Speaker 1: Welcome to the Mentor. I'm Mark Boris Michael Ramasy. Welcome
Speaker 1: to the Mentor. Mate, thanks for having me to see again.
Speaker 2: Good to see you this time you come down from Byron?
Speaker 1: Where did you come off from Melbourne? Byron?
Speaker 2: This time coming down from Byron? Not a bad place
Speaker 2: to be this time year.
Speaker 1: Correct.
Speaker 2: Yeah, I haven't been up there. Well, I've only don't
Speaker 2: like I was going. I did go up there, but
Speaker 2: like unfortunately got a call away for work and then
Speaker 2: I had to sort of only study for a day
Speaker 2: or two days sort of thing.
Speaker 1: No dramas. I'll get back up there.
Speaker 2: Okay, you are the co founder or one of the
Speaker 2: co founders of strong Plarates. It's just always some about pilaratees.
Speaker 2: I sort of know what it is. It's you know,
Speaker 2: I was first introduced in Australia like maybe twenty years ago,
Speaker 2: twenty five years ago, pilarts as a concept, but it's
Speaker 2: been around for how long time? Give me a little
Speaker 2: bit of the history of pilats. What was the deal
Speaker 2: with his dude to set it up, etcetera. There's a
Speaker 2: bit of a story around it.
Speaker 1: Isn't that. Yeah, it's and it's gone through so many
Speaker 1: iterations and it's time. But Joseph Pallati's created pilartis Joe, Yeah, yeah,
Speaker 1: decades and decades ago. It's been around for a long time,
Speaker 1: and it's it's you know, it started very much core strength,
Speaker 1: and they kind of think it's really progressed over the
Speaker 1: last few years. It's gone I would say, went mainstream
Speaker 1: probably in the last say fifteen fifteen years, ten fifteen years,
Speaker 1: where the reformer has really developed and kind of gone
Speaker 1: into the commercial fitness space. And interestingly, it's now the
Speaker 1: most popular genre globally in the fitness industry since twenty
Speaker 1: twenty three for bookings.
Speaker 2: So and I'm sort of not surprised, and we'll talk
Speaker 2: about it a little bit a bit further on, but
Speaker 2: like in terms of you mentioned the reformer, which is
Speaker 2: a machine you can do pilarts on the ground without
Speaker 2: any equipment or maybe a ball or you know, like
Speaker 2: a band or something like that. There's lots of different
Speaker 2: ways of doing pilates, and I think what I think,
Speaker 2: as I understand, it's actually sort of about core, core strength.
Speaker 1: Core strength, mobility, stability, pelvic floor all those kind of
Speaker 1: things that are you know, incredibly good for your body.
Speaker 1: But I'd say a lot of people ignore them. Yeah,
Speaker 1: day to day, and that's really that's where people see
Speaker 1: the most benefit.
Speaker 2: Yeah, and then the reformer that's a machine. Now, so
Speaker 2: is that part of what he'd come up with or.
Speaker 1: Was that his thing or yeah, he has different different
Speaker 1: contraptions and things like that. But the reformers really developed.
Speaker 1: And you've got Matt pilates and you know that's basically
Speaker 1: no equipment. You can get accessory equipment and stuff, but yeah,
Speaker 1: so the reformers come to fruition and being commercialized. It's
Speaker 1: very much like spring loaded tension. So as you would
Speaker 1: lift a dumbbell, you would push against the spring. Ye.
Speaker 1: Big thing with pilates is sort of that time under
Speaker 1: tension holding the posers, activating all those little muscles. So yeah,
Speaker 1: it's it's it's resistance training, but in this sort of
Speaker 1: kind of safe flow impact format.
Speaker 2: Yeah that's yeah, because I know a lot of footy
Speaker 2: players or really players who do plarties as part of
Speaker 2: their rehab if they've got an injury. And I actually,
Speaker 2: funnily enough, I actually tried it once when I was
Speaker 2: rehabbing myself, not from football, from something else, and I
Speaker 2: didn't use a reform or anything that had one of those.
Speaker 1: Sort of like a weird contraption.
Speaker 2: It looks like there's a black bed and then there's
Speaker 2: some still rails to go above it, and there's a
Speaker 2: few cave and let that hanging down.
Speaker 1: And the lady was fantastic.
Speaker 2: She was she was the wife of and I guess
Speaker 2: I'm not going to replug you because it's this show
Speaker 2: about your business, but of one of our coaches, one
Speaker 2: of us is in coaches in the clab and and
Speaker 2: she got me to do some stuff, and like, man,
Speaker 2: I was like shocked at about at how hard it was. Like,
Speaker 2: you know, I always consider myself fairly strong guy, like
Speaker 2: I'm just twenty years ago when I did it, fairly
Speaker 2: strong relative to my weight, et cetera, and pretty mobile.
Speaker 2: But some of the stuff she got me to do,
Speaker 2: they look like really simple, weird stuff. And my legs
Speaker 2: started shaken. I started thinking, what the hell. It's like,
Speaker 2: you're right, you're under sort of you do things really
Speaker 2: slowly and really controlled. There's not much explosiveness in it.
Speaker 2: It's more really test out small muscles and all stability.
Speaker 1: Yeah, it's that's exactly right, and it's I guess, and
Speaker 1: this is sort of why we've created Strong and we're
Speaker 1: a little bit different. It's fantastic and it changes your body.
Speaker 1: I've got hundreds of stories I can talk about you. Yeah,
Speaker 1: I do Strong probably three or four times a week. Actually,
Speaker 1: I'll tell you a real quick story. So NAT five
Speaker 1: AFL player Brownlow medalists, very famous sort of n WA
Speaker 1: plays for the Freemantle docause he was one of our
Speaker 1: ambassadors and he was telling me your story. He was
Speaker 1: walking along, he was walking across the road and a
Speaker 1: clinical Plarties teacher saw him walking actually went up to
Speaker 1: him and said, you need to do pilarates. Your movement
Speaker 1: patterns aren't correct. Got him into Polarties that year, and
Speaker 1: that year he won the Brownlow medals. So you're seeing
Speaker 1: a lot more athletes do it. You're seeing all those
Speaker 1: amazing benefits of your body. But I guess, and this
Speaker 1: is a problem that we've tried to solve. If you're
Speaker 1: going to pay for a membership, let's say in the
Speaker 1: boutique fitness industry, seventy dollars a week, you probably want
Speaker 1: a little bit more than just polarts so you get
Speaker 1: all those awesome benefits of parties. But you want to
Speaker 1: be lifting heavy, you want to be in ea singly
Speaker 1: muscle mass, and you want to be looking after your heart,
Speaker 1: so you want to do an element of cardio and
Speaker 1: you want to earn calories as well, because you know
Speaker 1: most people want to drop pody fat. So that was
Speaker 1: a problem that we tried to solve. We took the reformer,
Speaker 1: which again incredible for you. We've added a roller or
Speaker 1: a bike.
Speaker 2: To the reformer to the reformer, so as a separate
Speaker 2: machine or all in one paytent two, I see you
Speaker 2: change the reformer correct.
Speaker 1: And this is why I sort of don't go into
Speaker 1: too much of the classical polates space because because it's
Speaker 1: really not my thing. I fell in love with pilarates
Speaker 1: when I broke my ankle and and did plays for
Speaker 1: rehab and loved it and it got me back to
Speaker 1: where I needed to be, but I always felt there
Speaker 1: was something missing. I need something more. I need to sweat,
Speaker 1: I need to feel better, and you know, as a
Speaker 1: as a as a human, I want to lift weights
Speaker 1: as well, and I want to be stronger. And so
Speaker 1: I found this machine in the US. We didn't actually
Speaker 1: create the machine. We found it a friend of mine
Speaker 1: showed it to me on social media and it was
Speaker 1: one studio out of Orange County with this row former
Speaker 1: machine and row former reformer with a rower pending peyton
Speaker 1: when this thing's like, this is this is what I've
Speaker 1: been looking for. And at the time, we just exited
Speaker 1: F forty five myself, my business partner Mark, we owned
Speaker 1: six F forty five's. We had the number one studio globally.
Speaker 1: We got out and we're like, what are we doing?
Speaker 1: And then we found, you know, we found this machine.
Speaker 1: I jumped on a plane, Mark jumped on a plane
Speaker 1: and we went over and tried this this row former machine,
Speaker 1: and it was the most excruciatingly beautiful workout from an
Speaker 1: endorphin perspective, from a challenging sort of mental challenge perspective
Speaker 1: of going from the rower to being completely gassed to
Speaker 1: then holding these these moves with time under tension and
Speaker 1: your heart rates staying elevated the whole time, which means
Speaker 1: you're burning a whole lot, a whole lot more calories
Speaker 1: than you would in normal reformer. And I was like,
Speaker 1: I need to do something with this, like I need
Speaker 1: to I need to bring this to Australia and we
Speaker 1: ended up negotiating the rights for the machine globally and
Speaker 1: we built a franchise model around the machine. And then yeah,
Speaker 1: today we've got eighty odd locations, two hundred on the way.
Speaker 1: We're in eleven countries now, where we'll be in fourteen
Speaker 1: by the end of the year. We've got eighty studios
Speaker 1: sold in the US and that's probably a big part
Speaker 1: of our expansion. Now biggest fitness market in the world.
