis of what their strengths are, figure out what you want your strengths are. And then make sure that you focus on your strengths and minimize your weaknesses.

20:35 This is Pete Moore. Here's the last tip for you of the podcast. We are partnered up with a company called higher dose higherdose.com they are the leader in workout recovery products. Infrared technology, LED light masks, neck enhancers, and other products such as PEMF mats and sauna blankets. If you have not gotten on the workout recovery train yet, your time and your stop is now. You got to get these products in there before these workout recovery and spas end up saturating your market. Having your members walk out of the club and going into one of their locations for 200 bucks per month where they're paying 39 to you. Let's become an expert in workout recovery. If we are already an authority in. Workouts, Higher dose, check it out. There's a wholesale code and we look.

21:29 Forward to helping you augment your products. And services to meet the demands of your members. And hey, let's get people happy, healthy and sweating. And the recovery should be just as. Good as the workout. When you take a look at just the tennis program, um, you know, tennis kind of has gone through different ebbs and flows, and I feel like tennis is like, back in fashion now or back, back in vogue. I think that there's a lot of data that shows that from a cardio and longevity standpoint, like, tennis is the most. Is the most recommended sport for people to play.

22:13 I think people kind of, some people like, tailed off into like, Padel and to pickleball, but tennis isn't going anywhere. So talk about, like, the strength of the tennis, you know, your conviction about tennis as a sport. Yeah, I think, I mean, tennis is here to stay. I mean, when you look at the amount of money that, I mean, the, the Cleveland Open just put $350 million into their facilities. You look at what they're investing in, the US Invested in the facilities in New York City and just the growth of tennis. I think since CO is up like 30% or something like that, yeah, it's kind of leveled off a little bit. But the key to tennis and I think the key to operating the clubs that we have is all about the having the right staff and having the right programs. And that's where we're really the leaders, is we have the best pro staff.

23:05 We have kids that we're developing. They're going on to play D1 schools. We have Lemoyne College that plays out of our facilities. So it's all about taking those Members and, you know, giving them good quality lessons, having them good quality leagues, usta, all those things make a really vibrant tennis program. And tennis has been our. Ever since I've been involved. Our most stable part of our business. Yeah. And it also talk about swim because, you know, every kid needs to learn how to swim anywhere across the country. And that seems to be. There's a lot more focus on that. There's some franchises now that have been launched, I know, like Big Blue Swim School. And I think there's even some in New York City that like, took some retail space that I thought was crazy. But there's clearly a big market and people will, you know, pay, you know, you know, to get their kids certified. And also, I think swimming as a, you know, sport and modality is going to get even more and more, you know, exposure from whether it's Olympics or whether it's like they end up setting up some kind of pro swim league. Yeah, let's talk about. Talk about that as well, since you maintain two pools. Yeah, we have a really vibrant swim lesson program.

24:25 And again, even with the pools, it's really all about programming. So we certainly have lap swimming available, but we really focus on swim lessons and classes and those kinds of things. And we've been really successful at it. And again, it's having the right, the right person. We have an excellent aquatics director. We have, you know, we compete with the wise and people are willing. We have waiting lists for people to come take some lessons with us when it's almost for free at the Y. And then from a standpoint of the elevate, you know, brand name, you know, you have that. You obviously have that registered in New York State.

25:08 Is that something that, that you're able to take outside the state if you ever came across an opportunity to either buy or rebrand or, you know, affiliate with another club? Oh, I think. Definitely. Absolutely. Yeah. Yep. I think that'd be extremely easy to do. Yep. Yep. And then how do you feel about Syracuse sports? It seemed like there was a good football season that started. Maybe that might not go as well according to plan, but I think the basketball program's got Carmelo Anthony's son playing, so it should be a good year up at the Carrier Dome. Yeah, Very, very excited about basketball. Unfortunately, our quarterback got hurt, who's a dynamic player. So that's. That's what unfortunately happened this year with football. But, yeah, basketball is going to be interesting. It's. They have some tough shoes to fill with Boeheim. I mean, living here since 1988. I've seen some great basketball, some great football, and hopefully be back to that this year with basketball. Yeah. So you've dedicated your life to the halo sector, so thank you for that. Yeah. You know, over the next couple of years, as you, you know, get involved in other, you know, Rex roundtables and you kind of share the learnings that you had, do you have any. Do you have any quote that you live by or, you know, like, words of wisdom for those people that are in the industry that may be maybe much younger than you and me to say, like, you know, this is why you should dedicate your life to this profession? Yeah. My quote is, I learned a long time ago from a guy, Carl Sivani, in the fitness business,

26:41 grow where you've been planted. I think a lot of times people are looking for. The grass is always greener on the other side. And I think if you take the approach of growing where you're planted, become a master at what you're doing. I think there's so many. There's so many opportunities that come your way, and if you really are a true expert at what you're doing, you'll see those opportunities. They might be small, but they can turn into something big if you really kind of just grow where you're being planted and like that. So that's. That's what I've lived by in this way, to kind of coach kids by. Awesome. All right, man, well, thanks for coming on the show. Good to see you. Look forward to seeing you. And I'll be up there if there's any uncle there, days up at. Up at Syracuse. I will.

27:24 I'll swing by and get a workout and wear my elevate white T shirt. All right, sounds good. Look forward to it. All right, awesome. Thanks, buddy. Thanks so much.