Speaker 1: This is Bloomberg Business Week with Carol Messer and Jason
Speaker 1: Kelly on Bloomberg Radio. All right, let's get into one
Speaker 1: of our favorite things to talk about. It's the world
Speaker 1: of fitness. Jim Rowley is back with us. The CEO
Speaker 1: of Crunch Fitness. Johnny is on the phone from San Francisco. Jim,
Speaker 1: we caught up. Good lord. It was last year. It
Speaker 1: seems like a hundred years ago. A lot has happened
Speaker 1: since then. And first of all, I trust your well
Speaker 1: doing okay out in San Francisco. I'm doing well. It's
Speaker 1: nice to talk to you again. And I think it's
Speaker 1: been eight or nine months. It was in July after
Speaker 1: it was after TPG made that investment, wasn't it. That's right,
Speaker 1: that was I think we spoke probably a week later.
Speaker 1: You're right, that's exactly right. So give us an update.
Speaker 1: I mean, what's going on as you look at what's
Speaker 1: you know, what's happening in the world. Obviously the world
Speaker 1: is shut down, but people still thinking about staying well,
Speaker 1: staying fit. How does it look from where you sit? Well,
Speaker 1: I'm encouraged, I'm frustrated, and I'm angry. So I'm I'm
Speaker 1: feeling a lot of emotion, as I think a lot
Speaker 1: of people are. Um you know, we had to close
Speaker 1: over three hundred gems between our own gyms and our
Speaker 1: franchise network in a matter of seventy two hours, and
Speaker 1: we've gone from a significant amount of revenue to zero
Speaker 1: since March sixteenth, and we've tried to be considerate of
Speaker 1: our team members and our and our members along the way.
Speaker 1: I was able and fortunate enough to pay our all
Speaker 1: of our team members from March sixteenth through March thirty one,
Speaker 1: regardless of the fact that we were closed and unfortunately
Speaker 1: had to furlough nearly three thousand employees on April one.
Speaker 1: I've been able to pick up their healthcare costs associated
Speaker 1: with their benefits plans. So that's been a little bit
Speaker 1: of a good feeling that we could do something for
Speaker 1: employees while they're not working. But yeah, it's been a
Speaker 1: difficult time for us. We've spent the majority of the
Speaker 1: last three weeks just really working on our on how
Speaker 1: we re emerge, how do we reinvent ourselves during this period,
Speaker 1: and what does it look like to be the new Crunch, bigger, better,
Speaker 1: stronger as we emerge. Can you do anything while you know,
Speaker 1: in terms of online we you know, Jason, I've talked
Speaker 1: a lot about I've been doing yoga closes online. I
Speaker 1: guess it's different because you've got gyms and people want
Speaker 1: to use equipment. But I do wonder how do you
Speaker 1: can you take advantage of the online world in any
Speaker 1: any form? Yeah, Carrol is a great question, and we
Speaker 1: have And we had a program um years ago that
Speaker 1: we established called Crunch Live, and the Crunch Live had
Speaker 1: over a hundred workouts on it as a digital format,
Speaker 1: and we were doing probably two thousand workouts a day
Speaker 1: and over a hundred countries pre COVID. Since we've hit
Speaker 1: nearly a hundred thirty five countries and we've reached a
Speaker 1: peak of almost a hundred thousand workouts a day UM,
Speaker 1: so they're able to get into the Crunch library. We've
Speaker 1: also done Facebook workouts. We've put a lot of material
Speaker 1: upon Instagram around the benefits of nutrition supplementation UM, and
Speaker 1: we've done some workout challenges and so forth. We also
Speaker 1: partnered with a group called LIPS Session and we've allowed
Speaker 1: our personal trainers to continue to do their one on
Speaker 1: one personal training sessions with their clients and that's been
Speaker 1: really beneficial for both the trainers and the members. Yeah.