Speaker 1: And it you know, it's working. It's all those things
Speaker 1: that I thought, Yeah, this is what it could be.
Speaker 1: It's working now in this incredible membership model that's sort
Speaker 1: of giving clients everything.
Speaker 2: So just in terms of go to market, when you
Speaker 2: decided to go to market, or maybe just let's just
Speaker 2: peel back a little bit. So you both did your
Speaker 2: time at forty five, So what do you learn there?
Speaker 2: Not great outcomes happened after at forty five, but I
Speaker 2: mean in the beginning it was okay. So what did
Speaker 2: you learn and take to your new business? What did
Speaker 2: you take too? Strong from their forty five?
Speaker 1: You had six? Do you have six? Franchise? You said,
Speaker 1: we had six. We had the number one grossing studio
Speaker 1: in the world in Australia in the world. But this
Speaker 1: was in Port Melbourne, right, Yeah, And I always say
Speaker 1: it's and there's a lot of there's a lot of
Speaker 1: great founders that have come out of forty five in
Speaker 1: the fitness space, and I always say it's the best apprenticeship.
Speaker 1: You learn the good and the bad. You know you're
Speaker 1: going to go through some of the bad. Yeah, certainly,
Speaker 1: and this is probably a reason that you took to
Speaker 1: your business to make your business better. Yeah, yeah, I
Speaker 1: mean it's it's certainly a reason that I exited. And
Speaker 1: I'm still close with a lot of their forty five
Speaker 1: founders and people, and I'm happy to talk candidly about it.
Speaker 1: But the oversaturation of studios, like were the number one studio,
Speaker 1: but we had another one sort of one point nine
Speaker 1: case down the road. So that for us is something
Speaker 1: we're trying to avoid. So that's something that we learned.
Speaker 1: Too much supply is not always good, So slow sustainable
Speaker 1: growth is the way. Otherwise you'll have casualties. It's too many,
Speaker 1: they are cannibalizing each other, things like that.
Speaker 2: So in other words, distance between postcodes correct or number
Speaker 2: of postcodes per franchise yep, So like just on that.
Speaker 2: What is what's your models? You you have five postcodes?
Speaker 2: What are you doing? What do you do?
Speaker 1: Or is by a number of people? Yeah, population, we
Speaker 1: try and anywhere from thirty to seventy thousand people.
Speaker 2: So a franchise is likely to get somewhere between thirty two.
Speaker 1: Seventy seventy thousand populations if that means.
Speaker 2: Three postcodes or five postcodes or one post code. That's
Speaker 2: so it's the population that determines the number of postcodes,
Speaker 2: as opposed to oh, you know you're you're in Bondai
Speaker 2: and I'm going to give another one to the guy
Speaker 2: in Bronti.
Speaker 1: Yep, I mean that would actually work, but it's because
Speaker 1: Bondai is such a mech But yeah, it's it's a
Speaker 1: very thought thought thought about an ad hoc process. So
Speaker 1: you pre map, you can pre map Australia with franchise territories,
Speaker 1: but when it comes to signing a franchise agreement, it's
Speaker 1: all about how do we carve this up to make
Speaker 1: it sustainable? How And we've literally been taking territories off
Speaker 1: the map to ensure that there's space between all all
Speaker 1: our different territories. So, yeah, you don't want to oversall
Speaker 1: because as.
Speaker 2: A franchise or which is what you do, you you
Speaker 2: actually have a map, you and your co founder and
Speaker 2: I guess these days stuff, but you actually map the
Speaker 2: joint so you know, you start to carve it up.
Speaker 2: You say, well this is call it, let's call it Sydney,
Speaker 2: this is Sydney and the Greater Sydney and these you know,
Speaker 2: we might have one hundred in Sydney and does that
Speaker 2: then when you do Brisbane and you do everywhere else
Speaker 2: and stuff overseas and understand your biggest one is even
Speaker 2: is Singapore.
Speaker 1: I think at this stage when you're bigger franchises, our
Speaker 1: highest performing highfording franchise the six sixty of the seventy
Speaker 1: eight or nine we have today in Australia. Right, So.
Speaker 2: When you sort of set that out that and you've
Speaker 2: got your map and you look at what you've currently got,
Speaker 2: that informs you as to your growth prospects. So when
Speaker 2: you sort of also work trying to work out how
Speaker 2: we're going to grow this business, where we're going to
Speaker 2: grow because that comes to where we're going to grow
Speaker 2: the business, where I'm going to invest my time and
Speaker 2: effort in my digital marketing. You know, my taking calls
Speaker 2: and where am I going to do interviews, et cetera.
Speaker 2: It starts with the map, doesn't it with the franchise.
Speaker 1: It does, and the map that you get there. There's
Speaker 1: probably three four decent businesses that will map everything for you.
Speaker 1: The sort of data driven but it's where you land
Speaker 1: is very, very different. So for instance, in America, you know,
Speaker 1: there's and we work with Cape, KPMG, a few other
Speaker 1: sort of companies, CBRE and found that we could get
Speaker 1: seven one hundred and fifty Tier one. It's in America,
Speaker 1: and what do you consider TI one? TI one is
Speaker 1: based off things like household income, competition in there.
Speaker 2: So you build an algorithm around them. Yeah, Michael, so
Speaker 2: because that's really important. So I just want to sort
Speaker 2: of dive into that a little bit. So it's not
Speaker 2: just me to going, well, that looks like a good
Speaker 2: area because there's seventy five thousand people there. You actually build.
Speaker 2: You prioritize areas because you can't open them all up
Speaker 2: at the same time, it's not possible. So you prioritize
Speaker 2: based on an algorithm that's weights different things. So you
Speaker 2: put more weight on, for example, their income, maybe you
Speaker 2: put more weight on.
Speaker 1: They're families there. Perhaps I don't know density even the
Speaker 1: fitness market in that area. Competition analysis, Yeah, and probably
Speaker 1: the more saturated the area is the bigger the opportunity.
Speaker 1: So saturated in terms of what gyms, but the more
Speaker 1: competition you've got, correct is that because the more saturated
Speaker 1: is that informs your people's propensity to want to train.
Speaker 2: Do you think that's the reason or is it people
Speaker 2: move to an area because they know it's lots of
Speaker 2: gyms there.
Speaker 1: Well supplying demands. So if there's a huge demand for gyms,
Speaker 1: more gyms all open in that area. So we know
Speaker 1: that that community is an active community. Byron Bay has
Speaker 1: eleven thousand residents, but is in our top five locations
Speaker 1: in Australia really in terms of revenue owning. Yeah. So,
Speaker 1: and that's because the Byron Bay population are highly highly engaged.
Speaker 1: Now for a lot of franchises, they want to go
Speaker 1: into areas with no competition. They want to find the
Speaker 1: be first to market. For us, given how unique how
Speaker 1: our product is and our service offering is, we like
Speaker 1: to go into a saturated market because we feel we
Speaker 1: have a very very unique solution to plates. And two
Speaker 1: even you strength and conditioning, training, all that sort of thing.
Speaker 1: So we like the competition.
Speaker 2: That that's really interesting. So I like the planning more
Speaker 2: all that you have In terms of growth, I mean growth.
Speaker 2: Everyone goes, oh growth, you know, how do I power
Speaker 2: up my growth? Well, it's about planning and it's about mapping.
Speaker 2: You must map where you can grow. It's easy to
Speaker 2: say I want to grow, like where are we're going
Speaker 2: to grow? Probably this? And I do want to come
Speaker 2: back to your planning side of things. And I think
Speaker 2: what you just said about the algorithm, as I said,
Speaker 2: an algorithm, but like you know, it's just a formula
Speaker 2: that your you guys are built, that you own. But
Speaker 2: I do want to come back to the point you
Speaker 2: just made a moment ago. In terms of you can plan,
Speaker 2: you can say the population is great, this, the demand
Speaker 2: and supply is you know where we want it to be?
Speaker 2: You know, in terms of socioeconomics, in terms of demo demographics.
Speaker 2: You might tell me a bit later, but it could
Speaker 2: be you know, skew. You might be more skewed to
Speaker 2: females over forty, or you might be more skewed to
Speaker 2: males over forty.
Speaker 1: I don't know. You can tell me in the moment.
Speaker 2: But so to say, let's say all the stats are right,
Speaker 2: but at the end of the day, it comes down
Speaker 2: your product. If I could just go back to the
Speaker 2: product for a second. The product is this, let's call
Speaker 2: it remodulated reform a machine. I can't remember what you
Speaker 2: called it.
Speaker 1: You called it row former and bike former? Is it
Speaker 1: actually row former? Is that them? There's such a thing.
Speaker 1: It's a proof paydent in the US, still pending in ours,
Speaker 1: but it's it's a row former. It's it's a trademarked word.
Speaker 1: And we have the bike form as well, so you
Speaker 1: pick if you ride or wrote for the day.
Speaker 2: Okay, I haven't met someone he's strong, so can I
Speaker 2: just although we did use one of your strong Well,
Speaker 2: we held a function up in Byron and it was
Speaker 2: like a how to do a pitch and I did
Speaker 2: it with another guy and we did together. We did
Speaker 2: it my farm and we actually send everyone down to
Speaker 2: the Byron.
Speaker 1: Strong party. Yeah, and they loved it. They loved it.
Speaker 1: We booked it out I think for a day or
Speaker 1: an hour to or whatever it is. They loved it.
Speaker 2: But I never argin o myself, so I know the
Speaker 2: reform machine looks like it's you know, it's like a
Speaker 2: it's got a box, it's got pulleys, two handles, single handles.
Speaker 2: It's got a long sort of runner that your seat
Speaker 2: moves up and down. It's parallel to the floor. It's
Speaker 2: been very high up off the floor's you know, maybe
Speaker 2: half a meter or a third of a meter up
Speaker 2: off the floor.
Speaker 1: What does what does the row form have done?
Speaker 2: Have you put like a rower handle where the two
Speaker 2: individual handles are?
Speaker 1: Is that what's happened? It's like if you visualize, so
Speaker 1: you're right, you've got a carriage, a platform, a platform,
Speaker 1: a carriage. We've created a second carriage. It's a smaller
Speaker 1: one that moves, and that is actually the row seat
Speaker 1: right you need. So it's four point three meters in
Speaker 1: lengths are quite long. And then on the end is
Speaker 1: a rower which has bolted in right, and so the
Speaker 1: second carriage doubles is a row seat. So you can
Speaker 1: fluidly move between rowing and players, rolling and parties. And again,
Speaker 1: like as I said before, like it helps keep that
Speaker 1: heart rate elevated, and we don't roll a lot like
Speaker 1: you might row for maximum five minutes. You're coming back
Speaker 1: to reformer doing you know, spring loaded tension and holding
Speaker 1: a plane kunder resistance, but that calorie burn is so
Speaker 1: much more substantial because you've been rowing. So yeah, it's
Speaker 1: just sort of one big fluid machine. And then similarly
Speaker 1: for the bike.
Speaker 2: So as a bike version of this, yes, so you
Speaker 2: can get on the biking, spin the pedals, spin the worlds,
Speaker 2: and then get back onto the reformers so to speak. Yeah,
Speaker 2: so was the bike version in existence or did you
Speaker 2: guys come up with that idea?
Speaker 1: No, we've started. And big thing I think with any
Speaker 1: business is like our innovation button is always on. I mean,
Speaker 1: how many brands do you see now that haven't innovated
Speaker 1: are the same as twenty years ago? Yep, so that's
Speaker 1: forty five. Well, franchising is it's interesting mine, Like think
Speaker 1: about McDonald's, you know, mcafe and healthy Options and now
Speaker 1: the tech component we can already you know, all these
Speaker 1: things need to happen. So for us, like it started
Speaker 1: with the row former and then we built the tech screen.
Speaker 1: So similar to forty five, you've got screens there, but
Speaker 1: the instructor clicks through pictures of the exercise of like
Speaker 1: an avatar doing exercise, so instantly when we brought that in.
Speaker 1: That brought in more men who were probably a little
Speaker 1: bit reformers. For chicks, well that's the conception, right, But
Speaker 1: we've built our male audience over twenty percent now and
Speaker 1: started at like to sub ten. So yeah, we did that.
Speaker 1: Then we brought in the bike because you can't roll
Speaker 1: every day. You need diversity in what you're doing. And
Speaker 1: then actually this week we've just released a reverse spring
Speaker 1: system which simulates like a forty kilo dead lift press Paul,
Speaker 1: because we've really leaning into the science of well, if
Speaker 1: people need to build muscle, they need to lift heavier.
Speaker 1: We need to work on progressive overload, so we need
Speaker 1: to stop, rest, start again, whereas polarates flows is generally
Speaker 1: I'm just going to keep moving for an hour. Yeah,
Speaker 1: and you're in your aerobic energine system, which is very
Speaker 1: tough to build muscle. So long story short, that innovation
Speaker 1: cycle will never finish. I'm now a lot of our
Speaker 1: innovation is tech focused, and that's what I'm building out
Speaker 1: at the moment. But yeah, every year at conference where
Speaker 1: we met, I deliver one major innovation to a network.
Speaker 2: So innovation comes down to product attraction, attractiveness, not just
Speaker 2: for the franchise, but French Z, but also for the consumer,
Speaker 2: the customer or the clientele of the franchise Z. And
Speaker 2: I think let's just talk about innovation for a second.
Speaker 2: Do you innovate based on what you survey from your
Speaker 2: customer base? Or do you innovate based on what you
Speaker 2: and maybe your own little team decide is the latest
Speaker 2: and greatest overseas and what drives innovation direction. Because of me,
Speaker 2: you can send around and innovate about a million things
Speaker 2: and maybe only one works. It's a bit like a
Speaker 2: spray technique, you know, they just one you only ever
Speaker 2: hit once. How do you because it's got to spend
Speaker 2: money on all this stuff, how do you efficiently innovate?
Speaker 2: What's your program?
Speaker 1: It's primarily based off customer data and research, and I
Speaker 1: would say almost all the innovations we've created a date
Speaker 1: are there to improve customer retention and increase average lifetime
Speaker 1: value of a customer. So we want them trading with
Speaker 1: us for ten years, which is working. You know, we
Speaker 1: had ninety plus percent of our members said they felt stronger,
Speaker 1: eighty five percent felt like they were more flexible, and
Speaker 1: then it was really cool stat actually seventy percent said
Speaker 1: they felt less discomfort. So what we're doing is working.
Speaker 1: So's surveying, were surveying with surveying, but it's very much
Speaker 1: what what is going to keep our consumer around, keep
Speaker 1: them guessing, keep them motivated, keep them happy, because you
Speaker 1: can't just deliver the same thing over and over and
Speaker 1: over and over. It doesn't work people, it gets stale,
Speaker 1: they move on. It's a very competitive industry, as you know.
Speaker 1: So yeah, it's based off customer research, and i'd say
Speaker 1: a portion of it is actually still a gut feel
Speaker 1: and sort of myself, my business partner Mark and some
Speaker 1: of our kind of in our movement team. We've got
Speaker 1: exercise physiologists, strength and conditioning coach, polarities expert, and we
Speaker 1: all work together to create programming. We've got a testing
Speaker 1: team of twenty people that test the programs and workshopping
Speaker 1: this kind of stuff. But it's a big process. Like
Speaker 1: the reverse spring system we just launched has been We've
Speaker 1: been working on this for like two and a half
Speaker 1: years so and we're a five year old company, so
Speaker 1: text a little bit quicker in some regards. But when
Speaker 1: it's like you're delivering an innovation to the network and
Speaker 1: it's hardware based. It needs to be so much testing
Speaker 1: and thought and all that kind of stuff. Yeah, and
Speaker 1: I'm just before I go to the break. In terms of.
Speaker 2: Releasing an innovation, do you have a have you learned
Speaker 2: that there's a period of in a year, there is
Speaker 2: some time at a particularly year, like for example, this
Speaker 2: year twenty twenty five, that is best to release the
Speaker 2: beginning of the year to keep everybody excited, to make
Speaker 2: sure they're new and because you know they're starting the
Speaker 2: year off, they might be feeling pretty shitty because of
Speaker 2: Christmas just passed. I've got to get back into make
Speaker 2: size regime and that's my new year is resolution or
Speaker 2: whatever the case may be. And I've got to make
Speaker 2: a choice as to where I'm going to go. And
Speaker 2: you know, because people have choices, and if there's something
Speaker 2: new out there, they might because XIS environments can be
Speaker 2: quite fetish, you know, because one minute we're telling them
Speaker 2: get in top. We need to do more resistant work,
Speaker 2: not on me getting to we need to do more
Speaker 2: arabic work for our heart and lungs. Another time we're
Speaker 2: getting we should be swimming, you know. No resistance in
Speaker 2: other words, have no resistance, no friction, in terms of
Speaker 2: our body. There's always a new fad coming through, not
Speaker 2: a fad, but a new experience. So when is the
Speaker 2: best time do you think in your business to release
Speaker 2: your renovations.
Speaker 1: It's probably more when to avoid in the fitness space. Yeah,
Speaker 1: we'll not do it really. Yeah, December is the best time?
Speaker 1: Is the worst time? Yeah? Is that because everybody is distracted?
Speaker 1: I mean Christmas, Christmas parties. It's just Australia everywhere. That's
Speaker 1: that's Australia is worse than everywhere else.
Speaker 2: I'll post Melbourne Cup day, astray closes down and Australia.
Speaker 1: Get anything done. I was was. I worked all through
Speaker 1: Christmas and I was painful trying to get anything done.
Speaker 1: But anyway, it's Australia.
Speaker 2: Don't do it around December is at the bottom line.
Speaker 1: That's right, and and the rest of the world follows
Speaker 1: to a smaller extent. But the best time is generally
Speaker 1: we find February is probably the best. Now we've gone
Speaker 1: a little bit earlier because we've started drip feeding marketing
Speaker 1: of our new system, and we're trying to when everyone
Speaker 1: else is still asleep at the wheel. We're trying to
Speaker 1: really get people, get exactly. So we started this marketing
Speaker 1: pretty much second of Jan and we just launched what
Speaker 1: twenty third of Jan, so or sorry, twentieth of Jan.