Speaker 1: I mean it's interesting too to think about. And you
Speaker 1: alluded to this earlier, Jim, this notion that you know,
Speaker 1: you you have your you have your staff, but so
Speaker 1: many people in this world, uh, you know, we're sort
Speaker 1: of independent contractors that they've got a side hustle or
Speaker 1: you know, they sort of make it work in this
Speaker 1: fitness business that that we all know, all three of
Speaker 1: us know. Uh, it's sort of pieced together in a
Speaker 1: lot of ways. There's a it's very fragmented. Uh So
Speaker 1: I do wonder, you know, how the business model changes
Speaker 1: from here or does it effectively revert what are you
Speaker 1: finding as you you know, sort of work through re emerging. Yeah,
Speaker 1: so look, I think that we're all a where that
Speaker 1: you know, the morbidity rates skyrocket if you've got hypertension,
Speaker 1: heart disease, obesity, diabetes, diabetes, or any respiratory illness. Right,
Speaker 1: So when it comes to obesity, diabetes, hypertension, and heart as,
Speaker 1: we know that exercise are are great things that you
Speaker 1: can do to a law with nutrition and proper diet,
Speaker 1: exercise right, that you can do to kind of be
Speaker 1: in better shape and and help in the event that
Speaker 1: you get a virus like this. So look, when you
Speaker 1: talk about encouraged, we're encouraged by the members that are
Speaker 1: participating with Crunch Live. We're encouraged by the fact that
Speaker 1: the feedback we've received has been tremendous. Um get open,
Speaker 1: get open, We can't wait for our Crunch members are
Speaker 1: putting up memes showing, like, you know, thousands of people
Speaker 1: rushing the front door of Crunch when it opens, and
Speaker 1: it had a little bit of fun with it. But
Speaker 1: we think there's a lot of pent up demand. We
Speaker 1: also think that there's a lot of baking and a
Speaker 1: lot of calorie construction going on during this period. You
Speaker 1: cannot buy flower. I have been trying for weeks and
Speaker 1: I cannot buy flower. It's crazy flowerless baking. There's flowerless bag.
Speaker 1: But we we are encouraged. Our members have sent us
Speaker 1: a lot of goodwill via social media, just saying we
Speaker 1: can't wait to get open, and and and and start
Speaker 1: up again and and again. Yesterday with the White House
Speaker 1: and the CDC um you know, releasing the Open America,
Speaker 1: Opening America again. Plan to have Jim's mentioned for the
Speaker 1: first time to be in the power point deck to
Speaker 1: talk about the fact that Jim's can be open in
Speaker 1: phase one with social distancing and sanitary requirements and so forth.
Speaker 1: That was really encouraging. So we're we're excited about that,
Speaker 1: and we've been partnying with some ministry veterans in China
Speaker 1: and other parts of Asia to really understand like how
Speaker 1: have they been emerging? What is this right? So we
Speaker 1: we we've got a lot of intelligence as to what
Speaker 1: to expect, and we've spent the better part of the
Speaker 1: last three weeks working on kind of our readiness plan,
Speaker 1: which is a thirty seven page document for both our
Speaker 1: franchise network and our sinnings are detwork. That was really fun.
Speaker 1: Hold that thought, Jim. We're gonna continue this conversation in
Speaker 1: just a minute. Excited to be talking to Jim Rowley,
Speaker 1: CEO of Crunch Fitness. All right, I want to get
Speaker 1: back to Crunch the EO Jim Rowley, he's with us
Speaker 1: on the phone. So, Jim, you were just before we
Speaker 1: had to take a break here, we were talking about
Speaker 1: the reopening and what your team has been focusing on.
Speaker 1: Tell us the kind of things that the discussions you've
Speaker 1: been having, you know, kind of what does life look
Speaker 1: like as we say, you know, after the virus, after
Speaker 1: COVID nineteen, what are the discussions you're having and how
Speaker 1: do you think you're reopen. So we're looking at a
Speaker 1: phased approach for understanding what the consumer demand, the member
Speaker 1: demand is going to be. We've we've already got a
Speaker 1: class registration system that's done through our apps, and we're
Speaker 1: able to manage inventory that way. We're considering doing that
Speaker 1: with reservations in terms of workout if there's a need
Speaker 1: from from each of the governors and so forth. We're
Speaker 1: really looking kind of calling it the crunch way, which
Speaker 1: is informing members we want them to be kind, consider
Speaker 1: it and be mindful, and then from there, we've got
Speaker 1: conference of protocols around social distancing, social spacing, spacing, cleanliness, sanitation, disinfection.
Speaker 1: We've been upgrading all of our systems for the past
Speaker 1: three weeks. Uh, you know, despite the fact that we've
Speaker 1: been making no money, we've been working on infrastructure changes
Speaker 1: to ensure that the clubs are clean, disinfected, that all
Speaker 1: of our products kill the COVID nineteen virus. Buying mass
Speaker 1: buying gloves um really being comprehensive in that nature and
Speaker 1: just looking at at the at the whole protocol soup
Speaker 1: to nuts, so as you enter a crunch, you'll be
Speaker 1: informed of what the new guidelines are as you go
Speaker 1: to check in six ft spacing with with intervals on
Speaker 1: the floor that say ready, set, go. But there's six
Speaker 1: six ft apart right, So what are the mannerism is
Speaker 1: going to be like when you're with a personal trainer
Speaker 1: with the personal trainer be gloved in mass and what
Speaker 1: what kind of separation will be required to still get
Speaker 1: that instruction? Um. We put a grid system on our
Speaker 1: on our floors of our group fitness classes to ensure
Speaker 1: that there's six ft um from member to member. We've
Speaker 1: shut off every other treadmill to ensure that there's six
Speaker 1: ft between people that are using the treadmills or the
Speaker 1: ellipticals or the bikes or what have you. So we've
Speaker 1: tried to look at every single aspect of the club,
Speaker 1: turn it upside now and say how can we reinvent
Speaker 1: this ensure that it's clean, sanitary and uh, and it's
Speaker 1: a healthy environment for our members and our team members
Speaker 1: and uh. Again. We put out a thirty seven page
Speaker 1: document that is relatively comprehensive and really looked at it
Speaker 1: from a tactical strategic standpoint. Wow. I mean you answered
Speaker 1: a lot of my questions Jim, just there in terms
Speaker 1: of like what is this actually or my next question,
Speaker 1: which was what does this actually look like? I do?