Speaker 1: So it's yeah, it's really interesting how it works. America's
Speaker 1: on from first of Jan. It's mad. It's quite crazy.
Speaker 1: How yeah, how much Overseas differs from Australia. But we're
Speaker 1: a little bit sleepy early Jan. Yeah, we're blessed. It's bad.
Speaker 2: We can do it sort of what we like. Well,
Speaker 2: I'm going to go the break and to come straight back.
Speaker 2: I do want to talk to you about the marketing,
Speaker 2: you know, like timing and marketing. Do you mark around
Speaker 2: retention periods? Do you have do you know analytically when
Speaker 2: your biggest risk of retention is? In other words, is
Speaker 2: there a period of the year when people are I'm
Speaker 2: over exercise? Is it beginning winter? Because you know, like
Speaker 2: media organizations have high value periods.
Speaker 1: I remember when I was doing.
Speaker 2: The TV show that we would always build a show
Speaker 2: either before the winter started because peop watched much more
Speaker 2: TV when it got darker, and then you would make
Speaker 2: sure that that show was over before daylight saving came
Speaker 2: in because since daylight saving caving, people just stopped watching
Speaker 2: television and then definitely didn't do anything in December and
Speaker 2: you wouldn't pick up.
Speaker 1: Again until February.
Speaker 2: But you know, ideally the TV was always around April,
Speaker 2: May June. That's the peak period May June July, you know,
Speaker 2: when people at home. I'm very curious as to your
Speaker 2: industry whether or not there's a sort of some sort
Speaker 2: of pattern, you know, because it's interesting. You know, we
Speaker 2: talk about analyzing things. I mean, really, what we're trying
Speaker 2: to do is identify patterns and how can we not
Speaker 2: be disadvantaged by a pattern? And how can we take
Speaker 2: advantage of a pattern? And these are basic business fundamentals
Speaker 2: and I'll be interested to know about that and how
Speaker 2: do you market into those patterns once you've established patterns.
Speaker 1: But let's go to the brain. Come straight back. So
Speaker 1: I'm back from the break.
Speaker 2: I'm here with a co founder of Strong Plarties, Michael Ramsey,
Speaker 2: and we've been talking about a whole lot of stuff,
Speaker 2: and you know, we've established how important innovation is when
Speaker 2: it comes to recruiting and retaining. You know, you might
Speaker 2: like just to be known as that person, but at
Speaker 2: the end of the day, it's about recruiting new customers,
Speaker 2: recruiting new franchisees to distribute the product, and also helping
Speaker 2: them retain their customer base. And they're like critical parts
Speaker 2: of the business model. And we have also talked about
Speaker 2: I do want to talk a little bit about why
Speaker 2: you choose particular territories outside of Australia. You know, we
Speaker 2: talked about the mapping process, but I want to know
Speaker 2: why would you go to the US, why would you
Speaker 2: go to Singapore, et cetera.
Speaker 1: And I'll park that for the second.
Speaker 2: But the thing I want to talk to you right
Speaker 2: now about is marketing and marketing. When does when do
Speaker 2: you get the best bang for your buck? And how
Speaker 2: do you market.
Speaker 1: Historically? And I will just say I'll just talk about
Speaker 1: Australia just for this. I think it's the easiest way. Historically,
Speaker 1: I would say November, it's November, is what the best
Speaker 1: or worst? Best best? And then also like your February
Speaker 1: March would be on par as well Novembers.
Speaker 2: You know, we're talking too franchises A. Michael will be
Speaker 2: talking to consumer.
Speaker 1: B two C. So just consumer. When we see our
Speaker 1: sort of peaks and revenue, let's say franchise revenue that
Speaker 1: comes in through the studios, I would say November is
Speaker 1: certainly the best that we have and then peaks of
Speaker 1: sort of membership sign up in engagement is sort of
Speaker 1: late jan through till late March, the guilt period exactly exactly,
Speaker 1: and I mean it's really important. It's not that like
Speaker 1: it falls off a cliff in April or August. I
Speaker 1: mean half of Australia will go to Bali or Europe
Speaker 1: as well. So those considerations as school holidays, which also
Speaker 1: affects utilization in the studios.
Speaker 2: But is it low utilization during school holidays.
Speaker 1: Yeah, it's generally lower because kids are at home parents parents,
Speaker 1: you know, or they've got parents taking them away time
Speaker 1: for all that sort of thing. So for us, like
Speaker 1: it's not even about capitalizing on those those big periods,
Speaker 1: it's about having a really consistent marketing calendar and a
Speaker 1: really great strategy. So we know that like now we're
Speaker 1: eighteen months ahead of planning with our calendar. We know
Speaker 1: that there's these huge uplifts in in in revenue with
Speaker 1: times like Black Friday sales in November the financial year sales.
Speaker 2: So Michael, when you say you talk about people who
Speaker 2: sign up or people who people who buy packs.
Speaker 1: Right, and because Polarates is we're a hybrid model, so
Speaker 1: where you can either sign up to a direct membership
Speaker 1: maybe it's seventy seventy five dollars a week unlimited training,
Speaker 1: or you can buy a five pack, ten pack, twenty pack,
Speaker 1: five sessions. Yep, right, correct, So it's you know, we
Speaker 1: know in these sales periods people are purchasing. So around
Speaker 1: Black Friday, like the studio is sometimes double in revenue
Speaker 1: because all the consumers are looking for deals. So yes,
Speaker 1: you want to capitalize on that. End of financial year
Speaker 1: is kind of pretty similar as well. It's getting bigger
Speaker 1: in the fitness industry. But for us, it's like having
Speaker 1: these consistent periods of are we dropping a new marketing
Speaker 1: campaign here, are we dropping a new innovation here, We've
Speaker 1: got this incredible campaign we call it Strong Week where
Speaker 1: it's all about our members. That's in August, which is
Speaker 1: generally a low period, and that was strategic so we
Speaker 1: can gauge them. We do like custom programming, as so
Speaker 1: many prizes we give away and there's all these you know,
Speaker 1: social media prizes and and you know whatever, it's it's
Speaker 1: it's pretty it's pretty intense week, but we always do
Speaker 1: so well out of it. So it's just about I
Speaker 1: think mapping out that twelve month.
Speaker 2: Do you try to smooth it or the smooth are
Speaker 2: you in terms of your marketing campaign periods? Is that
Speaker 2: about smoothing revenues or is it about just taking or
Speaker 2: is it about I don't care, I'm just going to
Speaker 2: take advantage of the big spike.
Speaker 1: I mean for us, it's all about it's always about growing,
Speaker 1: and it's not always revenue we have. We did have
Speaker 1: a year on year we always increase and we increase
Speaker 1: twenty percent average revenue last year. But yeah, it's it's
Speaker 1: sometimes we're looking at metrics like how do we get
Speaker 1: people training more and how do we how do we
Speaker 1: get members staying longer at the main Longer you mean
Speaker 1: so not not terminating their membership.
Speaker 2: After a five pack five pack or a year or
Speaker 2: six months, whatever the case may be.
Speaker 1: Yeah, if there are I think our average customer stays
Speaker 1: it strong for about fourteen months. It sounds pretty long.
Speaker 1: That is longer. Industry average I think is much lower.
Speaker 1: But how do we increase that? And what marketing campaign
Speaker 1: or maybe it's a programming sort of iteration that we
Speaker 1: do to keep them. Maybe it's you know, some sort
Speaker 1: of you know, we're doing a twenty one day habits
Speaker 1: challenge and it's all built into you know, their app
Speaker 1: where they close the ring, similar to like an Apple
Speaker 1: Watch and all that kind of thing. So it's it's
Speaker 1: more about you know, looking at the overall picture and saying, Okay,
Speaker 1: these are good revenue months, how do we how do
Speaker 1: we keep keep people longer? And then looking at those
Speaker 1: peak periods and saying, all right, well let's capitalize here.
Speaker 1: Let's capitalize here.
Speaker 2: But do you have a preferred platform, like is it
Speaker 2: TikTok or is.
Speaker 1: It mister what we were talking about? You know, yeah,
Speaker 1: it's it's Facebook. It's certainly Instagram Facebook Facebook Still, well
Speaker 1: call it Meta, I mean Meta owns Facebook Instagram. Look,
Speaker 1: most of the most of the return on investment is
Speaker 1: through Instagram marketing.
Speaker 2: Is that because you haven't really got into the TikTok
Speaker 2: yet or is it or you try it just doesn't work.
Speaker 1: There were limitations in Australia with TikTok advertising this you
Speaker 1: can probably do more or you could do more in America.
Speaker 1: I think it's coming back. So for our US launch.
Speaker 1: It's a lot more TikTok focused Australia. Still, Yeah, not
Speaker 1: that big a drive or necessity. But I would say,
Speaker 1: you know, majority of our leads come from digital marketing
Speaker 1: through Instagram and Facebook. And how much do you rely
Speaker 1: on micro influencers?
Speaker 2: I mean do you plug it into that sort of category?
Speaker 1: Yeah, influencers is a really interesting one.
Speaker 2: Can we just break it up between influencers and micro
Speaker 2: influencers and specific influencers and other words sports training influences
Speaker 2: micro influencers.
Speaker 1: I feel other way to go highly localized, highly targeted.
Speaker 2: Right, so micro let's define that though. Micro influencers might
Speaker 2: be a person who's a bond die, person who is
Speaker 2: known to go to try it all the gyms and
Speaker 2: recons strong Blood is the best?
Speaker 1: Is that what we're talking about. Yeah, Similarly, it's not
Speaker 1: so much the Jim junkie. We like the local heroes.
Speaker 1: So you know the owner of the coffee shop, he
Speaker 1: might have five thousand followers.
Speaker 2: Yeah.
Speaker 1: The hairdressers are great, they talk all day. Yeah, so
Speaker 1: they're the micros that we like.
Speaker 2: You do you knock on their door or has the
Speaker 2: work or do you go through a third party who
Speaker 2: hooks you up.
Speaker 1: We generally knock on their door, so all the franchise
Speaker 1: e does and when they're on boarded through our induction process,
Speaker 1: it taught all these things before launch. Try and get
Speaker 1: you ten local heroes involved.
Speaker 2: So so, Michael, I'm sorry to keep you revenue, but
Speaker 2: is it when you when you're inducting your franchise into well,
Speaker 2: just keep amusing by.
Speaker 1: It's close by.
Speaker 2: But when you're when you're inducting your Bondai franchise, your
Speaker 2: team says to him, look, here's here's a way of
Speaker 2: getting influences. You actually induct them in in a like
Speaker 2: an education process. These are the sort of people we
Speaker 2: need to talk to. For example, with your local headresser
Speaker 2: and barber and this do you also go to this
Speaker 2: saying and this is the conversation you have with them.
Speaker 2: You're going to get your haircut or you go and
Speaker 2: get your beard shaved, and you say, you know, would
Speaker 2: you be interested?
Speaker 1: And do you pay them? The micro influencers, it's generally
Speaker 1: for someone with a with a smallish following. It's more
Speaker 1: a free membership or a free tempe tempas three contradeal
Speaker 1: and it's it's more about building and communities like probably
Speaker 1: the number one success factor for for a boutique fitness.
Speaker 1: It's about building that community. And you can't be too
Speaker 1: sales or or trying to press someone to do something
Speaker 1: they don't want to do. But yeah, it's all about
Speaker 1: how it's approached, working together, Like you can't just be
Speaker 1: here coming in and flaw my business and needs to
Speaker 1: be some reciprocal stuff. I even like to go pay
Speaker 1: for a session at all. You know, the franchises around you,
Speaker 1: you need to pay and look after each other. I
Speaker 1: think with small business, I think it is super important.
Speaker 1: But yeah, it's for a lot of franchisees who generally
Speaker 1: open in their hometown where they live. They're already the
Speaker 1: local hero. You know, they've got everyone there. We've got
Speaker 1: a We've just brought on a tech like a software
Speaker 1: subscription where you can analyze the area. You can get
Speaker 1: all the data of the influencers that live there, where
Speaker 1: their following is, which is also very very important as well.
Speaker 1: And we can actually give our franchiseesy a list of twenty.
Speaker 1: But ideally the best way this happens and I'll use
Speaker 1: the Bay and Bay case st again. You know, it's
Speaker 1: all about getting in your community and that those girls
Speaker 1: in Byron have been in their community. They own a
Speaker 1: pt studio, they know every single person. It was just
Speaker 1: for them. It was very organic. So yeah, it's it's
Speaker 1: the challenge of I guess enfranchising. You have the franch
Speaker 1: you have a franchise model where you can have sort
Speaker 1: of the mum and dad operator, or you can have
Speaker 1: the investor model where and in the US we've had
Speaker 1: one guy by forty seven locations on his own, and
Speaker 1: the investor model is less connected to the community. So
Speaker 1: it's about how do we solve that problem there? Yeah,
Speaker 1: really interesting.
Speaker 2: Stevie ol has got one in Cooji or his wife
Speaker 2: has partner. He's got one in Couljie next door to
Speaker 2: his recovery outlet, which recovery being one of those pleaching
Speaker 2: I get a in friends Horner, you get in the
Speaker 2: cole bath. You know, they've got of lots of other
Speaker 2: sort of contraptions that help you recover and be better.
Speaker 2: But he's put a strong pilarities right next door. I
Speaker 2: think he's got another one to it's he got one
Speaker 2: or two. He's looking in Bondai BONDEI okay, so he's
Speaker 2: got that one and that sort of like feeds feeds
Speaker 2: the recovery business because people will come over and maybe
Speaker 2: you feel a bit sore or you know, I just
Speaker 2: want to continue on their health program.
Speaker 1: That's quite clever.
Speaker 2: He would be a good example of a because you know,
Speaker 2: he's the ramp, was the ram with rugby union coach.
Speaker 2: So he's a good example of an influencer in an area.
Speaker 2: I mean, does that Is that the sort of thing
Speaker 2: you like to see?
Speaker 1: Yeah, and we love to see that. And it didn't
Speaker 1: take long for that studio to just take off, take off.
Speaker 1: I mean I was just literally before before this, we
Speaker 1: had a performance meeting and I was looking at the
Speaker 1: amount of new trials going through the door and could
Speaker 1: you and they're doing such a good job new trials
Speaker 1: being members that we've got a trial off of four
Speaker 1: sessions for forty It gets people in refer a mate, Yeah,
Speaker 1: all that sort of stuff. You know, you like to
Speaker 1: run promotions a couple of times a year, not all
Speaker 1: the time because it kind of it's not good for
Speaker 1: your brand to always be on discount. But yeah, so
Speaker 1: they're doing really really well.
Speaker 2: That's an example of a let's call it a local
Speaker 2: influencer exactly. You know, play for Australia coach Ramwick. It's
Speaker 2: a pretty prochal area everybody. And Ranwick Rugby Club is
Speaker 2: just down the bottom of couldi oval there, it's just
Speaker 2: near the oval, so like, and it would be known
Speaker 2: in the local Area's a local kid.
Speaker 1: He grew up.
Speaker 2: He went to school of Waverleys. As a recall, he
Speaker 2: played footed one of my son's.
Speaker 1: So yeah, like I get I get that.
Speaker 2: That makes sense to me, A lot of sense to
Speaker 2: me if I could just move across, if you don't mind,
Speaker 2: I like to just look at Singapore for a moment.
Speaker 2: I'm intrigued with Singapore. See if it's a funny place,
Speaker 2: you know, like maybe I was going out there for
Speaker 2: work about ten years ago. He used to go there
Speaker 2: every month. At that point you couldn't even get a
Speaker 2: decent coffee. But it was a very Starbucky type style,
Speaker 2: you know, that's the But then they started a morph
Speaker 2: into sort of coffee getting here, like a high quality coffee,
Speaker 2: like a proper coffee, not a Starbucks style coffee. And
Speaker 2: I haven't been there much lately, but it seems to
Speaker 2: be adopting a lot of stuff that Australia does, but
Speaker 2: a lot of money everyone's got two in the family.
Speaker 2: Both work usually stable jobs, good income places at rich joint.
Speaker 2: You know, it's just it's a wealthy place. I actually
Speaker 2: love Singapore. I don't not necessarily, I wouldn't want to
Speaker 2: live there, but it's great tax haven. But I love
Speaker 2: the place because of if I look at the system there,
Speaker 2: the way they've sort of built that country with like
Speaker 2: a pretty much an autocracy, and how they've sort of
Speaker 2: small it's got no resources, yet it's very wealthy. It's amazing.
Speaker 2: Why did you guys decide to happen up with Singapool?
Speaker 1: It's certainly the most engaged fitness community in Asia really
Speaker 1: by a mile. In otherwise, what do you mean by that?
Speaker 2: People love love their fitness, love their fitness. What about
Speaker 2: health generally? Like is it a health joint? Like people
Speaker 2: thinking about it. I'm going to have this shake, I'm
Speaker 2: going to have that food, I'm going to have that protein.
Speaker 2: Is that something you've passively Really it's full?
Speaker 1: Yeah, it's really. Yeah. It's it's become a real mecha
Speaker 1: in the fitness and wellness space as big on tech
Speaker 1: as well, huge tech, huge on tech. But all the
Speaker 1: big franchise brands like anytime fitness, and I think at
Speaker 1: forty five had at one point had a lot of
Speaker 1: studios at BFT. They're all doing, you know, exceptionally well
Speaker 1: really and I think I don't know what the stat is,
Speaker 1: but for instance, we just launched in Japan and only
Speaker 1: four percent of the population have a gym membership in Japan,
Speaker 1: so we had to and there's some of the challenges
Speaker 1: of launching overseas in different markets. You know, we had
Speaker 1: to alter the programming to be more entry level, which
Speaker 1: is totally fine. There's lots of long term opportunity there.
Speaker 1: Australia there's thirty two percent of the population with a
Speaker 1: gym membership, which is actually I think quite high, but
Speaker 1: there's still a lot of room to grow as a
Speaker 1: as a country. Have a Singapore there, I don't know,
Speaker 1: and that's sort of where I was getting at. I
Speaker 1: would I would assume based off their population it's probably
Speaker 1: much higher than that. So for whatever reason, there's.