Speaker 1: I want to ask you before we get too far
Speaker 1: away from what's happening right now, about the financial support,
Speaker 1: if any, that you're getting on a federal or state level.
Speaker 1: Understanding the sort of complexities to some extent of your
Speaker 1: business sort of being a company but also having franchisees,
Speaker 1: are you able to tap into any of these sources
Speaker 1: of funds that are out there? Jason, I always feel
Speaker 1: like you and I are mind melding. I was hoping
Speaker 1: you were going to ask this question. Unfortunately, we're we're
Speaker 1: too big to qualify and too small to matter, so
Speaker 1: we are not as a corporation. We haven't been able
Speaker 1: to participate in anything. And when I opened, I said, look,
Speaker 1: I'm encouraged, I'm hopeful, but I'm also frustrated and angry
Speaker 1: because as a company we've been left out. We don't
Speaker 1: qualify for the SBA loans. Many of our franchise e
Speaker 1: s have have applied and so forth. Some have been
Speaker 1: turned down, some are getting negative feedback and so forth.
Speaker 1: And we know that the three billions already been utilized,
Speaker 1: so we're anxious to see if the two fifty will
Speaker 1: be part of the next stimulus. But where I'm really
Speaker 1: angry is while I'm making no revenue and I'm not
Speaker 1: able to qualify for the Cares Act or the p
Speaker 1: p P and so forth. I've got landlords, some of
Speaker 1: which are being tremendous. They've they've given us deferrals on
Speaker 1: rent and they consider our circumstances. Others are being deaf here.
Speaker 1: They don't want to talk about it there wait and see.
Speaker 1: And then I've got about a third of our landlords
Speaker 1: that are sending default notices that they're being opportunistic, trying
Speaker 1: to get us into a place where they can terminate
Speaker 1: our leases, and they're really being almost vengeful in nature.
Speaker 1: And you know, you watch these commercials. I even listen
Speaker 1: to the Bloomboog commercials, and we talked about we're all
Speaker 1: in this together. It doesn't have here. The landlords are
Speaker 1: and I don't think anybody's speaking about that. Um they
Speaker 1: even if they gave me a deferral, they'll they'll get
Speaker 1: their money at some point. Whereas I generate no revenue,
Speaker 1: I have no recourse to get it back. So that's
Speaker 1: where I get angry. I'm also frustrated that the business
Speaker 1: interruption insurance nobody qualifies, yes from from a lot of
Speaker 1: restaurants too. Yeah, do you have any sense that that
Speaker 1: could change? Well, we're lobbying with We're working with Congress
Speaker 1: from Brian Fitzpatrick out of Pennsylvania, and our industry UM
Speaker 1: is the International Health and Racket Sports Association. We've got
Speaker 1: a lobbying team together. We're trying to work UM through
Speaker 1: Capitol Hill to get something and play both for understanding
Speaker 1: the qualifications for s b A, but also for in
Speaker 1: the future to understand that business and interruption insurance should
Speaker 1: include pandemics such as this. It's impossible for me to
Speaker 1: get my head wrapped around the fact that we've been
Speaker 1: paying all this money for all this time and we're
Speaker 1: excluded from something like this. This seems like the perfect
Speaker 1: opportunity for the insurance. But he's a step up if
Speaker 1: nothing else, have them administer a program the government backed. Yeah. Hey, hey, Jim,
Speaker 1: just twenty seconds. You gotta be quick. What about TPG
Speaker 1: they've made an investment before. Can't you get some funds
Speaker 1: from them? I mean, they've got deep pockets, Carol, I
Speaker 1: told you this when we met in July. They've been
Speaker 1: they were incredible during the process. They've been even better
Speaker 1: during UH kind of the honeymoon phase and into the
Speaker 1: first year. They've been tremendous. And of course, um, they're
Speaker 1: not gonna let Crunch fail there. They've they've made that
Speaker 1: commendment to us. Right now, we've got enough cash to
Speaker 1: get probably through July UH and hopefully you know, we'll
Speaker 1: be way ahead of that. But our forecasts are okay.
Speaker 1: But imagine imagine our partners saying we've got you. If
Speaker 1: we get into dark waters, yeah, all right, we're gonna
Speaker 1: leave it there. Can't wait to catch up with you.
Speaker 1: On the other side, Jim really see of Crunch Fitness