Speaker 2: Only a small population, there's only like I don't know,
Speaker 2: it's only seven miles long, and I don't know, something
Speaker 2: like four miles wise isn't really big because I think
Speaker 2: it's like eight million people in here.
Speaker 1: Yeah, I think it's something like that as well. But
Speaker 1: it must, it might. They must just be very highly
Speaker 1: engaged communities of people that love fitness culture. There's so
Speaker 1: much to do.
Speaker 2: I mean, it's a greatespeak simple. I mean, it's not
Speaker 2: like you can go down a bonder for a serf.
Speaker 2: You can't go to the mountains and you know, in
Speaker 2: the middle of winter and experienced snow, we'll go down
Speaker 2: the snow. You can't fly to Melbourne or Brisbane or
Speaker 2: Gold Coast or Daintrey Forest, Singapore, Singapore.
Speaker 1: There's nowhere to go. Like you're in the joint. You're
Speaker 1: in the joint. There's nothing that way or nothing that way.
Speaker 1: They've got a.
Speaker 2: Little down at Sinosa. They've got a little bit of
Speaker 2: a sort of a semi type thing going on. But
Speaker 2: it's not a you know, a greatest respect. It's not
Speaker 2: that much to do, so training would be a big part.
Speaker 2: Work is a big deal. Everyone works there six days
Speaker 2: or six and five and a half days at least
Speaker 2: a week, they worked long hours. Maybe it's the sweet
Speaker 2: spot is exercise and looking good and feeling good and
Speaker 2: taking it to the next level. I'm not surprised it's
Speaker 2: done well. I'm just curious as to why you guys
Speaker 2: chose it.
Speaker 1: We went and did a conference about two years ago,
Speaker 1: and there was a group that owned I think ten
Speaker 1: yoga studios over there that were doing very very well,
Speaker 1: and Singaporean group. Singaporean group. Ozzie guy married Singaporean that
Speaker 1: he now lives there, right, and he ended up purchasing
Speaker 1: ten studios with a development schedule over three and a
Speaker 1: half years or something. So it wasn't so much us
Speaker 1: identifying Singapore. We knew it was a good market, we'd heard,
Speaker 1: we'd looked at data things like that, but it was
Speaker 1: more finding the right partner, and then when we found
Speaker 1: the right partner, we gave him exclusivity or them a
Speaker 1: master franchise sort of thing similar, but they own every studio.
Speaker 1: They're not franchising, right right. Master franchises are good in
Speaker 1: some circumstances and not in others. I would say you
Speaker 1: need a population of at least thirty to fifty million
Speaker 1: in a country to master franchise, right, Yeah, Because so.
Speaker 2: This individual owns all studios, all of the.
Speaker 1: Studios, that's right, They've got all ten. And what's the
Speaker 1: mode look like? Michael?
Speaker 2: So you you tam miss say, look, mate, Singapore jaws
Speaker 2: at fifty what would you take a percentage of revenue?
Speaker 1: How's it was like a royalty? Yeah, we take eight
Speaker 1: percent of revenue and a two marketing levy.
Speaker 2: So yeah, so you see your and so that means
Speaker 2: and then therefore your responsibility is to spend your money
Speaker 2: marketing his business in Singapore, for example, And there's a
Speaker 2: greed schedule, I guess. I mean, we come up with
Speaker 2: a great schedule and then whatever his take is, he
Speaker 2: pays your percentage of that.
Speaker 1: That's that's cool. And have you done? Is it the
Speaker 1: same model in the United States? Same identical model around
Speaker 1: the world. We have mastered in Japan, Korea and Canada,
Speaker 1: big populations. Yeah ye, but yeah, same model all around
Speaker 1: the world. It's you know, enfranchising is tough, Like it's
Speaker 1: the biggest question I get asked. When I have friends
Speaker 1: that own one, two, three studios. You know, they're going, well,
Speaker 1: they're like, should I franchise? And nine times out of
Speaker 1: ten I say no, because if unless you're prepared and
Speaker 1: you have a product or a service offering that can
Speaker 1: probably open one hundred studios, don't franchise, open your own
Speaker 1: or you can do and this is something we're looking
Speaker 1: at now. For the US. You can do like a
Speaker 1: section of say corporate owned, where HQ owns x amount
Speaker 1: of studios, it can franchise x amount just to grow
Speaker 1: the brand and get the brand equity. I guess bills
Speaker 1: in other countries and other areas. But it's a really
Speaker 1: interesting one because I think a lot of people assume
Speaker 1: that franchising is easy to pull the trigger.
Speaker 2: It is tough, tough work, and it's continuous, it doesn't stop. Yeah,
Speaker 2: it's not one transaction. It's a series of transactions with
Speaker 2: lots of twists and turns on the way through. Is
Speaker 2: it expensive? So some people think, oh, I'll do a
Speaker 2: franchise because in terms of building out my distribution of
Speaker 2: the product, there's a lot of capital requirements. So if
Speaker 2: I get someone else to do the take, go on
Speaker 2: the franchise. They can spend their capital and they can run,
Speaker 2: you can have their overheads, and I don't have to
Speaker 2: worry about that sort of stuff.
Speaker 1: I mean, that makes sense. Doesn't mean it's going to work,
Speaker 1: but that makes sense.
Speaker 2: Is your business or your franchise or opening an outlet,
Speaker 2: is it capital intensive?
Speaker 1: Yeah, it's anywhere from four to five hundred k. It's
Speaker 1: opened up a studio.
Speaker 2: Is that is that fit out or is it mostly
Speaker 2: machines and stuff? That's everything, But where where would most
Speaker 2: of the money be dropped?
Speaker 1: Probably thirty percent would be equipment, the rest would be
Speaker 1: fit out. And then also marketing pre sale is super important.
Speaker 1: You need to spend early on I think last year
Speaker 1: our average was two hundred and fifty eight members before opening,
Speaker 1: which means, let's say you break even is one hundred
Speaker 1: to one hundred and fifty members. You're profitable from day one.
Speaker 1: So yeah, it's sort of around i'd say around that
Speaker 1: five hundred k mark now. But it's all about getting
Speaker 1: the business model right. So seventy percent of our franchisees
Speaker 1: own two or more studios, so they're all making money.
Speaker 1: We've never closed the studio in five years. You need
Speaker 1: to get the business model right so your overheads can't
Speaker 1: be too crazy expensive. You want to get a return
Speaker 1: on investment, you know, we try and get EBITDA at
Speaker 1: least around sort of twenty five thirty percent revenue of revenue.
Speaker 1: So I'd say it's less about the capital and more
Speaker 1: about the ROI right, I mean, you can you can
Speaker 1: get you know, machines, finance fit, that's finance, all that
Speaker 1: sort of thing. But I think it's it's all about
Speaker 1: building a really sustainable business model. And you know, the
Speaker 1: clients need to be comfortable with the price, the franchise
Speaker 1: that you need to make money, and the franchise all
Speaker 1: needs to expand and build brand. It all needs to
Speaker 1: work in an ecosystem. And there's so many intricacies. But yeah,
Speaker 1: it's as I was saying before, it's I think it's
Speaker 1: a lot more complex than people think. But Jesus, we've.
Speaker 2: Learned someone who's been running franchise business for thirty years. Man,
Speaker 2: I know how freaking arted this view. But it is complex.
Speaker 1: But I really like your model.
Speaker 2: Do you guys, do you does head office franchise or
Speaker 2: do you sell the equipment to the franchise e or
Speaker 2: is it third party?
Speaker 1: Yes, so the person that we met in the US
Speaker 1: that created the machine, he's now our equipment supplier. So
Speaker 1: it's third party. It still goes through us because it
Speaker 1: just saves a lot of headaches and things like delivery
Speaker 1: of equipment on time, ready for launch or ready.
Speaker 2: For their logistics. Yeah, and and and in terms of
Speaker 2: the logistics, well, in terms of maybe everything. So when
Speaker 2: if I go and to sign up to a strong
Speaker 2: parties in couldji, does that mean does the does my
Speaker 2: sign up money?
Speaker 1: Do you manage all that for me?
Speaker 2: There's a franchise or for oil mean do you is
Speaker 2: that you collect all my money and then send him
Speaker 2: his money take your share? Or does it all the
Speaker 2: money go direct to him and he pays you your share?
Speaker 1: It goes direct to him, then he pays us, he
Speaker 1: pays you. Okay, Now there's there's there's franchise systems out
Speaker 1: there that do it the other way around. Yeah.
Speaker 2: Man, my business, I like to collect money and to
Speaker 2: the payment, but which means it always a month behind
Speaker 2: because I have to collect all the money. Then because
Speaker 2: I'm collecting from banks, I have to collecting the money.
Speaker 2: We're collecting three hundred million, so that's a fevit of
Speaker 2: money to collect, you know, and we've got to make
Speaker 2: sure it gets to everybody at the end of every month.
Speaker 2: We're paying at twenty million a month. But like it's
Speaker 2: I would like to do it that way because I
Speaker 2: don't want to be sitting there waiting for someone to
Speaker 2: pay me. And I've been able to manage to get
Speaker 2: them to wait for me to pay them because and
Speaker 2: that's the model in my industry. By the ways, there's
Speaker 2: no one else any different. But so, so you're not
Speaker 2: actually doing administration for them, you're not really running their
Speaker 2: back office. You're doing the marketing, but we're helping the marketing.
Speaker 1: Yeah, we're giving them systems and everything is something is
Speaker 1: what we've set up in software, our own portal. We've
Speaker 1: developed everything's there for them and we teach them how
Speaker 1: to use it. Yeah, but they need to run there,
Speaker 1: but you're not running it for them.
Speaker 2: So because some models, because I'm involved in another business
Speaker 2: called m will used to be called whimp to Warrior.
Speaker 2: We had to change it because we're going to get canceled.
Speaker 2: Is now called train Altar, which we listened on the
Speaker 2: Nastak where we actually provide all the back office to
Speaker 2: MMA gyms. We had eight thousand gyms around around the world.
Speaker 2: And because we do all the marketing, we do all
Speaker 2: their payments, we receive the payments, we pay them mainly
Speaker 2: because MMA gym guys, I'm pretty hopeless at it, you know,
Speaker 2: and they do a market they're very good teachers. They
Speaker 2: love MMA, but they're not very good at anything else.
Speaker 2: So it sounds like to me though, that your franchisees
Speaker 2: all budding entrepreneurs and business owners, proper business owners, not
Speaker 2: necessarily specialists. They may also be a specialist in which
Speaker 2: huge guys do strong plarateies. But it starts off they're
Speaker 2: probably a business owner, want to be a business owner,
Speaker 2: run their own business.
Speaker 1: Is that a fair assumption, I'd say most of them are. Yeah, yeah,
Speaker 1: And it's we're a lot more selective now in who
Speaker 1: we allow to buy into the brand. We're at the
Speaker 1: start speak to markets very very important. So at the
Speaker 1: start it was a little more scatter gun, take what
Speaker 1: you get and you learn, you learn. As I said,
Speaker 1: we still haven't closed the studio. Our average revenue, as
Speaker 1: I said, increases last last year by twenty percent, so
Speaker 1: things things are heading in the right direction. But the
Speaker 1: selection process is now very much. You know, there's a prerequisite.
Speaker 1: They need capital as well. A lot of people want
Speaker 1: to buy strong but don't have the money.
Speaker 2: Yeah, they're buying because they want to make capital. You've
Speaker 2: got to have capitals kick it off exactly. It's a
Speaker 2: bit hungry, yeah, I mean day one it's a bit hungry.
Speaker 2: I mean, you've got to got to have their backing. Yep,
Speaker 2: you can't walk in there sort of broke or.
Speaker 1: An asset that you can you know you can you
Speaker 1: can get lending from. Yeah, but yeah, it's it's it's
Speaker 1: nice to be in the position now where we've got
Speaker 1: the reputation, we've got the data, we've got the runs
Speaker 1: on the board, and we don't need to bring in
Speaker 1: absolutely everyone who applies. Most of the growth is coming internally.
Speaker 1: So there's franchisees now.
Speaker 2: With getting another four studio. Yeah, I've got a friend
Speaker 2: who's got a couple out of the West. Her name
Speaker 2: is Adriana because she's got a few.
Speaker 1: Out that west. She's doing well west.
Speaker 2: Yeah, but she was an early adopter. She went in
Speaker 2: the years ago like maybe Weather or Park COVID period
Speaker 2: early COVID perhaps, and a goer, you know, pretty tough,
Speaker 2: tough at what she does and from all the council
Speaker 2: doing quite well. So if I could just put two
Speaker 2: questions onto you now, Michael, just a little slightly different time,
Speaker 2: given that you've been around this game. You're only young,
Speaker 2: but you've been around this game for a fair while.
Speaker 2: It probably feels like a lifetime to you. What would
Speaker 2: you tell your younger self today, if you were kicking
Speaker 2: this business off now, don't do this or do that.
Speaker 1: It could be a bit of both. Great question. I
Speaker 1: would say, back yourself and go harder and believe in
Speaker 1: what you're doing. Go harder, go harder, don't be sort
Speaker 1: of shit like it's it's amazing, Like we are the
Speaker 1: black sheep of the players industry. So we cop a
Speaker 1: lot of slack for putting TVs up and running strength
Speaker 1: components through the reformer and using the purist not at
Speaker 1: all like we're running our franchise marketing right now is
Speaker 1: love traditional polarties do not invest in strong like it's
Speaker 1: a little bit of a catch like we're just trying to,
Speaker 1: you know, be a little bit disruptive and not not
Speaker 1: not traditional franchise marketing. But it would be go harder,
Speaker 1: back yourself, believe in what you're doing, and not think
Speaker 1: that you know there's limitations or or there's risks, because yeah,
Speaker 1: I I just I know it feels like we're in
Speaker 1: a really good growth phase, and in truth, we are.
Speaker 1: But there are a lot of times in those early
Speaker 1: days when the criticisms coming in and you know, there's
Speaker 1: a lot of traditionalists, saying Joseph Plarties would roll over
Speaker 1: in his grave if you saw this. Fu Yeah, And personally,
Speaker 1: I wish I'd just not really taken that on board
Speaker 1: and just stayed the path.
Speaker 2: Yeah.
Speaker 1: Every single time we've created an innovation or an edgy
Speaker 1: marketing campaign or just really dived into what the consumer
Speaker 1: actually wants and followed the science, it's come off to
Speaker 1: be brilliant. Every time we've grown, we've Yeah, consumers are
Speaker 1: getting the results, We're opening more franchises, and I just
Speaker 1: wish I had that mindset early on. I'm a little
Speaker 1: more a little more confident in the way I go
Speaker 1: about things now, but it's taken sort of four or
Speaker 1: five years to get here.
Speaker 2: So and well done and fine. The final question for
Speaker 2: you is always take a view in business. As a
Speaker 2: business owner, I always know what your exit is day one.
Speaker 2: I mean, he might not exit, he might stay there forever.
Speaker 2: But what's what do you think about that? I mean,
Speaker 2: what's Michael's position. I mean, you're a young guy, but
Speaker 2: you don't want to be doing this when you're seventy.
Speaker 1: What do you think?
Speaker 2: Do you ever think about that stuff? We're just going
Speaker 2: to I'm just going to go for it at the moment.
Speaker 1: Yeah, I mean it's it's always in the back of
Speaker 1: my mind. And it's not like we don't have pe
Speaker 1: knocking on the door every week, or private equity, private
Speaker 1: equity family officers like whatever always knocking on the door
Speaker 1: saying give us a peace, will help you expand all
Speaker 1: that sort of Yeah, and we'll help control you. Right now,
Speaker 1: we myself and Mark own one hundred percent of the
Speaker 1: business were self funded. And the more we can do
Speaker 1: this and the longer we can we can hold on,
Speaker 1: the better the result at the end. What's the breaking point?
Speaker 1: Is it?
Speaker 2: Okay, So that's a good point as long as you
Speaker 2: can hold on and that I think that's a function
Speaker 2: of how ambitious you are.
Speaker 1: So if you're.
Speaker 2: Cash flow enables you to open on twenty a month,
Speaker 2: but ideally like to have forty a month because you
Speaker 2: might be getting worried.
Speaker 1: I've got to get out there and get it.
Speaker 2: Take the real estate straight away, get as much real
Speaker 2: estate as possible, which is the forty five model, and
Speaker 2: then do something after that. Okay, if you're not that ambitious,
Speaker 2: but you're ambitious enough just to take what you can
Speaker 2: afford to open, then I don't think you need your money.
Speaker 1: No, and you don't, they will try to get you
Speaker 1: to do it. They will seduce you. It's so I'm
Speaker 1: getting really used to the questions and the conversations. I
Speaker 1: like to still have a chat with them. Yeah, and
Speaker 1: it's so interesting. They're always like, hey, you being no pressure,
Speaker 1: you know, no pressure, It's all good. I just want
Speaker 1: to help you all that kind of thing. But yeah, look,
Speaker 1: it's it's like we're doing very well from a brand perspective,
Speaker 1: from a consumer perspective. If we had to answer to
Speaker 1: a board that was telling us you need to open
Speaker 1: twenty studios a month, you need to do this, you
Speaker 1: need to do that, I think we would lose touch
Speaker 1: of the brand and I probably wouldn't enjoy it as
Speaker 1: much either. No way, no. So for us, we're going
Speaker 1: to get to where we want to get to and
Speaker 1: it's not going to take that long. Franchising is great
Speaker 1: because it is high cash flow. You've got residual income
Speaker 1: coming from franchisees. You've got new territories that you sell
Speaker 1: which are fifty k pop. The money comes in. Were asleep. Yeah,
Speaker 1: I wouldn't say that much, but it's still it's still it.
Speaker 2: Is annuity business. Like it's sort of like anuity business.
Speaker 2: You're getting paid weekly, a month or whatever the cycle is.
Speaker 2: It sort of isn't anuity business. There's not one transaction
Speaker 2: where they pay you a franchise fee, which probably just
Speaker 2: you we just break it even on the franchise fee,
Speaker 2: but the annuity just keeps rolling. And assuming they're an operator,
Speaker 2: they can then run the business. And assuming got the
Speaker 2: right product in the right marketing, which seems like you
Speaker 2: have at the moment, there's still a good innuity business
Speaker 2: and that'll help fund either an ambitious level of growth,
Speaker 2: maybe not an overly ambitious level of growth, which we
Speaker 2: need lots of capital. But the trade off I'm getting
Speaker 2: lots of capital from it pe is that you sort
Speaker 2: of lose control a bit because.
Speaker 1: They usually buy themselves.
Speaker 2: And I'm not bagging mobs because they're great, but you know,
Speaker 2: we've had them on the show.
Speaker 1: Et cetera.
Speaker 2: But it doesn't sound like you need one because they
Speaker 2: usually buy themselves. A veto right by the way, so
Speaker 2: when they're come in, they might only have thirty forty percent,
Speaker 2: but they say we've got the right to say no,
Speaker 2: which is the effective really we've got the right to
Speaker 2: tell you what to do in a different sort of way,
Speaker 2: and I think people should only go to them if
Speaker 2: they need to grow really fast for some reason.
Speaker 1: I completely agree with you. It's we don't need them.
Speaker 1: And even the even the reporting requirements once you're a
Speaker 1: place in that game is it's a distraction. As long
Speaker 1: as we're putting money back into the brand. Like we
Speaker 1: talked about the marketing fund, we spend sometimes two times
Speaker 1: what we get in, Like, we're putting it back into
Speaker 1: the product, back into the marketing. As long as the
Speaker 1: consumers are enjoying it, the franchises are happy and making money,
Speaker 1: we're good. And we've got a great pipeline of studios
Speaker 1: coming up. You know, I think the two hundred on
Speaker 1: the way at least now. We don't want a thousand studios,
Speaker 1: you know, that just to me seems crazy. So it's
Speaker 1: it's very much long story shot. I would say, it's
Speaker 1: like step by step, you know, And there might be
Speaker 1: something down the road where maybe we do a raise
Speaker 1: to really fast track you know, Strong's expansion in the US.
Speaker 1: Maybe we look at something like that. But yeah, while
Speaker 1: things are good, we're going to keep keep the path.
Speaker 1: It's interesting.
Speaker 2: Just remind me of something in two thousand and four
Speaker 2: when General Electric bought the Wizard business of me and
Speaker 2: I stayed on as a chairman, and I remember the
Speaker 2: marketing department. The marketing department of Wizard had like thirty
Speaker 2: staff and the accounting department of Wiz it had like
Speaker 2: six seven And within were two months that was flipped.
Speaker 2: The accounting department became thirty because they had to report
Speaker 2: up to people in America, and like the level of reporting,
Speaker 2: like this metric and that metric and et cetera, just
Speaker 2: got out of control. And you know, the marketing state
Speaker 2: of thirty, but like accounting and the extra cost, it
Speaker 2: became a because you know those people are accountants or whatever.
Speaker 2: See if I the type people, they're all getting paid
Speaker 2: one hundred and fifty, two undred and fifty and all
Speaker 2: they just just churning on reports that every month, based
Speaker 2: on this, based on that, and it doesn't doesn't increase
Speaker 2: your P and L, it doesn't increase your revenue, doesn't
Speaker 2: make the franchisees any happy, it doesn't make the customers
Speaker 2: any happy. It does nothing for customers. I'm not bagging
Speaker 2: in these big organizations, but they are typical. They're not
Speaker 2: a private equy group, but they are a typical investor. Like,
Speaker 2: we need to know the numbers. And by the way,
Speaker 2: it's not just you want, Tom, these are the numbers
Speaker 2: we want. These are the metrics we want. Things you've
Speaker 2: never even thought about. Made them feel comfortable, make them
Speaker 2: feel happy. But it's an expensive exercise.
Speaker 1: Well, they need to answer to there, to their investors
Speaker 1: as well. They've got, they got, they've got.
Speaker 2: They have a like a suite of pro former processes
Speaker 2: which they give to the investors and applies to every investment.
Speaker 2: So they're not going to say, I don't worry, Michael,
Speaker 2: you know you've goum pretty good.
Speaker 1: We're happy.
Speaker 2: Just give us a number every six months. What would
Speaker 2: be happy with? They said, no, No, this is our
Speaker 2: rhythm and we need this every month because we need
Speaker 2: this every month for all from for from all our investments,
Speaker 2: because our investees, our people, invest our fund they want
Speaker 2: to see it.
Speaker 1: And you're right, So you have to try and.
Speaker 2: Avoid that whilst you're in this entrepreneurial phase and some
Speaker 2: stage you get maybe saturated or sort of saturated. Probably
Speaker 2: not in Japan and Korea and America, says so big markets.
Speaker 2: But here you probably get some stage which point maybe
Speaker 2: that's the time to think about these sort of things.
Speaker 1: But you know, investments you probably need to leave. Like
Speaker 1: any any good exit, you need to leave some meat
Speaker 1: on the bone as well, so to speak, a little
Speaker 1: bit less and saturated.
Speaker 2: Yeah, it's side, but I might explain something about it
Speaker 2: to the audience, because what's interesting about you just said
Speaker 2: is that when you come to do the valuation at
Speaker 2: an exit, let's say in Australia, and let's say you
Speaker 2: know your map says Australia to take five hundred franchises
Speaker 2: instead of waiting to five hundred franchises yourself.
Speaker 1: The reason why you might do it at three.
Speaker 2: Fifty, for argument's sake, is because when they do the
Speaker 2: valuation of the business, they will do a forward profit.
Speaker 1: So look at what is the it for next year.
Speaker 2: The profit net for next year will be based on
Speaker 2: not only what you're currently doing, but based on growth
Speaker 2: of new franchisees and growth of customers within the franchisees.
Speaker 2: So all of a sudden you can give them a
Speaker 2: much better forward looking number. The multiple will also change.
Speaker 2: So you take that profit and then you multiply that
Speaker 2: by multiple modiple, and that multiple if you are saturated,
Speaker 2: then that multiple might be five or six times. But
Speaker 2: if you've got lots of growth potential based on the
Speaker 2: number of extra franchises you put in, that multiple can
Speaker 2: go from five times to fifteen.
Speaker 1: Times twenty five enfranchising there and it can.
Speaker 2: Be such a much, much bigger increase in valuation. You
Speaker 2: may never get there, but that's sort of one of
Speaker 2: the reasons why that's an important point you make, which
Speaker 2: is why I wanted to explain a little bit more.
Speaker 1: To the audience.
Speaker 2: Franchising recurring income upfront new upfronts, they will have multiples
Speaker 2: apply to them and you leave a little bit more
Speaker 2: in the tank, and generally speaking you get away with
Speaker 2: a bit more, depending on the marketplace at the time,
Speaker 2: depending on the economy, et cetera.
Speaker 1: But good point.
Speaker 2: We shouldn't the pea companies, by the way, it's stupid
Speaker 2: they get all this stuff, but you know, it depends
Speaker 2: on how desperate they would to invest their money.
Speaker 1: It's a very different It's not twenty twenty one anymore,
Speaker 1: is it either, Like where money's cheap, well now, but
Speaker 1: look mate, it'll come back.
Speaker 2: It always does, because what will happen is you know,
Speaker 2: inst rats will start going down. Investors won't be getting
Speaker 2: six percent in the bank anymore. The beginning three percent.
Speaker 2: Investors going to say shame shit, like we better start
Speaker 2: putting some money back with the pe firms. The p
Speaker 2: firms get a whole you know, get a whole raise
Speaker 2: a whole.
Speaker 1: Lot of money.
Speaker 2: They can't leave the money sitting there in the bankers
Speaker 2: they're only getting three percent too. They've got it is
Speaker 2: going to say, we're going to find someone invest in.
Speaker 2: They go along to mature business like yours with a
Speaker 2: lot of upside, and they say, mate, you know we've
Speaker 2: been talking you for two years, but we've always been
Speaker 2: talking about them multiple of six but but now talking
Speaker 2: at fifteen, like are you interested? And you start quivering.
Speaker 2: But and that's a great thing to have to look
Speaker 2: forward to, because you know, judgments need to be made
Speaker 2: at the time, and you knows little things like you know,
Speaker 2: will they rule my brand, and will they affect my
Speaker 2: franchisees and will they ultimately affect my customers? All those
Speaker 2: sort of questions you'll go through. That's going to be
Speaker 2: fun that I love.
Speaker 1: This running a process. Yeah, it's yeah, yeah, And.
Speaker 2: You'll have to run through your own mind, but look,
Speaker 2: good luck to you made it.
Speaker 1: You're doing a great job.
Speaker 2: You're doing it a very very staged and very rational
Speaker 2: about the whole process.
Speaker 1: I love your product.
Speaker 2: I'm definitely when I got to Barron next going to
Speaker 2: go down to the one Barn and have a look
Speaker 2: at mind him, do a session. I know Jonathan who's
Speaker 2: join the piece, who's my business partner up there.
Speaker 1: He loves it and.
Speaker 2: As an Aussie business, Aussie brand, good luck you ma,
Speaker 2: it's great to see we're exporting against Americans.
Speaker 1: It's nice to represent Australia in the US. It's it's
Speaker 1: really it's pretty cool going over as your brand.
Speaker 2: I love it totally, totally. Normally it is coming the
Speaker 2: other way now it's going back that way.
Speaker 1: Good luck to you, Thanks mate, I appreciate it.
Speaker 2: H